UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

			

FORM 10-Q
 
(Mark One)

						
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the quarterly period ended June 30, 2021
 
OR

						
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the transition period from              to          

																								
Commission File
Number	 	Exact Name of Each Registrant as specified in its
charter; State of Incorporation; Address; and
Telephone Number		IRS Employer
Identification No.	
1-8962	 	PINNACLE WEST CAPITAL CORPORATION		86-0512431	
		(an Arizona corporation)			
		400 North Fifth Street, P.O. Box 53999			
		Phoenix	Arizona	85072-3999				
		(602)	250-1000					
1-4473	 	ARIZONA PUBLIC SERVICE COMPANY		86-0011170	
		(an Arizona corporation)			
		400 North Fifth Street, P.O. Box 53999			
		Phoenix	Arizona	85072-3999				
		(602)	250-1000					
 
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered	
Common Stock	PNW	The New York Stock Exchange	

Indicate by check mark whether each registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

																		
PINNACLE WEST CAPITAL CORPORATION	Yes	☒ 		No 	☐ 	
ARIZONA PUBLIC SERVICE COMPANY	Yes	☒ 		No 	☐ 	
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

PINNACLE WEST CAPITAL CORPORATION	Yes	☒ 		No 	☐ 	
ARIZONA PUBLIC SERVICE COMPANY	Yes	☒ 		No 	☐ 	
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 PINNACLE WEST CAPITAL CORPORATION

Large accelerated filer	☒ 	Accelerated filer	☐	Non-accelerated filer	☐	Smaller reporting company	☐	
								
Emerging growth company	☐							
 
ARIZONA PUBLIC SERVICE COMPANY

Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒ 	Smaller reporting company	☐	
								
Emerging growth company	☐							
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

PINNACLE WEST CAPITAL CORPORATION	Yes  	☐		No 	☒ 	
ARIZONA PUBLIC SERVICE COMPANY	Yes    	☐		No 	☒ 	
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

									
PINNACLE WEST CAPITAL CORPORATION	Number of shares of common stock, no par value, outstanding as of July 29, 2021:	112,785,588	
ARIZONA PUBLIC SERVICE COMPANY	Number of shares of common stock, $2.50 par value, outstanding as of July 29, 2021:	71,264,947	
 
Arizona Public Service Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format allowed under that General Instruction.

TABLE OF CONTENTS

 		Page	
 		 	
Forward-Looking Statements		2	
Part I	 		4	
Item 1.	Financial Statements		4	
 	Pinnacle West Capital Corporation		5	
 	Arizona Public Service Company		12	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		74	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		100	
Item 4.	Controls and Procedures		100	
 	 		 	
Part II	 		101	
Item 1.	Legal Proceedings		101	
Item 1A.	Risk Factors		101	
Item 5.	Other Information		101	
Item 6.	Exhibits		102	
Signatures	 		105	
 
This combined Form 10-Q is separately provided by Pinnacle West Capital Corporation (“Pinnacle West”) and Arizona Public Service Company (“APS”).  Any use of the words “Company,” “we,” and “our” refer to Pinnacle West.  Each registrant is providing on its own behalf all of the information contained in this Form 10-Q that relates to such registrant and, where required, its subsidiaries.  Except as stated in the preceding sentence, neither registrant is providing any information that does not relate to such registrant, and therefore makes no representation as to any such information.  The information required with respect to each company is set forth within the applicable items.  Item 1 of this report includes Condensed Consolidated Financial Statements of Pinnacle West and Condensed Consolidated Financial Statements of APS.  Item 1 also includes Combined Notes to Condensed Consolidated Financial Statements.

1

FORWARD-LOOKING STATEMENTS
    This document contains forward-looking statements based on current expectations.  These forward-looking statements are often identified by words such as “estimate,” “predict,” “may,” “believe,” “plan,” “expect,” “require,” “intend,” “assume,” “project,” “anticipate,” “goal,” “seek,” “strategy,” “likely,” “should,” “will,” “could,” and similar words.  Because actual results may differ materially from expectations, we caution readers not to place undue reliance on these statements.  A number of factors could cause future results to differ materially from historical results, or from outcomes currently expected or sought by Pinnacle West or APS.  In addition to the Risk Factors described in Part I, Item 1A of the Pinnacle West/APS Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“2020 Form 10-K”), Part II, Item 1A of this report and in Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report, these factors include, but are not limited to:
•the potential effects of the continued Coronavirus (“COVID-19”) pandemic, including, but not limited to, demand for energy, economic growth, our employees and contractors, supply chain, expenses, capital markets, capital projects, operations and maintenance activities, uncollectable accounts, liquidity, cash flows or other unpredictable events;
•our ability to manage capital expenditures and operations and maintenance costs while maintaining reliability and customer service levels;
•variations in demand for electricity, including those due to weather, seasonality, the general economy or social conditions, customer and sales growth (or decline), the effects of energy conservation measures and distributed generation, and technological advancements;
•power plant and transmission system performance and outages;
•competition in retail and wholesale power markets;
•regulatory and judicial decisions, developments and proceedings;
•new legislation, ballot initiatives and regulation, including those relating to environmental requirements, regulatory and energy policy, nuclear plant operations and potential deregulation of retail electric markets;
•fuel and water supply availability;
•our ability to achieve timely and adequate rate recovery of our costs through our rates and adjustor recovery mechanisms, including returns on and of debt and equity capital investment;
•our ability to meet renewable energy and energy efficiency mandates and recover related costs;
•the ability of APS to achieve its clean energy goals (including a goal by 2050 of 100% clean, carbon-free electricity) and, if these goals are achieved, the impact of such achievement on APS, its customers, and its business, financial condition and results of operations;
•risks inherent in the operation of nuclear facilities, including spent fuel disposal uncertainty;
•current and future economic conditions in Arizona, including in real estate markets;
•the direct or indirect effect on our facilities or business from cybersecurity threats or intrusions, data security breaches, terrorist attack, physical attack, severe storms, droughts, or other catastrophic events, such as fires, explosions, pandemic health events, or similar occurrences;
•the development of new technologies which may affect electric sales or delivery;
•the cost of debt and equity capital and the ability to access capital markets when required;
•environmental, economic and other concerns surrounding coal-fired generation, including regulation of greenhouse gas emissions;
•volatile fuel and purchased power costs;
•the investment performance of the assets of our nuclear decommissioning trust, pension, and other postretirement benefit plans and the resulting impact on future funding requirements;
•the liquidity of wholesale power markets and the use of derivative contracts in our business;
•potential shortfalls in insurance coverage;
•new accounting requirements or new interpretations of existing requirements;
•generation, transmission and distribution facility and system conditions and operating costs;
•the ability to meet the anticipated future need for additional generation and associated transmission facilities in our region;
•the willingness or ability of our counterparties, power plant participants and power plant landowners to meet contractual or other obligations or extend the rights for continued power plant operations; and
2

•restrictions on dividends or other provisions in our credit agreements and Arizona Corporation Commission (“ACC”) orders. 
These and other factors are discussed in the Risk Factors described in Part I, Item 1A of our 2020 Form 10-K, Part II, Item 1A of this report, and in Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report, which readers should review carefully before placing any reliance on our financial statements or disclosures.  Neither Pinnacle West nor APS assumes any obligation to update these statements, even if our internal estimates change, except as required by law.
3

PART I — FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

 INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

						
 	Page	
 	 	
Pinnacle West Condensed Consolidated Statements of Income for Three and Six Months Ended June 30, 2021 and 2020	5	
Pinnacle West Condensed Consolidated Statements of Comprehensive Income for Three and Six Months Ended June 30, 2021 and 2020	6	
Pinnacle West Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	7	
Pinnacle West Condensed Consolidated Statements of Cash Flows for Six Months Ended June 30, 2021 and 2020	9	
Pinnacle West Condensed Consolidated Statements of Changes in Equity for Three and Six Months Ended June 30, 2021 and 2020	10	
 		
APS Condensed Consolidated Statements of Income for Three and Six Months Ended June 30, 2021 and 2020	12	
APS Condensed Consolidated Statements of Comprehensive Income for Three and Six Months Ended June 30, 2021 and 2020	13	
APS Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020	14	
APS Condensed Consolidated Statements of Cash Flows for Six Months Ended June 30, 2021 and 2020	16	
APS Condensed Consolidated Statements of Changes in Equity for Three and Six Months Ended June 30, 2021 and 2020	17	
		
Combined Notes to Condensed Consolidated Financial Statements	19	
Note 1. Consolidation and Nature of Operations	19	
Note 2. Revenue	20	
Note 3. Long-Term Debt and Liquidity Matters	22	
Note 4. Regulatory Matters	23	
Note 5. Retirement Plans and Other Postretirement Benefits	43	
Note 6. Palo Verde Sale Leaseback Variable Interest Entities	45	
Note 7. Derivative Accounting	46	
Note 8. Commitments and Contingencies	50	
Note 9. Other Income and Other Expense	57	
Note 10. Earnings Per Share	58	
Note 11. Fair Value Measurements	58	
Note 12. Investment in Nuclear Decommissioning Trusts and Other Special Use Funds	63	
	
Note 13. Changes in Accumulated Other Comprehensive Loss	67	
Note 14. Income Taxes	69	
Note 15. Leases	70	
Note 16. Asset Retirement Obligations	72	
Note 17. New Accounting Standards	73	

4

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars and shares in thousands, except per share amounts)

																											
 		Three Months Ended
June 30,		Six Months Ended
June 30,	
 		2021		2020		2021		2020	
									
OPERATING REVENUES (NOTE 2)		$	1,000,249 			$	929,590 			$	1,696,724 			$	1,591,520 		
									
OPERATING EXPENSES		 		 					
Fuel and purchased power		269,835 			238,382 			468,062 			426,903 		
Operations and maintenance		229,690 			219,392 			459,745 			440,710 		
Depreciation and amortization		158,750 			152,482 			316,570 			306,561 		
Taxes other than income taxes		59,495 			56,768 			118,978 			113,536 		
Other expenses		4,093 			692 			7,449 			1,514 		
Total		721,863 			667,716 			1,370,804 			1,289,224 		
OPERATING INCOME		278,386 			261,874 			325,920 			302,296 		
OTHER INCOME (DEDUCTIONS)		 		 					
Allowance for equity funds used during construction		9,990 			8,811 			19,197 			16,508 		
Pension and other postretirement non-service credits — net		28,175 			14,142 			55,966 			28,053 		
Other income (Note 9)		12,207 			16,670 			24,636 			29,239 		
Other expense (Note 9)		(5,184)			(4,036)			(9,037)			(8,820)		
Total		45,188 			35,587 			90,762 			64,980 		
INTEREST EXPENSE		 		 					
Interest charges		62,777 			62,690 			124,715 			121,924 		
Allowance for borrowed funds used during construction		(5,199)			(4,749)			(10,193)			(8,825)		
Total		57,578 			57,941 			114,522 			113,099 		
INCOME BEFORE INCOME TAXES		265,996 			239,520 			302,160 			254,177 		
INCOME TAXES		46,560 			41,061 			42,210 			20,852 		
NET INCOME		219,436 			198,459 			259,950 			233,325 		
Less: Net income attributable to noncontrolling interests (Note 6)		3,739 			4,874 			8,612 			9,747 		
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	215,697 			$	193,585 			$	251,338 			$	223,578 		
									
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING — BASIC		112,882 			112,638 			112,855 			112,616 		
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING — DILUTED		113,223 			112,879 			113,158 			112,871 		
									
EARNINGS PER WEIGHTED-AVERAGE COMMON SHARE OUTSTANDING		 		 					
Net income attributable to common shareholders — basic		$	1.91 			$	1.72 			$	2.23 			$	1.99 		
Net income attributable to common shareholders — diluted		$	1.91 			$	1.71 			$	2.22 			$	1.98 		
 
The accompanying notes are an integral part of the financial statements.
5

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)

																								
 	Three Months Ended
June 30,		Six Months Ended
June 30,	
 	2021		2020		2021		2020	
								
NET INCOME	$	219,436 			$	198,459 			$	259,950 			$	233,325 		
								
OTHER COMPREHENSIVE INCOME, NET OF TAX	 		 					
Derivative instruments:	 		 					
Net unrealized gain (loss), net of tax benefit (expense) of $(286), $513, $(372) and $805	870 			(1,549)			1,132 			(1,257)		
Reclassification of net realized gain, net of tax expense of $0, $87, $0 and $481	— 			262 			— 			282 		
 Pension and other postretirement benefit activity, net of tax benefit (expense) $(21), $334, $(357) and $90	64 			(1,009)			1,086 			196 		
Total other comprehensive income	934 			(2,296)			2,218 			(779)		
								
COMPREHENSIVE INCOME	220,370 			196,163 			262,168 			232,546 		
Less: Comprehensive income attributable to noncontrolling interests	3,739 			4,874 			8,612 			9,747 		
								
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	216,631 			$	191,289 			$	253,556 			$	222,799 		
 
The accompanying notes are an integral part of the financial statements.

6

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)

												
 	June 30, 2021		December 31, 2020	
ASSETS	 		 	
				
CURRENT ASSETS	 		 	
Cash and cash equivalents	$	14,146 			$	59,968 		
Customer and other receivables	357,130 			313,576 		
Accrued unbilled revenues	223,918 			132,197 		
Allowance for doubtful accounts (Note 2)	(22,769)			(19,782)		
Materials and supplies (at average cost)	340,672 			314,745 		
Fossil fuel (at average cost)	25,074 			19,552 		
Income tax receivable	— 			6,792 		
Assets from risk management activities (Note 7)	82,309 			2,931 		
Deferred fuel and purchased power regulatory asset (Note 4)	300,912 			175,835 		
Other regulatory assets (Note 4)	119,890 			115,878 		
Other current assets	81,901 			76,627 		
Total current assets	1,523,183 			1,198,319 		
INVESTMENTS AND OTHER ASSETS	 		 	
Nuclear decommissioning trusts (Notes 11 and 12)	1,223,088 			1,138,435 		
Other special use funds (Notes 11 and 12)	358,436 			254,509 		
Other assets	112,091 			92,922 		
Total investments and other assets	1,693,615 			1,485,866 		
PROPERTY, PLANT AND EQUIPMENT	 		 	
Plant in service and held for future use	21,236,805 			20,837,885 		
Accumulated depreciation and amortization	(7,278,877)			(7,110,310)		
Net	13,957,928 			13,727,575 		
Construction work in progress	1,062,911 			937,384 		
Palo Verde sale leaseback, net of accumulated depreciation (Note 6)	96,101 			98,036 		
Intangible assets, net of accumulated amortization	279,911 			282,570 		
Nuclear fuel, net of accumulated amortization	109,110 			113,645 		
Total property, plant and equipment	15,505,961 			15,159,210 		
DEFERRED DEBITS	 		 	
Regulatory assets (Note 4)	1,173,977 			1,133,987 		
Operating lease right-of-use assets (Note 15)	718,948 			505,064 		
Assets for pension and other postretirement benefits (Note 5)	407,821 			502,992 		
Other	38,073 			34,983 		
Total deferred debits	2,338,819 			2,177,026 		
				
TOTAL ASSETS	$	21,061,578 			$	20,020,421 		
 
The accompanying notes are an integral part of the financial statements.

7

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)

 	June 30, 2021		December 31, 2020	
LIABILITIES AND EQUITY	 		 	
				
CURRENT LIABILITIES	 		 	
Accounts payable	$	377,157 			$	318,585 		
Accrued taxes	183,037 			159,551 		
Accrued interest	56,864 			56,962 		
Common dividends payable	93,610 			93,531 		
Short-term borrowings (Note 3)	504,700 			169,000 		
Current maturities of long-term debt (Note 3)	150,000 			— 		
Customer deposits	44,419 			48,340 		
Liabilities from risk management activities (Note 7)	1,512 			7,557 		
Liabilities for asset retirements (Note 16)	15,646 			15,586 		
	
Operating lease liabilities (Note 15)	128,673 			74,785 		
Regulatory liabilities (Note 4)	327,612 			229,088 		
Other current liabilities	140,038 			187,448 		
Total current liabilities	2,023,268 			1,360,433 		
LONG-TERM DEBT LESS CURRENT MATURITIES (Note 3)	6,315,927 			6,314,266 		
DEFERRED CREDITS AND OTHER	 		 	
Deferred income taxes	2,192,169 			2,135,403 		
Regulatory liabilities (Note 4)	2,443,312 			2,450,169 		
Liabilities for asset retirements (Note 16)	716,344 			689,497 		
Liabilities for pension benefits (Note 5)	163,207 			166,484 		
Liabilities from risk management activities (Note 7)	— 			11,062 		
Customer advances	247,531 			221,032 		
Coal mine reclamation	172,357 			170,097 		
Deferred investment tax credit	187,720 			191,372 		
Unrecognized tax benefits	6,002 			5,834 		
Operating lease liabilities (Note 15)	547,164 			361,336 		
Other	211,678 			190,643 		
Total deferred credits and other	6,887,484 			6,592,929 		
COMMITMENTS AND CONTINGENCIES (NOTE 8)				
EQUITY	 		 	
Common stock, no par value; authorized 150,000,000 shares, 112,819,703 and 112,760,051 issued at respective dates	2,692,015 			2,677,482 		
Treasury stock at cost; 36,153 and 72,006 shares at respective dates	(3,079)			(6,289)		
Total common stock	2,688,936 			2,671,193 		
Retained earnings	3,089,266 			3,025,106 		
Accumulated other comprehensive loss	(60,578)			(62,796)		
Total shareholders’ equity	5,717,624 			5,633,503 		
Noncontrolling interests (Note 6)	117,275 			119,290 		
Total equity	5,834,899 			5,752,793 		
				
TOTAL LIABILITIES AND EQUITY	$	21,061,578 			$	20,020,421 		
The accompanying notes are an integral part of the financial statements.
8

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)

 	Six Months Ended
June 30,	
 	2021		2020	
CASH FLOWS FROM OPERATING ACTIVITIES	 		 	
Net income	$	259,950 			$	233,325 		
Adjustments to reconcile net income to net cash provided by operating activities:	 		 	
Depreciation and amortization including nuclear fuel	350,536 			343,173 		
Deferred fuel and purchased power	(135,905)			(26,473)		
Deferred fuel and purchased power amortization	10,828 			(4,815)		
Allowance for equity funds used during construction	(19,197)			(16,508)		
Deferred income taxes	30,231 			22,229 		
Deferred investment tax credit	(3,651)			(3,386)		
	
Stock compensation	13,484 			9,130 		
Changes in current assets and liabilities:	 		 	
Customer and other receivables	(41,138)			7,767 		
Accrued unbilled revenues	(91,721)			(63,413)		
Materials, supplies and fossil fuel	(31,449)			10,295 		
Income tax receivable	6,792 			4,605 		
Other current assets	(14,021)			(24,896)		
Accounts payable	66,558 			17,772 		
Accrued taxes	23,486 			6,588 		
Other current liabilities	(39,638)			(45,334)		

	
Change in other long-term assets	(118,036)			(4,885)		
Change in other long-term liabilities	45,241 			(96,142)		
Net cash flow provided by operating activities	312,350 			369,032 		
CASH FLOWS FROM INVESTING ACTIVITIES			 	
Capital expenditures	(681,148)			(676,973)		
Contributions in aid of construction	32,104 			31,295 		
Allowance for borrowed funds used during construction	(10,193)			(8,825)		
Proceeds from nuclear decommissioning trusts sales and other special use funds	587,842 			391,859 		
Investment in nuclear decommissioning trusts and other special use funds	(588,982)			(393,000)		
Other	10,809 			3,123 		
Net cash flow used for investing activities	(649,568)			(652,521)		
CASH FLOWS FROM FINANCING ACTIVITIES	 		 	
Issuance of long-term debt	150,000 			1,088,886 		
	
Short-term borrowing and (repayments) — net	354,700 			184,225 		
Short-term debt borrowings under revolving credit facility	— 			751,690 		
Short-term debt repayments under revolving credit facility	(19,000)			(758,690)		
Dividends paid on common stock	(183,500)			(172,566)		
Repayment of long-term debt	— 			(800,000)		
Common stock equity issuance — net of purchases	(176)			(2,204)		
Distributions to noncontrolling interests	(10,628)			(11,372)		
	
Net cash flow provided by financing activities	291,396 			279,969 		
	
NET DECREASE IN CASH AND CASH EQUIVALENTS	(45,822)			(3,520)		
	
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	59,968 			10,283 		
	
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	14,146 			$	6,763 		
The accompanying notes are an integral part of the financial statements.
9

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
(dollars in thousands)

	Three Months Ended June 30, 2021	
	Common Stock		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount		Shares		Amount									
Balance, April 1, 2021	112,791,565 			$	2,687,052 			(44,338)			$	(3,776)			$	3,060,752 			$	(61,512)			$	124,164 			$	5,806,680 		
Net income			— 					— 			215,697 			— 			3,739 			219,436 		
Other comprehensive income			— 					— 			— 			934 			— 			934 		
Dividends on common stock ($1.66 per share)			— 					— 			(187,181)			— 			— 			(187,181)		
Issuance of common stock	28,138 			4,963 					— 			— 			— 			— 			4,963 		
	
Reissuance of treasury stock for stock-based compensation and other			— 			8,185 			697 			— 			— 			— 			697 		
Other			— 					— 			(2)			— 			— 			(2)		
Capital activities by noncontrolling interests			— 					— 			— 			— 			(10,628)			(10,628)		
Balance, June 30, 2021	112,819,703 			$	2,692,015 			(36,153)			$	(3,079)			$	3,089,266 			$	(60,578)			$	117,275 			$	5,834,899 		

	Three Months Ended June 30, 2020	
	Common Stock		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount		Shares		Amount									
Balance, April 1, 2020	112,563,610 			$	2,664,387 			(72,302)			$	(7,000)			$	2,867,610 			$	(55,579)			$	127,414 			$	5,596,832 		
Net income			— 					— 			193,585 			— 			4,874 			198,459 		
Other comprehensive loss			— 					— 			— 			(2,296)			— 			(2,296)		
Dividends on common stock ($1.57 per share)			— 					— 			(176,086)			— 			— 			(176,086)		
Issuance of common stock	27,514 			1,131 					— 			— 			— 			— 			1,131 		
Purchase of treasury stock (a)			— 			(12,346)			(924)			— 			— 			— 			(924)		
Reissuance of treasury stock for stock-based compensation and other			— 			48,665 			4,734 			— 			— 			— 			4,734 		
	
Other			— 					— 			— 			— 			(1)			(1)		
Capital activities by noncontrolling interests			— 					— 			— 			— 			(11,372)			(11,372)		
Balance, June 30, 2020	112,591,124 			$	2,665,518 			(35,983)			$	(3,190)			$	2,885,109 			$	(57,875)			$	120,915 			$	5,610,477 		

(a)Primarily represents shares of common stock withheld from certain stock awards for tax purposes.
    
The accompanying notes are an integral part of the financial statements.

10

PINNACLE WEST CAPITAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
(dollars in thousands

	Six Months Ended June 30, 2021	
	Common Stock		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount		Shares		Amount									
Balance, Jan 1, 2021	112,760,051 			$	2,677,482 			(72,006)			$	(6,289)			$	3,025,106 			$	(62,796)			$	119,290 			$	5,752,793 		
Net income			— 					— 			251,338 			— 			8,612 			259,950 		
Other comprehensive income			— 					— 			— 			2,218 			— 			2,218 		
Dividends on common stock ($1.66 per share)			— 					— 			(187,176)			— 			— 			(187,176)		
Issuance of common stock	59,652 			14,533 							— 			— 			— 			14,533 		
Purchase of treasury stock (a)			— 			(17,437)			(1,333)			— 			— 			— 			(1,333)		
Reissuance of treasury stock for stock-based compensation and other			— 			53,290 			4,543 			— 			— 			— 			4,543 		
Other									(2)			— 			1 			(1)		
Capital activities by noncontrolling interests			— 					— 			— 			— 			(10,628)			(10,628)		
Balance, June 30, 2021	112,819,703 			$	2,692,015 			(36,153)			$	(3,079)			$	3,089,266 			$	(60,578)			$	117,275 			$	5,834,899 		

	Six Months Ended June 30, 2020	
	Common Stock		Treasury Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount		Shares		Amount									
Balance, Jan 1, 2020	112,540,126 			$	2,659,561 			(103,546)			$	(9,427)			$	2,837,610 			$	(57,096)			$	122,540 			$	5,553,188 		
Net income			— 					— 			223,578 			— 			9,747 			233,325 		
Other comprehensive loss			— 					— 			— 			(779)			— 			(779)		
Dividends on common stock ($1.57 per share)			— 					— 			(176,079)			— 			— 			(176,079)		
Issuance of common stock	50,998 			5,957 					— 			— 			— 			— 			5,957 		
Purchase of treasury stock (a)			— 			(33,070)			(3,010)			— 			— 			— 			(3,010)		
Reissuance of treasury stock for stock-based compensation and other			— 			100,633 			9,247 			— 			— 			— 			9,247 		
Capital activities by noncontrolling interests			— 					— 			— 			— 			(11,372)			(11,372)		
Balance, June 30, 2020	112,591,124 			$	2,665,518 			(35,983)			$	(3,190)			$	2,885,109 			$	(57,875)			$	120,915 			$	5,610,477 		

(a)Primarily represents shares of common stock withheld from certain stock awards for tax purposes.
    
The accompanying notes are an integral part of the financial statements.
11

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(dollars in thousands)

																											
 		Three Months Ended
June 30,		Six Months Ended
June 30,	
 		2021		2020		2021		2020	
									
OPERATING REVENUES (NOTE 2)		$	1,000,249 			$	929,590 			$	1,696,724 			$	1,591,520 		
									
OPERATING EXPENSES		 		 					
Fuel and purchased power		269,835 			238,382 			468,062 			426,903 		
Operations and maintenance		226,698 			216,221 			453,099 			434,486 		
Depreciation and amortization		158,728 			152,460 			316,528 			306,518 		
Taxes other than income taxes		59,478 			56,758 			118,950 			113,516 		
Other expenses		4,093 			692 			7,449 			1,514 		
Total		718,832 			664,513 			1,364,088 			1,282,937 		
OPERATING INCOME		281,417 			265,077 			332,636 			308,583 		
OTHER INCOME (DEDUCTIONS)		 		 					
Allowance for equity funds used during construction		9,990 			8,811 			19,197 			16,508 		
Pension and other postretirement non-service credits — net		28,234 			14,421 			56,071 			28,683 		
Other income (Note 9)		11,563 			13,272 			23,523 			24,905 		
Other expense (Note 9)		(4,261)			(3,859)			(7,611)			(8,527)		
Total		45,526 			32,645 			91,180 			61,569 		
INTEREST EXPENSE		 		 					
Interest charges		59,930 			56,802 			119,318 			112,538 		
Allowance for borrowed funds used during construction		(5,199)			(4,749)			(10,193)			(8,825)		
Total		54,731 			52,053 			109,125 			103,713 		
INCOME BEFORE INCOME TAXES		272,212 			245,669 			314,691 			266,439 		
INCOME TAXES		48,725 			43,677 			51,044 			24,229 		
NET INCOME		223,487 			201,992 			263,647 			242,210 		
Less: Net income attributable to noncontrolling interests (Note 6)		3,739 			4,874 			8,612 			9,747 		
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDER		$	219,748 			$	197,118 			$	255,035 			$	232,463 		
 
The accompanying notes are an integral part of the financial statements.
12

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(dollars in thousands)

																								
 	Three Months Ended
June 30,		Six Months Ended
June 30,	
 	2021		2020		2021		2020	
								
NET INCOME	$	223,487 			$	201,992 			$	263,647 			$	242,210 		
								
OTHER COMPREHENSIVE INCOME, NET OF TAX	 		 					
Derivative instruments:	 		 					
 Net unrealized gain, net of tax benefit of $0, $0, $0 and $292	— 			— 			— 			292 		
Reclassification of net realized gain, net of tax expense $0, $87, $0 and $481	— 			262 			— 			282 		
Pension and other postretirement benefits activity, net of tax benefit (expense) $(53), $361, $(357) and $124	159 			(1,090)			1,086 			(77)		
Total other comprehensive income	159 			(828)			1,086 			497 		
								
COMPREHENSIVE INCOME	223,646 			201,164 			264,733 			242,707 		
Less: Comprehensive income attributable to noncontrolling interests	3,739 			4,874 			8,612 			9,747 		
								
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDER	$	219,907 			$	196,290 			$	256,121 			$	232,960 		
 
The accompanying notes are an integral part of the financial statements.

13

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands)

												
	June 30,
2021		December 31,
2020	
ASSETS	 		 	
				
PROPERTY, PLANT AND EQUIPMENT	 		 	
Plant in service and held for future use	$	21,233,344 			$	20,834,424 		
Accumulated depreciation and amortization	(7,275,617)			(7,107,058)		
Net	13,957,727 			13,727,366 		
Construction work in progress	1,062,911 			937,384 		
Palo Verde sale leaseback, net of accumulated depreciation (Note 6)	96,101 			98,036 		
Intangible assets, net of accumulated amortization	279,755 			282,415 		
Nuclear fuel, net of accumulated amortization	109,110 			113,645 		
Total property, plant and equipment	15,505,604 			15,158,846 		
				
INVESTMENTS AND OTHER ASSETS	 		 	
Nuclear decommissioning trusts (Notes 11 and 12)	1,223,088 			1,138,435 		
Other special use funds (Notes 11 and 12)	358,436 			254,509 		
Other assets	68,248 			46,010 		
Total investments and other assets	1,649,772 			1,438,954 		
				
CURRENT ASSETS	 		 	
Cash and cash equivalents	11,954 			57,310 		
Customer and other receivables	357,023 			312,644 		
Accrued unbilled revenues	223,918 			132,197 		
Allowance for doubtful accounts (Note 2)	(22,769)			(19,782)		
Materials and supplies (at average cost)	340,672 			314,745 		
Fossil fuel (at average cost)	25,074 			19,552 		
	
Assets from risk management activities (Note 7)	82,309 			2,931 		
Deferred fuel and purchased power regulatory asset (Note 4)	300,912 			175,835 		
Other regulatory assets (Note 4)	119,890 			115,878 		
Other current assets	51,482 			47,593 		
Total current assets	1,490,465 			1,158,903 		
				
DEFERRED DEBITS	 		 	
Regulatory assets (Note 4)	1,173,977 			1,133,987 		
Operating lease right-of-use assets (Note 15)	717,411 			503,475 		
Assets for pension and other postretirement benefits (Note 5)	400,414 			495,673 		
Other	37,210 			34,413 		
Total deferred debits	2,329,012 			2,167,548 		
				
TOTAL ASSETS	$	20,974,853 			$	19,924,251 		

 The accompanying notes are an integral part of the financial statements.
14

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(dollars in thousands) 

	June 30,
2021		December 31,
2020	
LIABILITIES AND EQUITY	 		 	
				
CAPITALIZATION	 		 	
Common stock	$	178,162 			$	178,162 		
Additional paid-in capital	2,871,696 			2,871,696 		
Retained earnings	3,284,989 			3,216,955 		
Accumulated other comprehensive loss	(39,832)			(40,918)		
Total shareholder equity	6,295,015 			6,225,895 		
Noncontrolling interests (Note 6)	117,275 			119,290 		
Total equity	6,412,290 			6,345,185 		
Long-term debt less current maturities (Note 3)	5,819,198 			5,817,945 		
Total capitalization	12,231,488 			12,163,130 		
CURRENT LIABILITIES	 		 	

Short-term borrowings (Note 3)	495,000 			— 		
Accounts payable	369,905 			311,699 		
Accrued taxes	193,409 			148,970 		
Accrued interest	56,202 			56,322 		
Common dividends payable	93,500 			93,500 		
Customer deposits	44,419 			48,340 		
Liabilities from risk management activities (Note 7)	1,512 			7,557 		
Liabilities for asset retirements (Note 16)	15,646 			15,586 		
	
Operating lease liabilities (Note 15)	128,578 			74,695 		
Regulatory liabilities (Note 4)	327,612 			229,088 		
Other current liabilities	142,926 			190,420 		
Total current liabilities	1,868,709 			1,176,177 		
DEFERRED CREDITS AND OTHER	 		 	
Deferred income taxes	2,192,580 			2,143,673 		
Regulatory liabilities (Note 4)	2,443,312 			2,450,169 		
Liabilities for asset retirements (Note 16)	716,344 			689,497 		
Liabilities for pension benefits (Note 5)	146,728 			148,943 		
Liabilities from risk management activities (Note 7)	— 			11,062 		
Customer advances	247,531 			221,032 		
Coal mine reclamation	172,357 			170,097 		
Deferred investment tax credit	187,720 			191,372 		
Unrecognized tax benefits	39,995 			39,410 		
Operating lease liabilities (Note 15)	545,534 			359,653 		
Other	182,555 			160,036 		
Total deferred credits and other	6,874,656 			6,584,944 		
COMMITMENTS AND CONTINGENCIES (NOTE 8)				
TOTAL LIABILITIES AND EQUITY	$	20,974,853 			$	19,924,251 		

The accompanying notes are an integral part of the financial statements.
15

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)

 	Six Months Ended
June 30,	
 	2021		2020	
CASH FLOWS FROM OPERATING ACTIVITIES	 		 	
Net income	$	263,647 			$	242,210 		
Adjustments to reconcile net income to net cash provided by operating activities:	 		 	
Depreciation and amortization including nuclear fuel	350,494 			343,130 		
Deferred fuel and purchased power	(135,905)			(26,473)		
Deferred fuel and purchased power amortization	10,828 			(4,815)		
Allowance for equity funds used during construction	(19,197)			(16,508)		
Deferred income taxes	23,161 			15,233 		
Deferred investment tax credit	(3,651)			(3,386)		
	
Changes in current assets and liabilities:	 		 	
Customer and other receivables	(41,963)			824 		
Accrued unbilled revenues	(91,721)			(63,413)		
Materials, supplies and fossil fuel	(31,449)			10,295 		
Income tax receivable	— 			7,313 		
Other current assets	(12,636)			(19,752)		
Accounts payable	66,192 			17,915 		
Accrued taxes	44,439 			14,551 		
Other current liabilities	(39,749)			(40,381)		

Change in other long-term assets	(114,154)			(7,356)		
Change in other long-term liabilities	46,327 			(91,983)		
Net cash flow provided by operating activities	314,663 			377,404 		
CASH FLOWS FROM INVESTING ACTIVITIES	 		 	
Capital expenditures	(681,148)			(676,973)		
Contributions in aid of construction	32,104 			31,295 		
Allowance for borrowed funds used during construction	(10,193)			(8,825)		
Proceeds from nuclear decommissioning trusts sales and other special use funds	587,842 			391,859 		
Investment in nuclear decommissioning trusts and other special use funds	(588,982)			(393,000)		
Other	2,986 			(169)		
Net cash flow used for investing activities	(657,391)			(655,813)		
CASH FLOWS FROM FINANCING ACTIVITIES	 		 	
Issuance of long-term debt	— 			591,936 		
Short-term borrowings and (repayments) — net	495,000 			219,900 		
Short-term debt borrowings under revolving credit facility	— 			540,000 		
Short-term debt repayments under revolving credit facility	— 			(540,000)		
Repayment of long-term debt	— 			(350,000)		
Dividends paid on common stock	(187,000)			(176,000)		
Distributions to noncontrolling interests	(10,628)			(11,372)		
Net cash flow provided by financing activities	297,372 			274,464 		
NET DECREASE IN CASH AND CASH EQUIVALENTS	(45,356)			(3,945)		
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	57,310 			10,169 		
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	11,954 			$	6,224 		

The accompanying notes are an integral part of the financial statements.
16

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
(dollars in thousands)

	Three Months Ended June 30, 2021	
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount											
Balance, April 1, 2021	71,264,947 			$	178,162 			$	2,871,696 			$	3,252,244 			$	(39,991)			$	124,164 			$	6,386,275 		
Net Income			— 			— 			219,748 			— 			3,739 			223,487 		
Other comprehensive income			— 			— 			— 			159 			— 			159 		
Dividends on common stock			— 			— 			(187,000)			— 			— 			(187,000)		
Other			— 			— 			(3)			— 			— 			(3)		
Capital activities by noncontrolling activities			— 			— 			— 			— 			(10,628)			(10,628)		
Balance, June 30, 2021	71,264,947 			$	178,162 			$	2,871,696 			$	3,284,989 			$	(39,832)			$	117,275 			$	6,412,290 		

	Three Months Ended June 30, 2020	
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount											
Balance, April 1, 2020	71,264,947 			$	178,162 			$	2,721,696 			$	3,047,269 			$	(34,197)			$	127,414 			$	6,040,344 		
Net Income			— 			— 			197,118 			— 			4,874 			201,992 		
Other comprehensive loss			— 			— 			— 			(828)			— 			(828)		
Dividends on common stock			— 			— 			(176,000)			— 			— 			(176,000)		
Other			— 			— 			2 			— 			(1)			1 		
Capital activities by noncontrolling activities			— 			— 			— 			— 			(11,372)			(11,372)		
Balance, June 30, 2020	71,264,947 			$	178,162 			$	2,721,696 			$	3,068,389 			$	(35,025)			$	120,915 			$	6,054,137 		

The accompanying notes are an integral part of the financial statements.

17

ARIZONA PUBLIC SERVICE COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(unaudited)
(dollars in thousands)
																																										
	Six Months Ended June 30, 2021	
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount											
Balance, January 1, 2021	71,264,947 			$	178,162 			$	2,871,696 			$	3,216,955 			$	(40,918)			$	119,290 			$	6,345,185 		
Net Income			— 			— 			255,035 			— 			8,612 			263,647 		
Other comprehensive income			— 			— 			— 			1,086 			— 			1,086 		
Dividends on common stock			— 			— 			(187,000)							(187,000)		
Other			— 			— 			(1)			— 			1 			— 		
Capital activities by noncontrolling activities			— 			— 					— 			(10,628)			(10,628)		
Balance, June 30, 2021	71,264,947 			$	178,162 			$	2,871,696 			$	3,284,989 			$	(39,832)			$	117,275 			$	6,412,290 		

																																										
	Six Months Ended June 30, 2020	
	Common Stock		Additional Paid-In Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interests		Total	
	Shares		Amount											
Balance, January 1, 2020	71,264,947 			$	178,162 			$	2,721,696 			$	3,011,927 			$	(35,522)			$	122,540 			$	5,998,803 		
Net Income			— 			— 			232,463 			— 			9,747 			242,210 		
Other comprehensive income			— 			— 			— 			497 			— 			497 		
Dividends on common stock			— 			— 			(176,000)			— 			— 			(176,000)		
Other			— 			— 			(1)			— 			— 			(1)		
Capital activities by noncontrolling activities			— 			— 			— 			— 			(11,372)			(11,372)		
Balance, June 30, 2020	71,264,947 			$	178,162 			$	2,721,696 			$	3,068,389 			$	(35,025)			$	120,915 			$	6,054,137 		

The accompanying notes are an integral part of the financial statements.

18

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.     Consolidation and Nature of Operations
 
The unaudited condensed consolidated financial statements include the accounts of Pinnacle West and our subsidiaries:  APS, 4C Acquisition, LLC (“4CA”), Bright Canyon Energy Corporation (“BCE”) and El Dorado Investment Company (“El Dorado”).  See Note 8 for more information on 4CA matters. Intercompany accounts and transactions between the consolidated companies have been eliminated.  The unaudited condensed consolidated financial statements for APS include the accounts of APS and the Palo Verde Generating Station (“Palo Verde”) sale leaseback variable interest entities (“VIEs”) (see Note 6 for further discussion).  Our accounting records are maintained in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Amounts reported in our interim Condensed Consolidated Statements of Income are not necessarily indicative of amounts expected for the respective annual periods, due to the effects of seasonal temperature variations on energy consumption, timing of maintenance on electric generating units (“EGU”), and other factors.
 
Our condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments except as otherwise disclosed in the notes) that we believe are necessary for the fair presentation of our financial position, results of operations, and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in conformity with GAAP have been condensed or omitted pursuant to such regulations, although we believe that the disclosures provided are adequate to make the interim information presented not misleading. The accompanying condensed consolidated financial statements and these notes should be read in conjunction with the audited consolidated financial statements and notes included in our 2020 Form 10-K.

On June 30, 2020, the United States Federal Energy Regulatory Commission (“FERC”) issued an order granting a waiver request related to the existing Allowance for Funds Used During Construction (“AFUDC”) rate calculation beginning March 1, 2020 through February 28, 2021.  On February 23, 2021, this waiver was extended until September 30, 2021. The order provides a simplified approach that companies may elect to implement in order to minimize the significant distorted effect on the AFUDC formula resulting from increased short-term debt financing during the COVID-19 pandemic.  APS has adopted this simplified approach to computing the AFUDC composite rate by using a simple average of the actual historical short-term debt balances for 2019, instead of current period short-term debt balances, and has left all other aspects of the AFUDC formula composite rate calculation unchanged. This change impacts the AFUDC composite rate in both 2020 and 2021 but does not impact prior years.  Furthermore, the change in the composite rate calculation does not impact our accounting treatment for these costs. The change will not have a material impact on our financial statements. See Note 1 in our 2020 Form 10-K for information on the accounting treatment for AFUDC.

19

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Supplemental Cash Flow Information

The following table summarizes supplemental Pinnacle West cash flow information (dollars in thousands):

 	Six Months Ended
June 30,	
 	2021		2020	
Cash paid (received) during the period for:				
Income taxes, net of refunds	$	(788)			$	(3,028)		
Interest, net of amounts capitalized	112,010 			107,417 		
Significant non-cash investing and financing activities:				
Accrued capital expenditures	$	105,515 			$	87,815 		

Dividends accrued but not yet paid	93,610 			88,066 		

The following table summarizes supplemental APS cash flow information (dollars in thousands):

	Six Months Ended
June 30,	
 	2021		2020	
Cash paid (received) during the period for:				
Income taxes, net of refunds	$	3,317 			$	— 		
Interest, net of amounts capitalized	107,044 			100,991 		
Significant non-cash investing and financing activities:				
Accrued capital expenditures	$	105,515 			$	87,815 		

Dividends accrued but not yet paid	93,500 			88,000 		

2.    Revenue
Sources of Revenue
The following table provides detail of Pinnacle West’s consolidated revenue disaggregated by revenue sources (dollars in thousands):

		Three Months Ended June 30,		Six Months Ended June 30,	
		2021	2020		2021	2020	
Retail Electric Revenue							
Residential		$	531,717 		$	515,128 			$	872,555 		$	840,201 		
Non-Residential		420,995 		381,121 			735,778 		684,472 		
Wholesale Energy Sales		18,007 		15,927 			35,604 		30,595 		
Transmission Services for Others		22,579 		14,766 			41,572 		30,693 		
Other Sources		6,951 		2,648 			11,215 		5,559 		
Total operating revenues		$	1,000,249 		$	929,590 			$	1,696,724 		$	1,591,520 		

Retail Electric Revenue. Pinnacle West’s retail electric revenue is generated by wholly-owned regulated subsidiary APS’s sale of electricity to our regulated customers within the authorized service territory
20

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
at tariff rates approved by the ACC and based on customer usage. Revenues related to the sale of electricity are generally recognized when service is rendered or electricity is delivered to customers. The billing of electricity sales to individual customers is based on the reading of their meters. We obtain customers’ meter data on a systematic basis throughout the month, and generally bill customers within a month from when service was provided. Customers are generally required to pay for services within 15 days of when the services are billed. See “Allowance for Doubtful Accounts” discussion below for additional details regarding payment terms.

Wholesale Energy Sales and Transmission Services for Others. Revenues from wholesale energy sales and transmission services for others represent energy and transmission sales to wholesale customers. These activities primarily consist of managing fuel and purchased power risks in connection with the cost of serving our retail customers’ energy requirements. We may also sell into the wholesale markets generation that is not needed for APS’s retail load. Our wholesale activities and tariff rates are regulated by FERC.

In the electricity business, some contracts to purchase energy are settled by netting against other contracts to sell electricity. This is referred to as a book-out, and usually occurs in contracts that have the same terms (product type, quantities, and delivery points) and for which power does not flow. We net these book-outs, which reduces both wholesale revenues and fuel and purchased power costs.

Revenue Activities

Our revenues primarily consist of activities that are classified as revenues from contracts with customers. We derive our revenues from contracts with customers primarily from sales of electricity to our regulated retail customers. Revenues from contracts with customers also include wholesale and transmission activities. Our revenues from contracts with customers for the three and six months ended June 30, 2021 were $980 million and $1,663 million, respectively and for the three and six months ended June 30, 2020 were $915 million and $1,563 million, respectively.

We have certain revenues that do not meet the specific accounting criteria to be classified as revenues from contracts with customers. For the three and six months ended June 30, 2021 our revenues that do not qualify as revenue from contracts with customers were $20 million and $34 million, respectively, and for the three and six months ended June 30, 2020 were $15 million and $29 million, respectively. This relates primarily to certain regulatory cost recovery mechanisms that are considered alternative revenue programs. We recognize revenue associated with alternative revenue programs when specific events permitting recognition are completed. Certain amounts associated with alternative revenue programs will subsequently be billed to customers; however, we do not reclassify billed amounts into revenue from contracts with customers. See Note 4 for a discussion of our regulatory cost recovery mechanisms.

Contract Assets and Liabilities from Contracts with Customers

There were no material contract assets, contract liabilities, or deferred contract costs recorded on the Condensed Consolidated Balance Sheets as of June 30, 2021 or December 31, 2020.

Allowance for Doubtful Accounts

The allowance for doubtful accounts represents our best estimate of accounts receivable and accrued unbilled revenues that will ultimately be uncollectible due to credit loss risk. The allowance includes a write-off component that is calculated by applying an estimated write-off factor to retail electric revenues. The write-off factor used to estimate uncollectible accounts is based upon consideration of historical collections experience, the current and forecasted economic environment, changes to our collection policies, and management’s best estimate of future collections success.
21

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On March 13, 2020, due to the COVID-19 pandemic we voluntarily suspended disconnections of customers for nonpayment. The suspension of customer disconnections was extended from March 13, 2020 through December 31, 2020. The suspension of disconnection of customers for nonpayment ended on January 1, 2021 and certain customers with past due balances were placed on eight-month payment arrangements. During this time our disconnection policies were also impacted by the Summer Disconnection Moratorium. These circumstances and the on-going COVID-19 pandemic have impacted our allowance for doubtful accounts, including our write-off factor. We continue to monitor the impacts of COVID-19, our disconnection policies, payment arrangements, among other considerations impacting our estimated write-off factor and allowance for doubtful accounts. See Note 4 for additional details.

The following table provides a rollforward of Pinnacle West’s allowance for doubtful accounts (dollars in thousands):
															
		June 30, 2021		December 31, 2020	
Allowance for doubtful accounts, balance at beginning of period		$	19,782 			$	8,171 		
Bad debt expense		10,048 			20,633 		
Actual write-offs		(7,061)			(9,022)		
Allowance for doubtful accounts, balance at end of period		$	22,769 			$	19,782 		

3.    Long-Term Debt and Liquidity Matters

Pinnacle West and APS maintain committed revolving credit facilities in order to enhance liquidity and provide credit support for their commercial paper programs, to refinance indebtedness, and for other general corporate purposes.
 
Pinnacle West

On May 5, 2020, Pinnacle West refinanced its 364-day $50 million term loan agreement with a new 364-day $31 million term loan agreement that would have matured May 4, 2021. Borrowings under the agreement bore interest at Eurodollar Rate plus 1.40% per annum. Pinnacle West repaid this agreement on April 27, 2021.

On December 23, 2020, Pinnacle West entered into a $150 million term loan facility that matures June 30, 2022. The proceeds were received on January 4, 2021 and used for general corporate purposes.

On May 28, 2021, Pinnacle West replaced its $200 million revolving credit facility that would have matured on July 11, 2023, with a new $200 million revolving credit facility that matures on May 28, 2026. Pinnacle West has the option to increase the amount of the facility up to a maximum of $300 million upon the satisfaction of certain conditions and with the consent of the lenders.  Interest rates are based on Pinnacle West’s senior unsecured debt credit ratings and the agreement includes a sustainability-linked pricing metric which permits an interest rate reduction or increase by meeting or missing targets related to specific environmental and employee health and safety sustainability objectives. The facility is available to support Pinnacle West’s general corporate purposes, including support for Pinnacle West's $200 million commercial paper program, for bank borrowings or for issuances of letters of credits. At June 30, 2021, Pinnacle West had no outstanding borrowings under its credit facility, no letters of credit outstanding under the credit facility and $9.7 million of outstanding commercial paper borrowings.

22

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APS

On May 28, 2021, APS replaced its two $500 million revolving credit facilities that would have matured in June 2022 and July 2023, with two new $500 million revolving credit facilities that total $1 billion and that mature on May 28, 2026.  APS may increase the amount of each facility up to a maximum of $700 million, for a total of $1.4 billion, upon the satisfaction of certain conditions and with the consent of the lenders.  Interest rates are based on APS’s senior unsecured debt credit ratings and the agreements include a sustainability-linked pricing metric which permits an interest rate reduction or increase by meeting or missing targets related to specific environmental and employee health and safety sustainability objectives. These facilities are available to support APS’s general corporate purposes, including support for APS's $750 million commercial paper program, for bank borrowings or for issuances of letters of credit.  At June 30, 2021, APS had no outstanding borrowings under its revolving credit facilities, no letters of credit outstanding under the credit facilities and $495 million of outstanding commercial paper borrowings.

On December 17, 2020, the ACC issued a financing order in which, subject to specified parameters and procedures, it approved APS’s short-term debt authorization equal to the sum of (i) 7% of APS’s capitalization, and (ii) $500 million (which is required to be used for costs relating to purchases of natural gas and power) and a long-term debt authorization of $7.5 billion.

See “Financial Assurances” in Note 8 for a discussion of other outstanding letters of credit.
 
Debt Fair Value
 
Our long-term debt fair value estimates are classified within Level 2 of the fair value hierarchy. The following table presents the estimated fair value of our long-term debt, including current maturities (dollars in thousands):
																								
 	As of June 30, 2021		As of December 31, 2020	
 	Carrying
Amount		Fair Value		Carrying
Amount		Fair Value	
Pinnacle West	$	646,729 			$	654,095 			$	496,321 			$	509,050 		
APS	5,819,198 			6,746,984 			5,817,945 			7,103,791 		
Total	$	6,465,927 			$	7,401,079 			$	6,314,266 			$	7,612,841 		

4.    Regulatory Matters
 
COVID-19 Pandemic

Due to the COVID-19 pandemic, APS voluntarily suspended disconnections of customers for nonpayment and waived late payment fees beginning March 13, 2020 until December 31, 2020. The suspension of disconnection of customers for nonpayment ended on January 1, 2021 and customers were automatically placed on eight-month payment arrangements if they had past due balances at the end of the disconnection period of $75 or greater. APS will continue to waive late payment fees until October 15, 2021. APS has experienced and is continuing to experience an increase in bad debt expense associated with the COVID-19 pandemic, the Summer Disconnection Moratorium (defined below) and the related write-offs of customer delinquent accounts. In February 2021, due to COVID-19 APS delayed the annual reset of the PSA. Rather than the increase being effective February 2021, the PSA reset was implemented with 50% of the increase effective April 2021 and the remaining 50% increase effective November 2021 (see below for discussion of EIS, TEAM Phase II and PSA).

23

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On April 17, 2020, APS filed an application with the ACC requesting a COVID-19 emergency relief package to provide additional assistance to its customers. On May 5, 2020, the ACC approved APS returning $36 million that had been collected through the Demand Side Management (“DSM”) Adjustor Charge, but not allocated for current DSM programs, directly to customers through a bill credit in June 2020. APS has refunded approximately $43 million to customers. The additional $7 million over the approved amount of $36 million was the result of the kWh credit being based on historic consumption, which was different than actual consumption in the refund period. The difference was recorded to the DSM balancing account and was included in the 2021 DSM Implementation Plan, which was approved by the ACC on June 13, 2021 (see below for discussion of the DSM Adjustor Charge).

In 2020, APS spent more than $15 million to assist customers and local non-profits and community organizations to help with the impact of the COVID-19 pandemic, with $12.4 million of these dollars directly committed to bill assistance programs (the “COVID Customer Support Fund”). The COVID Customer Support Fund was comprised of a series of voluntary commitments of funds that are not recoverable through rates throughout 2020 of approximately $8.8 million. An additional $3.6 million in bill credits for limited income customers was ordered by the ACC in December 2020 of which 50%, up to a maximum of $2.5 million, was committed to be funds that are not recoverable through rates with the remaining being deferred for potential future recovery in rates. Included in the COVID Customer Support Fund were programs that assisted customers that had a delinquency of two or more months with a one-time credit of $100, an expanded credit of $300 for limited income customers, programs to assist extra small and small non-residential customers with a one-time credit of $1,000, and other targeted programs allocated to assist with other COVID-19 needs in support of utility bill assistance. The December 2020 ACC order further assisted delinquent limited income customers with an additional bill credit of up to $250 or their delinquent balance, whichever was less. APS has distributed all funds for all COVID Customer Support Fund programs combined. Beyond the COVID Customer Support Fund, APS has also provided $2.7 million to assist local non-profits and community organizations working to mitigate the impacts of the COVID-19 pandemic.

2019 Retail Rate Case Filing with the Arizona Corporation Commission

In accordance with the requirements of the 2019 rate review order described below, APS filed an application with the ACC on October 31, 2019 seeking an increase in annual retail base rates of $69 million. This amount includes recovery of the deferral and rate base effects of the Four Corners selective catalytic reduction (“SCR”) project that is currently the subject of a separate proceeding (see “SCR Cost Recovery” below). It also reflects a net credit to base rates of approximately $115 million primarily due to the prospective inclusion of rate refunds currently provided through the Tax Expense Adjustment Mechanism (“TEAM”). The proposed total annual revenue increase in APS’s application is $184 million. The average annual customer bill impact of APS’s request is an increase of 5.6% (the average annual bill impact for a typical APS residential customer is 5.4%).

The principal provisions of APS’s application were:

•a test year comprised of twelve months ended June 30, 2019, adjusted as described below;
•an original cost rate base of $8.87 billion, which approximates the ACC-jurisdictional portion of the book value of utility assets, net of accumulated depreciation and other credits;
•the following proposed capital structure and costs of capital:

 	 	Capital Structure	 	Cost of Capital	 	
Long-term debt	 	45.3 		%	4.10 		%	
Common stock equity	 	54.7 		%	10.15 		%	
Weighted-average cost of capital	 	 	 	7.41 		%	
 
24

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
•a 1% return on the increment of fair value rate base above APS’s original cost rate base, as provided for by Arizona law;
•a rate of $0.030168 per kWh for the portion of APS’s retail base rates attributable to fuel and purchased power costs (“Base Fuel Rate”);
•authorization to defer until APS’s next general rate case the increase or decrease in its Arizona property taxes attributable to tax rate changes after the date the rate application is adjudicated;
•a number of proposed rate and program changes for residential customers, including:
▪a super off-peak period during the winter months for APS’s time-of-use with demand rates;
▪additional $1.25 million in funding for APS’s limited-income crisis bill program; and
▪a flat bill/subscription rate pilot program;
•proposed rate design changes for commercial customers, including an experimental program designed to provide access to market pricing for up to 200 MW of medium and large commercial customers;
•recovery of the deferral and rate base effects of the construction and operating costs of the Ocotillo modernization project (see discussion below of the 2017 Settlement Agreement); and
•continued recovery of the remaining investment and other costs related to the retirement and closure of the Navajo Generating Station (the “Navajo Plant”) (see “Navajo Plant” below).

On October 2, 2020, the ACC Staff, the Residential Utility Consumer Office (“RUCO”) and other intervenors filed their initial written testimony with the ACC in this rate case. The ACC Staff recommends, among other things, a (i) $89.7 million revenue increase, (ii) average annual customer bill increase of 2.7%, (iii) return on equity of 9.4%, (iv) a 0.3% or, as an alternative, a 0% return on the increment of fair value rate base greater than original cost, (v) recovery of the deferral and rate base effects of the construction and operating costs of the Four Corners SCR project and (vi) recovery of the rate base effects of the construction and ongoing consideration of the deferral of the Ocotillo modernization project. RUCO recommends, among other things, a (i) $20.8 million revenue decrease, (ii) average annual customer bill decrease of 0.63%, (iii) return on equity of 8.74%, (iv) a 0% return on the increment of fair value rate base, (v) nonrecovery of the deferral and rate base effects of the construction and operating costs of the Four Corners SCR project pending further consideration, and (vi) recovery of the deferral and rate base effects of the construction and operating costs of the Ocotillo modernization project. Upon conclusion of APS's rate case and the completion of the deferral mechanisms, approximately $110 million of on-going operating costs related to the Four Corners SCR project and the Ocotillo modernization project will start to be reflected on APS’s income statement.

The filed ACC Staff and intervenor testimony include additional recommendations, some of which materially differ from APS’s filed application. On November 6, 2020, APS filed its rebuttal testimony and the principal provisions which differ from its initial application include, among other things, a (i) $169 million revenue increase, (ii) average annual customer bill increase of 5.14%, (iii) return on equity of 10%, (iv) return on the increment of fair value rate base of 0.8%, (v) new cost recovery adjustor mechanism, the Advanced Energy Mechanism (“AEM”), to enable more timely recovery of clean investments as APS pursues its clean energy commitment, (vi) recognition that securitization is a potentially useful financing tool to recover the remaining book value of retiring assets and effectuate a transition to a cleaner energy future that APS intends to pursue, provided legislative hurdles are addressed, and (vii) a Coal Community Transition (“CCT”) plan related to the closure or future closure of coal-fired generation facilities, of which $25 million would be funds that are not recoverable through rates with a proposal that the remainder be funded by customers over 10 years.

The CCT plan includes the following proposed components: (i) $100 million that will be paid over 10 years to the Navajo Nation for a sustainable transition to a post-coal economy, which would be funded by customers, (ii) $1.25 million that will be paid over five years to the Navajo Nation to fund an economic development organization, which would be funds not recoverable through rates, (iii) $10 million to facilitate electrification projects within the Navajo Nation, which would be funded equally by funds not recoverable through rates and by customers, (iv) $2.5 million per year in transmission revenue sharing to be paid to the Navajo Nation beginning after the closure of the Four Corners Power Plant through 2038, which would be
25

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
funds not recoverable through rates, (v) $12 million that will be paid over five years to the Navajo County Communities surrounding Cholla Power Plant, which would primarily be funded by customers, and (vi) $3.7 million that will be paid over five years to the Hopi Tribe related to APS’s ownership interests in the Navajo Generating Station, which would primarily be funded by customers. The commitment of funds that would not be recoverable through rates of $25 million were recognized in our December 31, 2020 financials.

On December 4, 2020, the ACC Staff and intervenors filed surrebuttal testimony. The ACC Staff reduced its recommended rate increase to $59.8 million, or an average annual customer bill increase of 1.82%. In RUCO’s surrebuttal, the recommended revenue decrease changed to $50.1 million, or an average annual customer bill decrease of 1.52%.

The hearing concluded on March 3, 2021 and the post-hearing briefing schedule concluded on April 30, 2021. In May 2021, the ACC declined to re-open the evidentiary record in APS’s pending rate case to take additional evidence on topics raised by certain ACC Commissioners, including adjustor cost recovery mechanisms.

On August 2, 2021, the Administrative Law Judge issued a Recommended Opinion and Order in APS’s rate case (the “2019 Rate Case ROO”). The 2019 Rate Case ROO recommends, among other things, a (i) $111 million base revenue decrease, (ii) return on equity for original cost rate base of 9.16%, (iii) a 0.15% return on the increment of fair value rate base greater than original cost, with total fair value rate of return further adjusted to include a 0.10% reduction to return on equity resulting in an effective fair value return of 0.05%, (iv) nonrecovery of the deferral and rate base effects of the operating costs and construction of the Four Corners SCR project (see "Four Corners SCR Cost Recovery" below for additional information), (v) recovery of the deferral and rate base effects of the operating costs and construction of the Ocotillo modernization project, which includes a reduction in the return on the deferral and (vi) a 15% disallowance of annual amortization of Navajo Plant regulatory asset recovery. The 2019 Rate Case ROO also recommended that the CCT plan include the following components: (i) $50 million that will be paid over 10 years to the Navajo Nation, (ii) $5 million that will be paid over five years to the Navajo County Communities surrounding Cholla Power Plant, and (iii) $1.675 million that will be paid to the Hopi Tribe related to APS’s ownership interests in the Navajo Generating Station. These amounts would be recoverable from APS’s customers through the RES. APS expects to file an exception regarding the disallowance of the SCR cost deferrals and plant investments that was recommended in the 2019 Rate Case ROO and APS is continuing to evaluate any additional exceptions it may file. The 2019 Rate Case ROO will be discussed at an upcoming ACC open meeting. APS cannot predict the outcome of this proceeding.

2016 Retail Rate Case Filing with the Arizona Corporation Commission
 
On June 1, 2016, APS filed an application with the ACC for an annual increase in retail base rates. On March 27, 2017, a majority of the stakeholders in the general retail rate case, including the ACC Staff, RUCO, limited income advocates and private rooftop solar organizations signed a settlement agreement (the “2017 Settlement Agreement”) and filed it with the ACC. The 2017 Settlement Agreement provides for a net retail base rate increase of $94.6 million, excluding the transfer of adjustor balances, consisting of: (1) a non-fuel, non-depreciation, base rate increase of $87.2 million per year; (2) a base rate decrease of $53.6 million attributable to reduced fuel and purchased power costs; and (3) a base rate increase of $61.0 million due to changes in depreciation schedules. The average annual customer bill impact under the 2017 Settlement Agreement was calculated as an increase of 3.28% (the average annual bill impact for a typical APS residential customer was calculated as an increase of 4.54%).

Other key provisions of the agreement include the following:

•an authorized return on common equity of 10.0%;
•a capital structure comprised of 44.2% debt and 55.8% common equity;
26

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
•a cost deferral order for potential future recovery in APS’s next general retail rate case for the construction and operating costs APS incurs for its Ocotillo modernization project;
•a cost deferral and procedure to allow APS to request rate adjustments prior to its next general retail rate case related to its share of the construction costs associated with installing SCR equipment at the Four Corners Power Plant (“Four Corners”);
•a deferral for future recovery (or credit to customers) of the Arizona property tax expense above or below a specified test year level caused by changes to the applicable Arizona property tax rate;
•an expansion of the Power Supply Adjustor (“PSA”) to include certain environmental chemical costs and third-party energy storage costs;
•a new AZ Sun II program (now known as “APS Solar Communities”) for utility-owned solar distributed generation with the purpose of expanding access to rooftop solar for low and moderate income Arizonans, recoverable through the Arizona Renewable Energy Standard and Tariff (“RES”), to be no less than $10 million per year in capital costs, and not more than $15 million per year in capital costs;
•an increase to the per kWh cap for the environmental improvement surcharge from $0.00016 to $0.00050 and the addition of a balancing account;
•rate design changes, including:
▪a change in the on-peak time of use period from noon-7 p.m. to 3 p.m.-8 p.m. Monday through Friday, excluding holidays;
▪non-grandfathered distributed generation (“DG”) customers would be required to select a rate option that has time of use rates and either a new grid access charge or demand component;
▪a Resource Comparison Proxy (“RCP”) for exported energy of 12.9 cents per kWh in year one; and
•an agreement by APS not to pursue any new self-build generation (with certain exceptions) having an in-service date prior to January 1, 2022 (extended to December 31, 2027 for combined-cycle generating units), unless expressly authorized by the ACC.

Through a separate agreement, APS, industry representatives, and solar advocates committed to stand by the 2017 Settlement Agreement and refrain from seeking to undermine it through ballot initiatives, legislation or advocacy at the ACC.

On August 15, 2017, the ACC approved (by a vote of 4-1) the 2017 Settlement Agreement without material modifications.  On August 18, 2017, the ACC issued a final written Opinion and Order reflecting its decision in APS’s general retail rate case (the “2017 Rate Case Decision”), which is subject to requests for rehearing and potential appeal. The new rates went into effect on August 19, 2017.

On January 3, 2018, an APS customer filed a petition with the ACC that was determined by the ACC Staff to be a complaint filed pursuant to Arizona Revised Statute §40-246 (the “Complaint”). The Complaint was later amended alleging that the rates and charges in the 2017 Rate Case Decision are not just and reasonable. The ACC held a hearing on this matter, and the Administrative Law Judge issued a Recommended Opinion and Order recommending that the Complaint be dismissed. On July 3, 2019, the Administrative Law Judge issued an amendment to the Recommended Opinion and Order that incorporated the requirements of the rate review of the 2017 Rate Case Decision (see below discussion regarding the rate review). On July 10, 2019, the ACC adopted the Administrative Law Judge’s amended Recommended Opinion and Order along with several ACC Commissioner amendments and an amendment incorporating the results of the rate review and resolved the Complaint.

See “Rate Plan Comparison Tool and Investigation” below for information regarding a review and investigation pertaining to the rate plan comparison tool offered to APS customers and other related issues.

27

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ACC Review of APS 2017 Rate Case Decision

On December 24, 2018, certain ACC Commissioners filed a letter stating that because the ACC had received a substantial number of complaints that the rate increase authorized by the 2017 Rate Case Decision was much more than anticipated, they believe there is a possibility that APS is earning more than was authorized by the 2017 Rate Case Decision.  Accordingly, the ACC Commissioners requested the ACC Staff to perform a rate review of APS using calendar year 2018 as a test year. The ACC Commissioners also asked the ACC Staff to evaluate APS’s efforts to educate its customers regarding the new rates approved in the 2017 Rate Case Decision.

On June 4, 2019, the ACC Staff filed a proposed order regarding the rate review of the 2017 Rate Case Decision. On June 11, 2019, the ACC Commissioners approved the proposed ACC Staff order with amendments. The key provisions of the amended order include the following:

•APS must file a rate case no later than October 31, 2019, using a June 30, 2019 test year;
•until the conclusion of the rate case being filed no later than October 31, 2019, APS must provide information on customer bills that shows how much a customer would pay on their most economical rate given their actual usage during each month;
•APS customers can switch rate plans during an open enrollment period of six months;
•APS must identify customers whose bills have increased by more than 9% and that are not on the most economical rate and provide such customers with targeted education materials and an opportunity to switch rate plans;
•APS must provide grandfathered net metering customers on legacy demand rates an opportunity to switch to another legacy rate to enable such customers to fully benefit from legacy net metering rates;
•APS must fund and implement a supplemental customer education and outreach program to be developed with and administered by ACC Staff and a third-party consultant; and
•APS must fund and organize, along with the third-party consultant, a stakeholder group to suggest better ways to communicate the impact of changes to adjustor cost recovery mechanisms (see below for discussion on cost recovery mechanisms), including more effective ways to educate customers on rate plans and to reduce energy usage.

APS filed its rate case on October 31, 2019 (see “2019 Retail Rate Case Filing with the Arizona Corporation Commission” above for more information). APS does not believe that the implementation of the other key provisions of the amended order regarding the rate review will have a material impact on its financial position, results of operations or cash flows.

On May 19, 2020, the ACC Staff filed a third-party consultant’s report which evaluated the effectiveness of APS’s customer outreach and education program related to the 2017 Rate Case Decision. On May 29, 2020, the Chairman of the ACC filed a letter with the ACC in response to this report and is alleging that APS is out of compliance with the 2017 Rate Case Decision and is over-earning. The Chairman proposed that the current rates should be classified as interim rates and customers held harmless if APS’s activities have caused the rates set in the 2017 Rate Case Decision to not be just and reasonable. Also, on May 29, 2020, a second commissioner filed a letter with the ACC agreeing with the Chairman’s assertions and further asserting that the 2017 Rate Case Decision should be re-opened. On June 18, 2020, at an ACC Open Meeting, the matters raised in these letters were discussed. The ACC did not vote to move forward with any adjustments to APS’s current rates. On November 4, 2020, the ACC voted to administratively close this docket.

28

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Cost Recovery Mechanisms
 
APS has received regulatory decisions that allow for more timely recovery of certain costs outside of a general retail rate case through the following recovery mechanisms.
 
Renewable Energy Standard.  In 2006, the ACC approved the RES.  Under the RES, electric utilities that are regulated by the ACC must supply an increasing percentage of their retail electric energy sales from eligible renewable resources, including solar, wind, biomass, biogas and geothermal technologies.  In order to achieve these requirements, the ACC allows APS to include a RES surcharge as part of customer bills to recover the approved amounts for use on renewable energy projects.  Each year APS is required to file a five-year implementation plan with the ACC and seek approval for funding the upcoming year’s RES budget. In 2015, the ACC revised the RES rules to allow the ACC to consider all available information, including the number of rooftop solar arrays in a utility’s service territory, to determine compliance with the RES.

On November 20, 2017, APS filed an updated 2018 RES budget to include budget adjustments for APS Solar Communities (formerly known as AZ Sun II), which was approved as part of the 2017 Rate Case Decision. APS Solar Communities is a 3-year program authorizing APS to spend $10 million to $15 million in capital costs each year to install utility-owned DG systems for low to moderate income residential homes, non-profit entities, Title I schools and rural government facilities. The 2017 Rate Case Decision provided that all operations and maintenance expenses, property taxes, marketing and advertising expenses, and the capital carrying costs for this program will be recovered through the RES.

On July 1, 2019, APS filed its 2020 RES Implementation Plan and proposed a budget of approximately $86.3 million. APS’s budget request supports existing approved projects and commitments and requests a permanent waiver of the residential distributed energy requirement for 2020 contained in the RES rules. On September 23, 2020, the ACC approved the 2020 RES Implementation Plan, including a waiver of the residential distributed energy requirements for the 2020 implementation year. In addition, the ACC approved the implementation of a new pilot program that incentivizes Arizona households to install at-home battery systems. Recovery of the costs associated with the pilot will be addressed in the 2021 Demand Side Management Implementation Plan (“DSM Plan”).

On July 1, 2020, APS filed its 2021 RES Implementation Plan and proposed a budget of approximately $84.7 million.  APS’s budget request supports existing approved projects and commitments and requests a permanent waiver of the residential distributed energy requirement for 2021 contained in the RES rules. In the 2021 RES Implementation Plan, APS requested $4.5 million to meet revenue requirements associated with the APS Solar Communities program to complete installations delayed as a result of the COVID-19 pandemic in 2020. On June 7, 2021, the ACC approved the 2021 RES Implementation Plan including a waiver of the residential distributed energy requirements for the 2021 implementation year. As part of the approval, the ACC authorized APS to collect $68.3 million through the Renewable Energy Adjustment Charge to support APS's RES programs.

On May 21, 2021, the ACC adopted a clean energy rules package which would require APS to meet certain clean energy standards and technology procurement mandates, obtain approval for its action plan included in its IRP, and seek cost recovery in a rate process. The adopted rules included substantial changes since the original Recommended Opinion and Order, and thus will require supplemental rulemaking before taking effect. APS cannot predict the outcome of this matter. See “Energy Modernization Plan” below for more information.

On July 1, 2021, APS filed its 2022 RES Implementation Plan and proposed a budget of approximately $93.1 million. APS’s budget proposal supports existing approved projects and commitments and requests a
29

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
permanent waiver of the residential and non-residential distributed energy requirements for 2022 contained in the RES rules. The ACC has not yet ruled on the 2022 RES Implementation Plan.

Demand Side Management Adjustor Charge.  The ACC Electric Energy Efficiency Standards require APS to submit a DSM Plan annually for review by and approval of the ACC. Verified energy savings from APS’s resource savings projects can be counted toward compliance with the Electric Energy Efficiency Standards; however, APS is not allowed to count savings from systems savings projects toward determination of the achievement of performance incentives, nor may APS include savings from these system savings projects in the calculation of its Lost Fixed Cost Recovery (“LFCR”) mechanism (see below for discussion of the LFCR).

On September 1, 2017, APS filed its 2018 DSM Plan, which proposed modifications to the demand side management portfolio to better meet system and customer needs by focusing on peak demand reductions, storage, load shifting and demand response programs in addition to traditional energy savings measures. The 2018 DSM Plan sought a requested budget of $52.6 million and requested a waiver of the Electric Energy Efficiency Standard for 2018.   On November 14, 2017, APS filed an amended 2018 DSM Plan, which revised the allocations between budget items to address customer participation levels but kept the overall budget at $52.6 million.

On December 31, 2018, APS filed its 2019 DSM Plan, which requested a budget of $34.1 million and focused on DSM strategies to better meet system and customer needs, such as peak demand reduction, load shifting, storage and electrification strategies.

On December 31, 2019, APS filed its 2020 DSM Plan, which requested a budget of $51.9 million and continued APS’s focus on DSM strategies such as peak demand reduction, load shifting, storage and electrification strategies. The 2020 DSM Plan addressed all components of the pending 2018 and 2019 DSM plans, which enabled the ACC to review the 2020 DSM Plan only. On May 15, 2020, APS filed an amended 2020 DSM Plan to provide assistance to customers experiencing economic impacts of the COVID-19 pandemic. The amended 2020 DSM Plan requested the same budget amount of $51.9 million. On September 23, 2020, the ACC approved the amended 2020 DSM Plan.

On April 17, 2020, APS filed an application with the ACC requesting a COVID-19 emergency relief package to provide additional assistance to its customers. On May 5, 2020, the ACC approved APS returning $36 million that had been collected through the DSM Adjustor Charge, but not allocated for current DSM programs, directly to customers through a bill credit in June 2020. APS has refunded approximately $43 million to customers. The additional $7 million over the approved amount was the result of the kWh credit being based on historic consumption which was different than actual consumption in the refund period. The difference was recorded to the DSM balancing account and was included in the 2021 DSM Implementation Plan, which was approved by the ACC on June 13, 2021.

On December 31, 2020, APS filed its 2021 DSM Plan, which requested a budget of $63.7 million and continued APS’s focus on DSM strategies, such as peak demand reduction, load shifting, storage and electrification strategies, as well as enhanced assistance to customers impacted economically by COVID-19. On April 6, 2021, APS filed an amended 2021 DSM Plan that proposed an additional performance incentive for customers participating in the residential energy storage pilot approved in the 2020 RES Implementation Plan. On July 13, 2021, the ACC approved the amended 2021 DSM Plan.

On April 20, 2021, APS filed a request to extend the June 1, 2021 deadline to file its 2022 DSM Plan until 120 days after the ACC has taken action on APS's amended 2021 DSM Plan. The ACC approved this request on June 8, 2021.

30

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Power Supply Adjustor Mechanism and Balance.  The PSA provides for the adjustment of retail rates to reflect variations primarily in retail fuel and purchased power costs.  The following table shows the changes in the deferred fuel and purchased power regulatory asset for 2021 and 2020 (dollars in thousands):

												
 	Six Months Ended
June 30,	
 	2021		2020	
Beginning balance	$	175,835 			$	70,137 		
Deferred fuel and purchased power costs — current period	135,905 			26,473 		
Amounts (charged) refunded to customers	(10,828)			4,815 		
Ending balance	$	300,912 			$	101,425 		
 
The PSA rate for the PSA year beginning February 1, 2019 was $0.001658 per kWh, as compared to the $0.004555 per kWh for the prior year. This rate was comprised of a forward component of $0.000536 per kWh and a historical component of $0.001122 per kWh. This represented a $0.002897 per kWh decrease compared to 2018. These rates went into effect as filed on February 1, 2019.

On November 27, 2019, APS filed its PSA rate for the PSA year beginning February 1, 2020. That rate was $(0.000456) per kWh and consisted of a forward component of $(0.002086) per kWh and a historical component of $0.001630 per kWh. The 2020 PSA rate is a $0.002115 per kWh decrease compared to the 2019 PSA year. These rates went into effect as filed on February 1, 2020.

On November 30, 2020, APS filed its PSA rate for the PSA year beginning February 1, 2021. That rate was $0.003544 per kWh and consisted of a forward component of $0.003434 per kWh and a historical component of $0.000110 per kWh. The 2021 PSA rate is a $0.004 per kWh increase, compared to the 2020 PSA year, which is the maximum permitted under the Plan of Administration for the PSA. This left $215.9 million of fuel and purchased power costs above this annual cap which will be reflected in future year resets of the PSA. These rates were to be effective on February 1, 2021 but APS delayed the effectiveness of these rates until the first billing cycle of April 2021 due to concerns of the impact on customers during COVID-19. In March 2021, the ACC voted to implement the 2021 PSA, with 50% of the rate increase effective in April 2021 and the remaining 50% of the increase effective in November 2021. The PSA rate implemented on April 1, 2021 was $0.001544 per kWh and consisted of a forward component of $(0.004444) per kWh and a historical component of $0.005988 per kWh. On November 1, 2021, the remaining increase will be implemented to a rate of $0.003544 per kWh and will consist of a forward component of $(0.004444) per kWh and a historical component of $0.007988 per kWh. As part of this approval, the ACC ordered ACC Staff to conduct a fuel and purchased power procurement audit, which is currently underway, to better understand the factors that contributed to the increase. APS cannot predict the outcome of this audit.

On March 15, 2019, APS filed an application with the ACC requesting approval to recover the costs related to two energy storage power purchase tolling agreements through the PSA. On December 29, 2020, the ACC Staff filed its report and recommended the storage costs be included in the PSA once the systems are in-service. On January 12, 2021, the ACC approved this application but did not rule on the prudency.

Environmental Improvement Surcharge. The EIS permits APS to recover the capital carrying costs (rate of return, depreciation and taxes) plus incremental operations and maintenance expenses associated with environmental improvements made outside of a test year to comply with environmental standards set by federal, state, tribal, or local laws and regulations.  A filing is made on or before February 1 for qualified environmental improvements made during the prior calendar year, and the new charge becomes effective April 1 unless suspended by the ACC.  There is an overall cap of $0.0005 per kWh (approximately $13 million to $14 million per year).  APS’s February 1, 2021 application requested an increase in the charge to
31

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
$10.3 million, or $1.5 million over the prior-period charge and it became effective with the first billing cycle in April 2021.
 
Transmission Rates, Transmission Cost Adjustor (“TCA”) and Other Transmission Matters.  In July 2008, FERC approved a modification to APS’s Open Access Transmission Tariff to allow APS to move from fixed rates to a formula rate-setting methodology in order to more accurately reflect and recover the costs that APS incurs in providing transmission services.  A large portion of the rate represents charges for transmission services to serve APS’s retail customers (“Retail Transmission Charges”).  In order to recover the Retail Transmission Charges, APS was previously required to file an application with, and obtain approval from, the ACC to reflect changes in Retail Transmission Charges through the TCA.  Under the terms of the settlement agreement entered into in 2012 regarding APS’s rate case (“2012 Settlement Agreement”), however, an adjustment to rates to recover the Retail Transmission Charges will be made annually each June 1 and will go into effect automatically unless suspended by the ACC.
 
The formula rate is updated each year effective June 1 on the basis of APS’s actual cost of service, as disclosed in APS’s FERC Form 1 report for the previous fiscal year.  Items to be updated include actual capital expenditures made as compared with previous projections, transmission revenue credits and other items. APS reviews the proposed formula rate filing amounts with the ACC Staff.  Any items or adjustments which are not agreed to by APS and the ACC Staff can remain in dispute until settled or litigated at FERC.  Settlement or litigated resolution of disputed issues could require an extended period of time and could have a significant effect on the Retail Transmission Charges because any adjustment, though applied prospectively, may be calculated to account for previously over- or under-collected amounts. The resolution of proposed adjustments can result in significant volatility in the revenues to be collected.

On March 7, 2018, APS made a filing to make modifications to its annual transmission formula to provide transmission customers the benefit of the reduced federal corporate income tax rate resulting from the Tax Cuts and Jobs Act (“Tax Act”) beginning in its 2018 annual transmission formula rate update filing. These modifications were approved by FERC on May 22, 2018 and reduced APS’s transmission rates compared to the rate that would have gone into effect absent these changes. On March 17, 2020, APS made a filing to make further modifications to its annual transmission formula to provide additional transparency for excess and deficient accumulated deferred income taxes resulting from the Tax Act, as well as for future local, state, and federal statutory tax rate changes. This filing is pending with FERC.

Effective June 1, 2019, APS’s annual wholesale transmission revenue requirement for all users of its transmission system increased by approximately $25.8 million for the twelve-month period beginning June 1, 2019 in accordance with the FERC-approved formula. Of this amount, wholesale customer rates increased by $21.1 million and retail customer rates would have increased by approximately $4.7 million. However, since changes in retail transmission charges are reflected through the TCA after consideration of transmission recovery in retail base rates and the ACC approved TCA balancing account, the retail revenue requirement increased by a total of $4.9 million, resulting in a decrease to residential rates and an increase to commercial rates. An adjustment to APS’s retail rates to recover FERC approved transmission charges went into effect automatically on June 1, 2019.

Effective June 1, 2020, APS’s annual wholesale transmission revenue requirement for all users of its transmission system decreased by approximately $6.1 million for the twelve-month period beginning June 1, 2020 in accordance with the FERC-approved formula. Of this net amount, wholesale customer rates increased by $4.8 million and retail customer rates would have decreased by approximately $10.9 million. However, since changes in retail transmission charges are reflected through the TCA after consideration of transmission recovery in retail base rates and the ACC approved balancing account, the retail revenue requirement decreased by a total of $7.4 million, resulting in reductions to both residential and commercial rates. An adjustment to APS’s retail rates to recover FERC approved transmission charges went into effect automatically on June 1, 2020.
32

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Effective June 1, 2021, APS’s annual wholesale transmission revenue requirement for all users of its transmission system increased by approximately $4 million for the twelve-month period beginning June 1, 2021 in accordance with the FERC-approved formula. Of this net amount, wholesale customer rates decreased by approximately $3.2 million and retail customer rates would have increased by approximately $7.2 million. However, since changes in retail transmission charges are reflected through the TCA after consideration of transmission recovery in retail base rates and the ACC approved balancing account, the retail revenue requirement decreased by $28.4 million, resulting in reductions to both residential and commercial rates. An adjustment to APS’s retail rates to recover FERC-approved transmission charges went into effect automatically on June 1, 2021.

Lost Fixed Cost Recovery Mechanism.  The LFCR mechanism permits APS to recover on an after-the-fact basis a portion of its fixed costs that would otherwise have been collected by APS in the kWh sales lost due to APS energy efficiency programs and to DG such as rooftop solar arrays.  The fixed costs recoverable by the LFCR mechanism are currently 2.5 cents for both lost residential and non-residential kWh as set forth in the 2017 Settlement Agreement.  The LFCR adjustment has a year-over-year cap of 1% of retail revenues.  Any amounts left unrecovered in a particular year because of this cap can be carried over for recovery in a future year.  The kWhs lost from energy efficiency are based on a third-party evaluation of APS’s energy efficiency programs.  DG sales losses are determined from the metered output from the DG units.
 
On February 15, 2018, APS filed its 2018 annual LFCR adjustment, requesting that effective May 1, 2018, the LFCR be adjusted to $60.7 million. On February 6, 2019, the ACC approved the 2018 annual LFCR adjustment to become effective March 1, 2019. On February 15, 2019, APS filed its 2019 annual LFCR adjustment, requesting that effective May 1, 2019, the annual LFCR recovery amount be reduced to $36.2 million (a $24.5 million decrease from previous levels). On July 10, 2019, the ACC approved APS’s 2019 LFCR adjustment as filed, effective with the next billing cycle of July 2019. On February 14, 2020, APS filed its 2020 annual LFCR adjustment, requesting that effective May 1, 2020, the annual LFCR recovery amount be reduced to $26.6 million (a $9.6 million decrease from previous levels). On April 14, 2020, the ACC approved the 2020 LFCR adjustment as filed, effective with the first billing cycle in May 2020. On February 15, 2021, APS filed its 2021 annual LFCR adjustment, requesting that effective May 1, 2021, the annual LFCR recovery amount be increased to $38.5 million (an $11.8 million increase from previous levels). On April 13, 2021, the ACC voted not to approve the requested $11.8 million increase to the annual LFCR adjustment, thus the previously approved rates continue to remain intact. The $11.8 million will continue to be maintained in the LFCR regulatory asset balancing account and will be included in APS’s next LFCR application filing in accordance with the compliance requirements.

Tax Expense Adjustor Mechanism.  As part of the 2017 Settlement Agreement, the parties agreed to a rate adjustment mechanism to address potential federal income tax reform and enable the pass-through of certain income tax effects to customers. The TEAM expressly applies to APS’s retail rates with the exception of a small subset of customers taking service under specially-approved tariffs. On December 22, 2017, the Tax Act was enacted.  This legislation made significant changes to the federal income tax laws including a reduction in the corporate tax rate from 35% to 21% effective January 1, 2018.

On January 8, 2018, APS filed an application with the ACC that addressed the change in the marginal federal tax rate from 35% to 21% resulting from the Tax Act and reduced rates by $119.1 million annually through an equal cents per kWh credit (“TEAM Phase I”).  On February 22, 2018, the ACC approved the reduction of rates through an equal cents per kWh credit. The rate reduction was effective for the first billing cycle in March 2018.

The impact of the TEAM Phase I, over time, is expected to be earnings neutral. However, on a quarterly basis, there is a difference between the timing and amount of the income tax benefit and the reduction in revenues refunded through the TEAM Phase I related to the lower federal income tax rate. The amount of
33

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
the benefit of the lower federal income tax rate is based on quarterly pre-tax results, while the reduction in revenues refunded through the TEAM Phase I is based on a per kWh sales credit which follows our seasonal kWh sales pattern and is not impacted by earnings of the Company.

On August 13, 2018, APS filed a second request with the ACC that addressed the return of an additional $86.5 million in tax savings to customers related to the amortization of non-depreciation related excess deferred taxes previously collected from customers (“TEAM Phase II”). The ACC approved this request on March 13, 2019, effective the first billing cycle in April 2019 through the last billing cycle in March 2020.

On March 19, 2020, due to the COVID-19 pandemic, APS delayed the discontinuation of TEAM Phase II until the first billing cycle in May 2020.  Amounts credited to customers after the last billing cycle in March 2020 will be recorded as a part of the balancing account and will be addressed for recovery as part of APS’s 2019 ACC rate case. Both the timing of the reduction in revenues refunded through TEAM Phase II and the offsetting income tax benefit are recognized based upon our seasonal kWh sales pattern.

On April 10, 2019, APS filed a third request with the ACC that addressed the amortization of depreciation related excess deferred taxes over a 28.5-year period consistent with IRS normalization rules (“TEAM Phase III”).  On October 29, 2019, the ACC approved TEAM Phase III providing both (i) a one-time bill credit of $64 million, which was credited to customers on their December 2019 bills, and (ii) a monthly bill credit effective the first billing cycle in December 2019 which will provide an additional benefit of $39.5 million to customers through December 31, 2020. On November 20, 2020, APS filed an application to continue the TEAM Phase III monthly bill credit through the earlier of December 31, 2021, or at the conclusion of APS’s 2019 pending rate case. On December 9, 2020, the ACC approved this request. Both the timing of the reduction in revenues refunded through the TEAM Phase III monthly bill credit and the offsetting income tax benefit are recognized based upon APS’s seasonal kWh sales pattern.

Net Metering

APS’s 2017 Rate Case Decision provides that payments by utilities for energy exported to the grid from DG solar facilities will be determined using a RCP methodology, a method that is based on the most recent five-year rolling average price that APS pays for utility-scale solar projects, while a forecasted avoided cost methodology is being developed.  The price established by this RCP method will be updated annually (between general retail rate cases) but will not be decreased by more than 10% per year. Once the avoided cost methodology is developed, the ACC will determine in APS’s subsequent rate cases which method (or a combination of methods) is appropriate to determine the actual price to be paid by APS for exported distributed energy.

In addition, the ACC made the following determinations:

•customers who have interconnected a DG system or submitted an application for interconnection for DG systems prior to September 1, 2017, based on APS’s 2017 Rate Case Decision, will be grandfathered for a period of 20 years from the date the customer’s interconnection application was accepted by the utility;
•customers with DG solar systems are to be considered a separate class of customers for ratemaking purposes; and
•once an export price is set for APS, no netting or banking of retail credits will be available for new DG customers, and the then-applicable export price will be guaranteed for new customers for a period of 10 years.

34

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
This decision of the ACC addresses policy determinations only. The decision states that its principles will be applied in future general retail rate cases, and the policy determinations themselves may be subject to future change, as are all ACC policies. A first-year export energy price of 12.9 cents per kWh was included in the 2017 Settlement Agreement and became effective on September 1, 2017.

In accordance with the 2017 Rate Case Decision, APS filed its request for a third-year export energy price of 10.5 cents per kWh on May 1, 2019.  This price also reflects the 10% annual reduction discussed above. The new rate rider became effective on October 1, 2019. APS filed its request for a fourth-year export energy price of 9.4 cents per kWh on May 1, 2020, with a requested effective date of September 1, 2020.  This price reflects the 10% annual reduction discussed above. On September 23, 2020, the ACC approved the annual reduction of the export energy price but voted to delay the effectiveness of the reduction in export prices until October 1, 2021. APS’s export energy price will remain at 10.5 cents per kWh until October 1, 2021.

On January 23, 2017, The Alliance for Solar Choice (“TASC”) sought rehearing of the ACC’s decision regarding the value and cost of DG. TASC asserted that the ACC improperly ignored the Administrative Procedure Act, failed to give adequate notice regarding the scope of the proceedings, and relied on information that was not submitted as evidence, among other alleged defects. TASC filed a Notice of Appeal in the Arizona Court of Appeals and filed a Complaint and Statutory Appeal in the Maricopa County Superior Court on March 10, 2017. As part of the 2017 Settlement Agreement described above, TASC agreed to withdraw these appeals when the ACC decision implementing the 2017 Settlement Agreement is no longer subject to appellate review.

See “2016 Retail Rate Case Filing with the Arizona Corporation Commission” above for information regarding an ACC order in connection with the rate review of the 2017 Rate Case Decision requiring APS to provide grandfathered net metering customers on legacy demand rates with an opportunity to switch to another legacy rate to enable such customers to benefit from legacy net metering rates.

Subpoena from Former Arizona Corporation Commissioner Robert Burns

On August 25, 2016, then-Commissioner Robert Burns, individually and not by action of the ACC as a whole, served subpoenas in APS’s then current retail rate proceeding on APS and Pinnacle West for the production of records and information relating to a range of expenditures from 2011 through 2016. The subpoenas requested information concerning marketing and advertising expenditures, charitable donations, lobbying expenses, contributions to 501(c)(3) and (c)(4) nonprofits and political contributions. The return date for the production of information was set as September 15, 2016. The subpoenas also sought testimony from Company personnel having knowledge of the material, including the Chief Executive Officer.

On September 9, 2016, APS filed with the ACC a motion to quash the subpoenas or, alternatively to stay APS’s obligations to comply with the subpoenas and decline to decide APS’s motion pending court proceedings. Contemporaneously with the filing of this motion, APS and Pinnacle West filed a complaint for special action and declaratory judgment in the Superior Court of Arizona for Maricopa County, seeking a declaratory judgment that Burns’ subpoenas are contrary to law. On September 15, 2016, APS produced all non-confidential and responsive documents and offered to produce any remaining responsive documents that are confidential after an appropriate confidentiality agreement is signed.

On February 7, 2017, Burns opened a new ACC docket and indicated that its purpose is to study and rectify problems with transparency and disclosure regarding financial contributions from regulated monopolies or other stakeholders who may appear before the ACC that may directly or indirectly benefit an ACC Commissioner, a candidate for ACC Commissioner, or key ACC Staff.  As part of this docket, Burns set March 24, 2017 as a deadline for the production of all information previously requested through the subpoenas.
35

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Neither APS nor Pinnacle West produced the information requested and instead objected to the subpoena. On March 10, 2017, Burns filed suit against APS and Pinnacle West in the Superior Court of Arizona for Maricopa County in an effort to enforce his subpoenas. On March 30, 2017, APS filed a motion to dismiss Burns’ suit against APS and Pinnacle West. In response to the motion to dismiss, the court stayed the suit and ordered Burns to file a motion to compel the production of the information sought by the subpoenas with the ACC. On June 20, 2017, the ACC denied the motion to compel.

On August 4, 2017, Burns amended his complaint to add all of the ACC Commissioners and the ACC itself as defendants. All defendants moved to dismiss the amended complaint. On February 15, 2018, the Superior Court dismissed Burns’ amended complaint. On March 6, 2018, Burns filed an objection to the proposed final order from the Superior Court and a motion to further amend his complaint. The Superior Court permitted Burns to amend his complaint to add a claim regarding his attempted investigation into whether his fellow commissioners should have been disqualified from voting on APS’s 2017 rate case. Burns filed his second amended complaint, and all defendants filed responses opposing the second amended complaint and requested that it be dismissed. Oral argument occurred in November 2018 regarding the motion to dismiss. On December 18, 2018, the trial court granted the defendants’ motions to dismiss and entered final judgment on January 18, 2019.

On February 13, 2019, Burns filed a notice of appeal. On July 12, 2019, Burns filed his opening brief in the Arizona Court of Appeals. APS filed its answering brief on October 21, 2019. The Arizona Court of Appeals originally granted the request for oral argument; however, on March 31, 2020, the court vacated the date scheduled for oral argument given the COVID-19 pandemic.  The court determined that the matter could be submitted without oral argument and has taken the matter under advisement and will issue a decision without oral argument.

Burns’ position as an ACC commissioner ended on January 4, 2021. Nevertheless, Burns filed a motion with the Court of Appeals arguing that the appeal was not mooted by this fact and the court should decide the matter. Both APS and the ACC filed responses opposing the motion and asserting that the matter is moot. On March 4, 2021, the Court of Appeals found Burns’ motion to be moot because the Court of Appeals had issued an opinion deciding the matter that same day. In its March 4, 2021 opinion, the Court of Appeals affirmed the trial court’s dismissal of Burns’ complaint, concluding that Burns could not overturn the ACC's 4-1 vote refusing to enforce his subpoenas. On May 15, 2021, Burns filed a petition for review with the Arizona Supreme Court asking for reversal of the Court of Appeals opinion and the trial court’s judgment. APS and the ACC filed responses to Burns’ petition on July 14, 2021 requesting that the petition be denied. The grant of review by the Arizona Supreme Court is discretionary. Pinnacle West and APS cannot predict the outcome of this matter.

Information Requests from Arizona Corporation Commissioners

On January 14, 2019, ACC Commissioner Kennedy opened a docket to investigate campaign expenditures and political participation of APS and Pinnacle West. In addition, on February 27, 2019, ACC Commissioners Burns and Dunn opened a new docket and requested documents from APS and Pinnacle West related to ACC elections and charitable contributions related to the ACC. On March 1, 2019, ACC Commissioner Kennedy issued a subpoena to APS seeking several categories of information for both Pinnacle West and APS, including political contributions, lobbying expenditures, marketing and advertising expenditures, and contributions made to 501(c)(3) and 501(c)(4) entities, for the years 2013-2018. Pinnacle West and APS voluntarily responded to both sets of requests on March 29, 2019. APS also received and responded to various follow-on requests from ACC Commissioners on these matters. Pinnacle West and APS cannot predict the outcome of these matters. The Company’s CEO, Mr. Guldner, appeared at the ACC’s January 14, 2020 Open Meeting regarding ACC Commissioners’ questions about political spending.  Mr. Guldner committed to the ACC that, during his tenure, Pinnacle West and APS, and any of their affiliated
36

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
companies, will not participate in ACC campaign elections through financial contributions or in-kind contributions.

Energy Modernization Plan

On January 30, 2018, former ACC Commissioner Tobin proposed the Energy Modernization Plan, which consisted of a series of energy policies tied to clean energy sources such as energy storage, biomass, energy efficiency, electric vehicles, and expanded energy planning through the integrated resource plan (“IRP”) process. In August 2018, the ACC directed ACC Staff to open a new rulemaking docket which will address a wide range of energy issues, including the Energy Modernization Plan proposals. The rulemaking will consider possible modifications to existing ACC rules, such as the RES, Electric and Gas Energy Efficiency Standards, Net Metering, Resource Planning, and the Biennial Transmission Assessment, as well as the development of new rules regarding forest bioenergy, electric vehicles, interconnection of distributed generation, baseload security, blockchain technology and other technological developments, retail competition, and other energy-related topics.

On April 25, 2019, the ACC Staff issued an initial set of draft energy rules and held various workshops to incorporate feedback from stakeholders and ACC Commissioners from April 2019 through July 2020. At the March 11-12, 2020 workshop, the ACC Staff committed to filing a final draft of proposed rules by July 2020. On July 30, 2020, the ACC Staff issued final draft energy rules which proposed 100% of retail kWh sales from clean energy resources by the end of 2050. Nuclear is defined as a clean energy resource. The proposed rules also require 50% of retail energy served be renewable by the end of 2035. A new energy efficiency standard was not included in the proposed rules. APS would be required to obtain approval of its action plan included in its IRP and seek recovery of prudently incurred costs in a rate process. If approved by the ACC Commissioners, the rules would require utilities to file a Clean Energy Implementation Plan and Energy Efficiency Report as part of their IRP every three years beginning in 2023. In addition, the ACC Staff proposed changing the IRP planning horizon from 15 years to 10 years.

The ACC discussed the final draft energy rules at several different meetings in 2020. On October 14, 2020, the ACC passed one amendment to ACC Staff’s final draft energy rules that would have required electric utilities to obtain 35% of peak load (as measured in 2020) by 2030 from DSM resources, including traditional energy efficiency, demand response and other programs aimed at reducing energy usage, peak demand management and load shifting. This standard aligned with the proposed rules’ three-year resource planning cycle and allowed recovery of costs through existing mechanisms until the ACC issues a decision in a future rate proceeding. On October 29, 2020, the ACC approved an amendment that would have required electric utilities to reduce their carbon emissions over 2016-2018 levels by 50% by 2032; 75% by 2040; and 100% by 2050. The ACC also approved an amendment that required utilities to install energy storage systems with an aggregate capacity equal to 5% of each utility’s 2020 peak demand by 2035, of which 40% must be derived from customer-owned or customer-leased distributed storage. Another approved amendment modified the resource planning process, including requirements for the ACC to approve a utility’s load forecast and resource plan, and for a utility to perform an all-source request for information to guide its resource plan. On November 13, 2020, the ACC approved a final draft energy rules package. On April 19, 2021, the Administrative Law Judge issued a Recommended Order and Opinion on the final energy rules. In May 2021, the ACC adopted clean energy rules based on a series of ACC amendments. The adopted rules include a final standard of 100% clean energy by 2070 and the following interim standards for carbon reduction from baseline carbon emissions level: 50% reduction by December 31, 2032; 65% reduction by December 31, 2040; 80% reduction by December 31, 2050 and 95% reduction by December 31, 2060. Since the adopted clean energy rules differ substantially from the original Recommended Order and Opinion, supplemental rulemaking procedures will be required before the rules become effective. APS cannot predict the outcome of this matter.

37

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Integrated Resource Planning

ACC rules require utilities to develop 15-year IRPs which describe how the utility plans to serve customer load in the plan timeframe.  The ACC reviews each utility’s IRP to determine if it meets the necessary requirements and whether it should be acknowledged.  In March of 2018, the ACC reviewed the 2017 IRPs of its jurisdictional utilities and voted to not acknowledge any of the plans.  APS does not believe that this lack of acknowledgment will have a material impact on our financial position, results of operations or cash flows.  Based on an ACC decision, APS was originally required to file its next IRP by April 1, 2020.  On February 20, 2020, the ACC extended the deadline for all utilities to file their IRP’s from April 1, 2020 to June 26, 2020. On June 26, 2020, APS filed its final IRP. On July 15, 2020, the ACC extended the schedule for final ACC review of utility IRPs to February 2021. In March 2021, the ACC Staff requested additional time to prepare its assessment of utility IRPs. The ACC has taken no action on APS’s IRP. APS cannot predict the outcome of this matter. See “Energy Modernization Plan” above for information regarding proposed changes to the IRP filings.

Public Utility Regulatory Policies Act

Under the Public Utility Regulatory Policies Act of 1978 (“PURPA”), qualifying facilities are provided the right to sell energy and/or capacity to utilities and are granted relief from certain regulatory burdens. On December 17, 2019, the ACC mandated a minimum contract length of 18 years for qualifying facilities over 100 kW in Arizona, and established that the rate paid to qualifying facilities must be based on the long-term avoided cost. “Avoided cost” is generally defined as the price at which the utility could purchase or produce the same amount of power from sources other than the qualifying facility on a long-term basis. During calendar year 2020, APS entered into two 18-year power purchase agreements with qualified facilities, each for 80 MW solar facilities. In March 2021, the ACC approved these agreements.

On July 16, 2020, FERC issued a final rule revising FERC’s regulations implementing PURPA. The final rule went into effect on December 31, 2020. APS is evaluating how the revised regulations may impact its operations.

Residential Electric Utility Customer Service Disconnections

On June 13, 2019, APS voluntarily suspended electric disconnections for residential customers who had not paid their bills. On June 20, 2019, the ACC voted to enact emergency rule amendments to prevent residential electric utility customer service disconnections during the period June 1 through October 15 (“Summer Disconnection Moratorium”). During the Summer Disconnection Moratorium, APS could not charge late fees and interest on amounts that were past due from customers. Customer deposits must also be used to pay delinquent amounts before disconnection can occur and customers will have four months to pay back their deposit and any remaining delinquent amounts. In accordance with the emergency rules, APS began putting delinquent customers on a mandatory four-month payment plan beginning on October 16, 2019.

In June 2019, the ACC began a formal regular rulemaking process to allow stakeholder input and time for consideration of permanent rule changes. The ACC further ordered that each regulated utility serving retail customers in Arizona update its service conditions by incorporating the emergency rule amendments, restore power to any customers who were disconnected during the month of June 2019 and credit any fees that were charged for a reconnection. The ACC Staff and ACC proposed draft amendments to the customer service disconnections rules. ACC stakeholder meetings were held in September 2019, October 2019 and January 2020 regarding the customer service disconnections rules. On April 14, 2021, the ACC voted to send to the formal rulemaking process a draft rules package governing customer disconnections that allows utilities to choose between a temperature threshold (above 95 degrees and below 32 degrees) or calendar threshold (June 1 – October 15) for disconnection moratoriums. The ACC held two public comment sessions on the draft rules
38

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
and will conduct a final vote before the rules become effective. The Summer Disconnection Moratorium will remain in effect until the ACC formalizes the final rules package.

Due to the COVID-19 pandemic, APS voluntarily suspended disconnections of customers for nonpayment and waived late payment fees beginning March 13, 2020 until December 31, 2020. The suspension of disconnection of customers for nonpayment ended on January 1, 2021 and customers were automatically placed on eight-month payment arrangements if they had past due balances at the end of the disconnection period of $75 or greater. APS will continue to waive late payment fees until October 15, 2021. APS has experienced and is continuing to experience an increase in bad debt expense associated with the COVID-19 pandemic. See “COVID-19 Pandemic” above for more information.

Retail Electric Competition Rules

On November 17, 2018, the ACC voted to re-examine the facilitation of a deregulated retail electric market in Arizona. An ACC special open meeting workshop was held on December 3, 2018. No substantive action was taken, but interested parties were asked to submit written comments and respond to a list of questions from ACC Staff. On July 1 and July 2, 2019, ACC Staff issued a report and initial proposed draft rules regarding possible modifications to the ACC’s retail electric competition rules. Interested parties filed comments to the ACC Staff report and a stakeholder meeting and workshop to discuss the retail electric competition rules was held on July 30, 2019. ACC Commissioners submitted additional questions regarding this matter. On February 10, 2020, two ACC Commissioners filed two sets of draft proposed retail electric competition rules. On February 12, 2020, ACC Staff issued its second report regarding possible modifications to the ACC’s retail electric competition rules. The ACC held a workshop on February 25-26, 2020 on further consideration and discussion of the retail electric competition rules. During a July 15, 2020 ACC Staff meeting, the ACC Commissioners discussed the possible development of a retail competition pilot program, but no action was taken. The ACC Commissioners are continuing to explore the retail electric competition rules. APS cannot predict whether these efforts will result in any changes and, if changes to the rules results, what impact these rules would have on APS.

Rate Plan Comparison Tool and Investigation

On November 14, 2019, APS learned that its rate plan comparison tool was not functioning as intended due to an integration error between the tool and APS’s meter data management system. APS immediately removed the tool from its website and notified the ACC. The purpose of the tool was to provide customers with a rate plan recommendation based upon historical usage data. Upon investigation, APS determined that the error may have affected rate plan recommendations to customers between February 4, 2019 and November 14, 2019. By the middle of May 2020, APS provided refunds to approximately 13,000 potentially impacted customers equal to the difference between what they paid for electricity and the amount they would have paid had they selected their most economical rate, as applicable, and a $25 payment for any inconvenience that the customer may have experienced. The refunds and payment for inconvenience being provided did not have a material impact on APS’s financial statements. APS developed a new tool for comparing customers’ rate plan options.  APS had an independent third party verify that the new rate comparison tool works correctly.  In February 2020, APS launched the new online rate comparison tool, which is now available for its customers. The ACC hired an outside consultant to evaluate the extent of the error and the overall effectiveness of the tool. On August 20, 2020, ACC Staff filed the outside consultant’s report on APS’s rate comparison tool. The report concluded APS’s new rate comparison tool is working as intended. The report also identified a small population of additional customers that may have been affected by the error and APS has provided refunds and the $25 inconvenience payment to approximately 3,800 additional customers. These additional refunds and payment for inconvenience did not have a material impact on APS’s financial statements. On September 28,
39

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2020, the ACC discussed this report but did not take any action. APS cannot predict if any action will be taken by the ACC at this time.

APS received civil investigative demands from the Office of the Arizona Attorney General, Civil Litigation Division, Consumer Protection & Advocacy Section (“Attorney General”) seeking information pertaining to the rate plan comparison tool offered to APS customers and other related issues including implementation of rates from the 2017 Settlement Agreement and its Customer Education and Outreach Plan associated with the 2017 Settlement Agreement. APS fully cooperated with the Attorney General’s Office in this matter. On February 22, 2021 APS entered into a consent agreement with the Attorney General as a way to settle the matter. The settlement resulted in APS paying $24.75 million, $24 million of which is being returned to customers as restitution. While this matter has been resolved with the Attorney General, APS cannot predict whether additional inquiries or actions may be taken by the ACC.

Four Corners SCR Cost Recovery

On December 29, 2017, in accordance with the 2017 Rate Case Decision, APS filed a Notice of Intent to file its SCR Adjustment to permit recovery of costs associated with the installation of SCR equipment at Four Corners Units 4 and 5.  APS filed the SCR Adjustment request in April 2018.  Consistent with the 2017 Rate Case Decision, the request was narrow in scope and addressed only costs associated with this specific environmental compliance equipment.  The SCR Adjustment request provided that there would be a $67.5 million annual revenue impact that would be applied as a percentage of base rates for all applicable customers.  Also, as provided for in the 2017 Rate Case Decision, APS requested that the adjustment become effective no later than January 1, 2019.  The hearing for this matter occurred in September 2018.  At the hearing, APS accepted ACC Staff’s recommendation of a lower annual revenue impact of approximately $58.5 million. The Administrative Law Judge issued a Recommended Opinion and Order finding that the costs for the SCR project were prudently incurred and recommending authorization of the $58.5 million annual revenue requirement related to the installation and operation of the SCRs. Exceptions to the Recommended Opinion and Order were filed by the parties and intervenors on December 7, 2018.  The ACC has not issued a decision on this matter. APS included the costs for the SCR project in the retail rate base in its 2019 Retail Rate Case filing with the ACC. On March 18, 2020, the ACC agreed to take administrative notice to include in the pending rate case portions of the record in this prior proceeding that are relevant to the SCRs.

On August 2, 2021, the 2019 Rate Case ROO recommended a disallowance of approximately $399 million of SCR plant investments and $61 million of SCR cost deferrals. The ACC has not issued a decision on this matter, but if the recommendation regarding the Four Corners SCR project in the 2019 Rate Case ROO is adopted and ordered by the ACC, APS would be required to record a write-off related to the SCR cost deferrals. As of June 30, 2021, the SCR cost deferral balance is approximately $75 million net of accumulated deferred income taxes. In addition, if the recommendation regarding the SCR plant investment disallowance in the 2019 Rate Case ROO is adopted and ordered by the ACC, the amount of any loss will be determined based on the value of the SCR plant investment assets at the time the disallowance is probable and estimable and could also be affected by other regulatory and legal considerations. As of June 30, 2021, the value of the SCR plant investments is approximately $320 million, net of accumulated deferred income taxes. If a disallowance of all or a portion of the SCR plant investments is determined to be estimable and probable, or if regulatory recovery of all or a portion of the deferred costs is determined to no longer be probable, it is reasonably possible that APS will recognize a material loss on the SCR investments and cost deferrals. For the period ended June 30, 2021, based on the fact that the 2019 Rate Case ROO is not a final decision and that APS intends to file exceptions to the 2019 Rate Case ROO related to the recommended disallowance of SCR plant investments and cost deferrals, among other factors, APS has not recorded any adjustments to write-off or write-down the SCR plant investments or cost deferrals. The pollution control assets are used and useful and are required to operate Four Corners and APS believes that these SCR investments were prudently
40

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
incurred. APS cannot predict the final outcome of the decision on this matter nor reasonably estimate the amount of any potential loss.

Cholla

On September 11, 2014, APS announced that it would close Unit 2 of the Cholla Power Plant (“Cholla”) and cease burning coal at the other APS-owned units (Units 1 and 3) at the plant by the mid-2020s, if the United States Environmental Protection Agency (“EPA”) approved a compromise proposal offered by APS to meet required environmental and emissions standards and rules. On April 14, 2015, the ACC approved APS’s plan to retire Unit 2, without expressing any view on the future recoverability of APS’s remaining investment in the unit. APS closed Unit 2 on October 1, 2015. In early 2017, EPA approved a final rule incorporating APS’s compromise proposal, which took effect on April 26, 2017. In December 2019, PacifiCorp notified APS that it planned to retire Cholla Unit 4 by the end of 2020. Cholla Unit 4 was retired on December 24, 2020.

Previously, APS estimated Cholla Unit 2’s end of life to be 2033. APS has been recovering a return on and of the net book value of the unit in base rates. Pursuant to the 2017 Settlement Agreement described above, APS will be allowed continued recovery of the net book value of the unit and the unit’s decommissioning and other retirement-related costs ($48.9 million as of June 30, 2021), in addition to a return on its investment. In accordance with GAAP, in the third quarter of 2014, Unit 2’s remaining net book value was reclassified from property, plant and equipment to a regulatory asset. The 2017 Settlement Agreement also shortened the depreciation lives of Cholla Units 1 and 3 to 2025.

Navajo Plant

The Navajo Plant ceased operations in November 2019. The co-owners and the Navajo Nation executed a lease extension on November 29, 2017 that allows for decommissioning activities to begin after the plant ceased operations.
APS is currently recovering depreciation and a return on the net book value of its interest in the Navajo Plant over its previously estimated life through 2026. APS will seek continued recovery in rates for the book value of its remaining investment in the plant ($67 million as of June 30, 2021) plus a return on the net book value as well as other costs related to retirement and closure, including the Navajo coal reclamation regulatory asset ($17.5 million as of June 30, 2021). APS believes it will be allowed recovery of the net book value, retirement and closure costs, in addition to a return on its investment. In accordance with GAAP, in the second quarter of 2017, APS’s remaining net book value of its interest in the Navajo Plant was reclassified from property, plant and equipment to a regulatory asset. If the ACC does not allow full recovery of the remaining net book value of this interest, all or a portion of the regulatory asset will be written off and APS’s net income, cash flows, and financial position will be negatively impacted. On August 2, 2021, the 2019 Rate Case ROO recommended that APS record 15% of the annual amortization of the regulatory asset as a non-operating expense. If the recommendation regarding the Navajo Plant in the 2019 Rate Case ROO is adopted and ordered by the ACC, APS does not expect this to have a material impact on its financial statements.

41

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Regulatory Assets and Liabilities 

The detail of regulatory assets is as follows (dollars in thousands): 

 	Amortization Through		June 30, 2021		December 31, 2020	
 			Current		Non-Current		Current		Non-Current	
Pension	(a)		$	— 			$	496,372 			$	— 			$	469,953 		
Deferred fuel and purchased power (b) (c)	2022		300,912 			— 			175,835 			— 		
Income taxes — allowance for funds used during construction (“AFUDC”) equity	2051		7,169 			161,279 			7,169 			158,776 		
Retired power plant costs	2033		28,182 			100,123 			28,181 			114,214 		
Ocotillo deferral	N/A		— 			124,919 			— 			95,723 		
SCR deferral	N/A		— 			95,171 			— 			81,307 		
Deferred property taxes	2027		8,569 			45,342 			8,569 			49,626 		
Lost fixed cost recovery (b)	2022		53,087 			— 			41,807 			— 		
Deferred compensation	2036		— 			35,806 			— 			36,195 		
Four Corners cost deferral	2024		8,077 			20,037 			8,077 			24,075 		
Income taxes — investment tax credit basis adjustment	2049		1,113 			23,807 			1,113 			24,291 		
Palo Verde VIEs (Note 6)	2046		— 			21,174 			— 			21,255 		
Coal reclamation	2026		1,068 			16,465 			1,068 			16,999 		
Loss on reacquired debt	2038		1,648 			10,128 			1,689 			10,877 		
Mead-Phoenix transmission line contributions in aid of construction (“CIAC”)	2050		332 			9,214 			332 			9,380 		
Tax expense adjustor mechanism (b)	2021		7,956 			— 			6,226 			— 		
Demand side management (b)	2022		— 			7,269 			— 			7,268 		
Tax expense of Medicare subsidy	2024		1,235 			3,167 			1,235 			3,704 		
TCA balancing account (b)	2023		— 			1,903 			— 			— 		
Deferred fuel and purchased power — mark-to-market (Note 7)	2024		— 			— 			3,341 			9,244 		
	
PSA interest	2022		133 			— 			4,355 			— 		
Other	Various		1,321 			1,801 			2,716 			1,100 		
Total regulatory assets (d)	 		$	420,802 			$	1,173,977 			$	291,713 			$	1,133,987 		

(a)This asset represents the future recovery of pension benefit obligations through retail rates.  If these costs are disallowed by the ACC, this regulatory asset would be charged to other comprehensive income (“OCI”) and result in lower future revenues. See Note 5.
(b)See “Cost Recovery Mechanisms” discussion above.
(c)Subject to a carrying charge.
(d)There are no regulatory assets for which the ACC has allowed recovery of costs, but not allowed a return by exclusion from rate base.  FERC rates are set using a formula rate as described in “Transmission Rates, Transmission Cost Adjustor and Other Transmission Matters.”

42

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The detail of regulatory liabilities is as follows (dollars in thousands):

																														
 	Amortization Through		June 30, 2021		December 31, 2020	
 			Current		Non-Current		Current		Non-Current	
Excess deferred income taxes — ACC - Tax Act (a)	2046		$	41,381 			$	993,982 			$	41,330 			$	1,012,583 		
Excess deferred income taxes — FERC - Tax Act (a)	2058		7,240 			225,995 			7,240 			229,147 		
Asset retirement obligations	2057		— 			567,900 			— 			506,049 		
Other postretirement benefits	(d)		47,798 			314,218 			37,705 			349,588 		
Removal costs	(c)		69,348 			61,601 			52,844 			103,008 		
Deferred fuel and purchased power — mark-to-market (Note 7)	2024		82,082 			27,305 			— 			— 		
Income taxes — change in rates	2050		2,839 			65,319 			2,839 			66,553 		
Four Corners coal reclamation	2038		5,461 			49,904 			5,460 			49,435 		
Income taxes — deferred investment tax credit	2049		2,231 			47,677 			2,231 			48,648 		
Spent nuclear fuel	2027		6,510 			41,815 			6,768 			44,221 		
Renewable energy standard (b)	2022		30,665 			— 			39,442 			103 		
Property tax deferral	N/A		— 			16,188 			— 			13,856 		
Demand side management (b)	2022		3,149 			12,457 			10,819 			— 		
Sundance maintenance	2031		556 			12,312 			2,989 			11,508 		
FERC transmission true up	2023		7,547 			3,511 			6,598 			3,008 		
TCA balancing account (b)	2023		10,750 			159 			2,902 			4,672 		
Tax expense adjustor mechanism (b) (e)	2021		7,148 			— 			7,089 			— 		
Deferred gains on utility property	2022		2,423 			333 			2,423 			1,544 		
Active union medical trust	N/A		— 			2,347 			— 			6,057 		
Other	Various		484 			289 			409 			189 		
Total regulatory liabilities	 		$	327,612 			$	2,443,312 			$	229,088 			$	2,450,169 		

(a)For purposes of presentation on the Statement of Cash Flows, amortization of the regulatory liabilities for excess deferred income taxes are reflected as “Deferred income taxes” under Cash Flows From Operating Activities.
(b)See “Cost Recovery Mechanisms” discussion above.
(c)In accordance with regulatory accounting guidance, APS accrues removal costs for its regulated assets, even if there is no legal obligation for removal.
(d)See Note 5.
(e)Pursuant to Decision 77852, the ACC has authorized APS to return to customers up to $7 million of liability recorded to the TEAM balancing account through December 31, 2021. Should new base rates become effective prior to December 31, 2021, any remaining unreturned balance is anticipated to be included in the new base rates.

5.    Retirement Plans and Other Postretirement Benefits
 
Pinnacle West sponsors a qualified defined benefit and account balance pension plan, a non-qualified supplemental excess benefit retirement plan, and other postretirement benefit plans for the employees of Pinnacle West and our subsidiaries.  The other postretirement benefit plans include a group life and medical plan and a post-65 retiree health reimbursement arrangement (“HRA”). Pinnacle West uses a December 31
43

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
measurement date each year for its pension and other postretirement benefit plans.  The market-related value of our plan assets is their fair value at the measurement date.

Under the HRA, included in the other postretirement benefit plan, the Company provides a subsidy to retirees to defray the cost of a Medicare supplemental policy. In prior years, we had been assuming a 4.75% escalation of these benefits; however, actual escalation has been significantly less than this assumption. Accordingly, during 2020 and for future periods, the escalation assumption was reduced to 2.00%. This escalation factor assumption change, among other factors, resulted in an increase in the over-funded status of the other postretirement benefit plan as of December 31, 2020. As a result, on January 4, 2021, we initiated the transfer of approximately $106 million of assets from the other postretirement benefit plan into the Active Union Employee Medical Account. The Active Union Employee Medical Account is an existing trust account that holds assets restricted for paying active union employee medical costs (see Note 12). The transfer of other postretirement benefit plan assets into the Active Union Employee Medical Account permits access to approximately $106 million of assets for the sole purpose of paying active union employee medical benefits. This transfer of assets into the Active Union Employee Medical Account is consistent with the terms of a similar 2018 transaction.

The following table provides details of the plans’ net periodic benefit costs and the portion of these costs charged to expense (including administrative costs and excluding amounts capitalized as overhead construction or billed to electric plant participants) (dollars in thousands):
																																																
 	Pension Benefits		Other Benefits	
 	Three Months Ended
June 30,		Six Months Ended
June 30,		Three Months Ended
June 30,		Six Months Ended
June 30,	
 	2021		2020		2021		2020		2021		2020		2021		2020	
Service cost — benefits earned during the period	$	14,939 			$	13,859 			$	30,618 			$	28,116 			$	4,341 			$	5,401 			$	8,898 			$	11,118 		
Non-service costs (credits):																
Interest cost on benefit obligation	24,614 			29,522 			49,283 			59,283 			4,095 			6,417 			8,257 			12,929 		
Expected return on plan assets	(50,706)			(46,915)			(101,314)			(93,721)			(10,361)			(10,019)			(20,722)			(20,038)		
  Amortization of:	 				 		 		 		 		 		 	
  Prior service credit	— 			— 			— 			— 			(9,427)			(9,394)			(18,854)			(18,788)		
  Net actuarial loss (gain)	3,989 			8,295 			7,974 			17,306 			(2,641)			— 			(5,046)			— 		
Net periodic benefit cost/(benefit)	$	(7,164)			$	4,761 			$	(13,439)			$	10,984 			$	(13,993)			$	(7,595)			$	(27,467)			$	(14,779)		
Portion of cost/(benefit) charged to expense	$	(8,614)			$	271 			$	(16,625)			$	1,613 			$	(9,608)			$	(5,056)			$	(19,136)			$	(10,512)		
 
Contributions
 
We have not made voluntary contributions to our pension plan year-to-date in 2021. The minimum required contributions for the pension plan are zero for the next three years. We expect to make voluntary contributions up to $100 million in 2021 and zero in 2022 and 2023. We do not expect to make any contributions over this period to our other postretirement benefit plans.
 
44

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6.    Palo Verde Sale Leaseback Variable Interest Entities
 
In 1986, APS entered into agreements with three separate VIE lessor trust entities in order to sell and lease back interests in Palo Verde Unit 2 and related common facilities. Prior to April 1, 2021, the lease terms allowed APS the right to retain the assets through 2023 under one lease and 2033 under the other two leases. On April 1, 2021, APS executed an amended lease agreement with one of the VIE lessor trust entities relating to the lease agreement with the term ending in 2023. The amendment extends the lease term for this lease through 2033 and changes the lease payment. As a result of this amendment, APS will now retain the assets through 2033 under all three lease agreements. APS will be required to make payments relating to the three leases in total of approximately $21 million annually for the period 2021 through 2033. At the end of the lease period, APS will have the option to purchase the leased assets at their fair market value, extend the leases for up to two years, or return the assets to the lessors.

The leases’ terms give APS the ability to utilize the assets for a significant portion of the assets’ economic life, and therefore provide APS with the power to direct activities of the VIEs that most significantly impact the VIEs’ economic performance.  Predominantly due to the lease terms, APS has been deemed the primary beneficiary of these VIEs and therefore consolidates the VIEs.

As a result of consolidation, we eliminate lease accounting and instead recognize depreciation expense, resulting in an increase in net income for the three and six months ended June 30, 2021 of $4 million and $9 million, respectively, and for the three and six months ended June 30, 2020 of $5 million and $10 million, respectively, entirely attributable to the noncontrolling interests. Income attributable to Pinnacle West shareholders is not impacted by the consolidation.

Our Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020 include the following amounts relating to the VIEs (dollars in thousands):

	June 30, 2021		December 31, 2020	
Palo Verde sale leaseback property, plant and equipment, net of accumulated depreciation	$	96,101 			$	98,036 		
Equity — Noncontrolling interests	117,275 			119,290 		
 
Assets of the VIEs are restricted and may only be used for payment to the noncontrolling interest holders. These assets are reported on our condensed consolidated financial statements.
 
APS is exposed to losses relating to these VIEs upon the occurrence of certain events that APS does not consider to be reasonably likely to occur.  Under certain circumstances (for example, the Nuclear Regulatory Commission (“NRC”) issuing specified violation orders with respect to Palo Verde or the occurrence of specified nuclear events), APS would be required to make specified payments to the VIEs’ noncontrolling equity participants and take title to the leased Unit 2 interests, which, if appropriate, may be required to be written down in value.  If such an event were to occur during the lease periods, APS may be required to pay the noncontrolling equity participants approximately $307 million beginning in 2021, and up to $501 million over the lease terms.
 
For regulatory ratemaking purposes, the agreements continue to be treated as operating leases and, as a result, we have recorded a regulatory asset relating to the arrangements.

45

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7.    Derivative Accounting
 
Derivative financial instruments are used to manage exposure to commodity price and transportation costs of electricity, natural gas, emissions allowances, and in interest rates.  Risks associated with market volatility are managed by utilizing various physical and financial derivative instruments, including futures, forwards, options and swaps.  As part of our overall risk management program, we may use derivative instruments to hedge purchases and sales of electricity and natural gas.  Derivative instruments that meet certain hedge accounting criteria may be designated as cash flow hedges and are used to limit our exposure to cash flow variability on forecasted transactions.  The changes in market value of such instruments have a high correlation to price changes in the hedged transactions.  Derivative instruments are also entered into for economic hedging purposes.  While economic hedges may mitigate exposure to fluctuations in commodity prices, these instruments have not been designated as accounting hedges.  Contracts that have the same terms (quantities, delivery points and delivery periods) and for which power does not flow are netted, which reduces both revenues and fuel and purchased power costs in our Condensed Consolidated Statements of Income, but does not impact our financial condition, net income or cash flows.
 
Our derivative instruments, excluding those qualifying for a scope exception, are recorded on the balance sheets as an asset or liability and are measured at fair value.  See Note 11 for a discussion of fair value measurements.  Derivative instruments may qualify for the normal purchases and normal sales scope exception if they require physical delivery and the quantities represent those transacted in the normal course of business.  Derivative instruments qualifying for the normal purchases and sales scope exception are accounted for under the accrual method of accounting and excluded from our derivative instrument discussion and disclosures below.
 
For its regulated operations, APS defers for future rate treatment 100% of the unrealized gains and losses on derivatives pursuant to the PSA mechanism that would otherwise be recognized in income.  Realized gains and losses on derivatives are deferred in accordance with the PSA to the extent the amounts are above or below the Base Fuel Rate (see Note 4).  Gains and losses from derivatives in the following tables represent the amounts reflected in income before the effect of PSA deferrals.
 
The following table shows the outstanding gross notional volume of derivatives, which represent both purchases and sales (does not reflect net position): 

			Quantity	
Commodity		Unit of Measure	June 30, 2021		December 31, 2020	
Power		GWh	368 			368 		
Gas		Billion cubic feet	189 			205 		
 
46

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Gains and Losses from Derivative Instruments
 
The following table provides information about APS’s gains and losses from derivative instruments in designated cash flow accounting hedging relationships (dollars in thousands):

 		Financial Statement Location		Three Months Ended
June 30,		Six Months Ended
June 30,	
Commodity Contracts				2021		2020		2021		2020	
	
Loss Reclassified from Accumulated OCI into Income (Effective Portion Realized) (a)		Fuel and purchased power (b)		$	— 			$	(349)			$	— 			$	(763)		

(a)During the three and six months ended June 30, 2021 and 2020, we had no gains or losses reclassified from accumulated OCI to earnings related to discontinued cash flow hedges.
(b)Amounts are before the effect of PSA deferrals.
 
During the next twelve months, we estimate that no amounts will be reclassified from accumulated OCI into income. For APS, the delivery period for all derivative instruments in designated cash flow accounting hedging relationships have lapsed.

The following table provides information about gains and losses from derivative instruments not designated as accounting hedging instruments (dollars in thousands):

 		Financial Statement Location		Three Months Ended
June 30,		Six Months Ended
June 30,	
Commodity Contracts				2021		2020		2021		2020	
	
Net Gain (Loss) Recognized in Income		Fuel and purchased power (a)		$	95,116 			$	(4,894)			$	121,975 			$	(34,971)		

(a)Amounts are before the effect of PSA deferrals.
 
Derivative Instruments in the Condensed Consolidated Balance Sheets
 
Our derivative transactions are typically executed under standardized or customized agreements, which include collateral requirements and, in the event of a default, would allow for the netting of positive and negative exposures associated with a single counterparty.  Agreements that allow for the offsetting of positive and negative exposures associated with a single counterparty are considered master netting arrangements.  Transactions with counterparties that have master netting arrangements are offset and reported net on the Condensed Consolidated Balance Sheets.  Transactions that do not allow for offsetting of positive and negative positions are reported gross on the Condensed Consolidated Balance Sheets.
 
We do not offset a counterparty’s current derivative contracts with the counterparty’s non-current derivative contracts, although our master netting arrangements would allow current and non-current positions to be offset in the event of a default.  These types of transactions may include non-derivative instruments, derivatives qualifying for scope exceptions, trade receivables and trade payables arising from settled positions, and other forms of non-cash collateral (such as letters of credit).  These types of transactions are excluded from the offsetting tables presented below.
 
The following tables provide information about the fair value of our risk management activities reported on a gross basis, and the impacts of offsetting.  These amounts relate to commodity contracts and are
47

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
located in the assets and liabilities from risk management activities and other assets lines of our Condensed Consolidated Balance Sheets.
																																	
As of June 30, 2021:
 (dollars in thousands)		Gross
 Recognized
 Derivatives
 (a)		Amounts
Offset
 (b)		Net
 Recognized
 Derivatives		Other
 (c)		Amount Reported on Balance Sheets	
Current assets		$	83,677 			$	(1,368)			$	82,309 			$	— 			$	82,309 		
Investments and other assets		27,305 			— 			27,305 			— 			27,305 		
Total assets		110,982 			(1,368)			109,614 			— 			109,614 		
											
Current liabilities		(1,595)			1,368 			(227)			(1,285)			(1,512)		
Deferred credits and other		— 			— 			— 			— 			— 		
Total liabilities		(1,595)			1,368 			(227)			(1,285)			(1,512)		
Total		$	109,387 			$	— 			$	109,387 			$	(1,285)			$	108,102 		

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions or collateral posted in excess of the recognized derivative instrument. Includes cash collateral received from counterparties of $1,285.
																																	
As of December 31, 2020:
 (dollars in thousands)		Gross
Recognized
Derivatives
 (a)		Amounts
Offset
(b)		Net
 Recognized
 Derivatives		Other
 (c)		Amount
Reported on
Balance Sheets	
Current assets		$	5,870 			$	(2,939)			$	2,931 			$	— 			$	2,931 		
Investments and other assets		3,150 			(1,332)			1,818 			— 			1,818 		
Total assets		9,020 			(4,271)			4,749 			— 			4,749 		
											
Current liabilities		(9,211)			2,939 			(6,272)			(1,285)			(7,557)		
Deferred credits and other		(12,394)			1,332 			(11,062)			— 			(11,062)		
Total liabilities		(21,605)			4,271 			(17,334)			(1,285)			(18,619)		
Total		$	(12,585)			$	— 			$	(12,585)			$	(1,285)			$	(13,870)		

(a)All of our gross recognized derivative instruments were subject to master netting arrangements.
(b)No cash collateral has been provided to counterparties, or received from counterparties, that is subject to offsetting.
(c)Represents cash collateral and cash margin that is not subject to offsetting. Amounts relate to non-derivative instruments, derivatives qualifying for scope exceptions, or collateral and margin posted in excess of the recognized derivative instrument.  Includes cash collateral received from counterparties of $1,285.

48

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Credit Risk and Credit Related Contingent Features
 
We are exposed to losses in the event of nonperformance or nonpayment by counterparties and have risk management contracts with many counterparties. As of June 30, 2021, we have two counterparties for which our exposure represents approximately 35% of Pinnacle West’s $110 million of risk management assets. This exposure relates to master agreements with counterparties and both are rated as investment grade. Our risk management process assesses and monitors the financial exposure of all counterparties.  Despite the fact that the great majority of our trading counterparties’ debt is rated as investment grade by the credit rating agencies, there is still a possibility that one or more of these companies could default, resulting in a material impact on consolidated earnings for a given period. Counterparties in the portfolio consist principally of financial institutions, major energy companies, municipalities and local distribution companies.  We maintain credit policies that we believe minimize overall credit risk to within acceptable limits.  Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition.  To manage credit risk, we employ collateral requirements and standardized agreements that allow for the netting of positive and negative exposures associated with a single counterparty.  Valuation adjustments are established representing our estimated credit losses on our overall exposure to counterparties.
 
Certain of our derivative instrument contracts contain credit-risk-related contingent features including, among other things, investment grade credit rating provisions, credit-related cross-default provisions, and adequate assurance provisions.  Adequate assurance provisions allow a counterparty with reasonable grounds for uncertainty to demand additional collateral based on subjective events and/or conditions.  For those derivative instruments in a net liability position, with investment grade credit contingencies, the counterparties could demand additional collateral if our debt credit rating were to fall below investment grade (below BBB- for Standard & Poor’s or Fitch or Baa3 for Moody’s).
 
The following table provides information about our derivative instruments that have credit-risk-related contingent features (dollars in thousands):

 	June 30, 2021	
Aggregate fair value of derivative instruments in a net liability position	$	1,595 		
Cash collateral posted	— 		
Additional cash collateral in the event credit-risk-related contingent features were fully triggered	— 		
 
    We also have energy-related non-derivative instrument contracts with investment grade credit-related contingent features, which could also require us to post additional collateral of approximately $87 million if our debt credit ratings were to fall below investment grade.

49

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.    Commitments and Contingencies
 
Palo Verde Generating Station
 
Spent Nuclear Fuel and Waste Disposal
 
On December 19, 2012, APS, acting on behalf of itself and the participant owners of Palo Verde, filed a second breach of contract lawsuit against the United States Department of Energy (“DOE”) in the United States Court of Federal Claims (“Court of Federal Claims”).  The lawsuit sought to recover damages incurred due to DOE’s breach of the Contract for Disposal of Spent Nuclear Fuel and/or High Level Radioactive Waste (“Standard Contract”) for failing to accept Palo Verde’s spent nuclear fuel and high level waste from January 1, 2007 through June 30, 2011, as it was required to do pursuant to the terms of the Standard Contract and the Nuclear Waste Policy Act.  On August 18, 2014, APS and DOE entered into a settlement agreement, stipulating to a dismissal of the lawsuit and payment by DOE to the Palo Verde owners for certain specified costs incurred by Palo Verde during the period January 1, 2007 through June 30, 2011. In addition, the settlement agreement, as amended, provides APS with a method for submitting claims and getting recovery for costs incurred through December 31, 2022.

APS has submitted six claims pursuant to the terms of the August 18, 2014 settlement agreement, for six separate time periods during July 1, 2011 through June 30, 2019. The DOE has approved and paid $99.7 million for these claims (APS’s share is $29.0 million). The amounts recovered were primarily recorded as adjustments to a regulatory liability and had no impact on reported net income. In accordance with the 2017 Rate Case Decision, this regulatory liability is being refunded to customers (see Note 4). On November 2, 2020, APS filed its seventh claim pursuant to the terms of the August 18, 2014 settlement agreement in the amount of $12.2 million (APS’s share is $3.6 million). On March 15, 2021, the DOE approved a payment of $12.1 million (APS’s share is $3.5 million) and on April 16, 2021, APS received this payment.

Nuclear Insurance

Public liability for incidents at nuclear power plants is governed by the Price-Anderson Nuclear Industries Indemnity Act (“Price-Anderson Act”), which limits the liability of nuclear reactor owners to the amount of insurance available from both commercial sources and an industry-wide retrospective payment plan.  In accordance with the Price-Anderson Act, the Palo Verde participants are insured against public liability for a nuclear incident of up to approximately $13.5 billion per occurrence. Palo Verde maintains the maximum available nuclear liability insurance in the amount of $450 million, which is provided by American Nuclear Insurers (“ANI”).  The remaining balance of approximately $13.1 billion of liability coverage is provided through a mandatory industry-wide retrospective premium program.  If losses at any nuclear power plant covered by the program exceed the accumulated funds, APS could be responsible for retrospective premiums.  The maximum retrospective premium per reactor under the program for each nuclear liability incident is approximately $137.6 million, subject to a maximum annual premium of approximately $20.5 million per incident.  Based on APS’s ownership interest in the three Palo Verde units, APS’s maximum retrospective premium per incident for all three units is approximately $120.1 million, with a maximum annual retrospective premium of approximately $17.9 million.

The Palo Verde participants maintain insurance for property damage to, and decontamination of, property at Palo Verde in the aggregate amount of $2.8 billion.  APS has also secured accidental outage insurance for a sudden and unforeseen accidental outage of any of the three units.  The property damage, decontamination, and accidental outage insurance are provided by Nuclear Electric Insurance Limited (“NEIL”).  APS is subject to retrospective premium adjustments under all NEIL policies if NEIL’s losses in any policy year exceed accumulated funds. The maximum amount APS could incur under the current NEIL
50

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
policies totals approximately $22.4 million for each retrospective premium assessment declared by NEIL’s Board of Directors due to losses.  In addition, NEIL policies contain rating triggers that would result in APS providing approximately $63.3 million of collateral assurance within 20 business days of a rating downgrade to non-investment grade.  The insurance coverage discussed in this and the previous paragraph is subject to certain policy conditions, sublimits and exclusions.

Contractual Obligations

As of June 30, 2021, our fuel and purchased power commitments have increased from the information provided in our 2020 Form 10-K. The increase is primarily due to new purchased power and energy storage commitments of approximately $624 million. The majority of the changes relate to 2026 and thereafter.

Other than the item described above, there have been no material changes, as of June 30, 2021, outside the normal course of business in contractual obligations from the information provided in our 2020 Form 10-K. See Note 3 for discussion regarding changes in our short-term and long-term debt obligations. See Note 6 for discussion regarding changes to our contractual obligations related to the Palo Verde sale leaseback transactions.

Superfund-Related Matters
 
The Comprehensive Environmental Response Compensation and Liability Act (“Superfund” or “CERCLA”) establishes liability for the cleanup of hazardous substances found contaminating the soil, water or air.  Those who released, generated, transported to or disposed of hazardous substances at a contaminated site are among the parties who are potentially responsible (“PRPs”).  PRPs may be strictly, and often are jointly and severally, liable for clean-up.  On September 3, 2003, EPA advised APS that EPA considers APS to be a PRP in the Motorola 52nd Street Superfund Site, Operable Unit 3 (“OU3”) in Phoenix, Arizona.  APS has facilities that are within this Superfund site.  APS and Pinnacle West have agreed with EPA to perform certain investigative activities of the APS facilities within OU3.  In addition, on September 23, 2009, APS agreed with EPA and one other PRP to voluntarily assist with the funding and management of the site-wide groundwater remedial investigation and feasibility study (“RI/FS”).  Based upon discussions between the OU3 working group parties and EPA, along with the results of recent technical analyses prepared by the OU3 working group to supplement the RI/FS for OU3, APS anticipates finalizing the RI/FS during the fourth quarter of 2021. We estimate that our costs related to this investigation and study will be approximately $3 million.  We anticipate incurring additional expenditures in the future, but because the overall investigation is not complete and ultimate remediation requirements are not yet finalized, at the present time expenditures related to this matter cannot be reasonably estimated.
 
On August 6, 2013, the Roosevelt Irrigation District (“RID”) filed a lawsuit in Arizona District Court against APS and 24 other defendants, alleging that RID’s groundwater wells were contaminated by the release of hazardous substances from facilities owned or operated by the defendants.  The lawsuit also alleges that, under Superfund laws, the defendants are jointly and severally liable to RID.  The allegations against APS arise out of APS’s current and former ownership of facilities in and around OU3.  As part of a state governmental investigation into groundwater contamination in this area, on January 25, 2015, the Arizona Department of Environmental Quality (“ADEQ”) sent a letter to APS seeking information concerning the degree to which, if any, APS’s current and former ownership of these facilities may have contributed to groundwater contamination in this area.  APS responded to ADEQ on May 4, 2015. On December 16, 2016, two RID environmental and engineering contractors filed an ancillary lawsuit for recovery of costs against APS and the other defendants in the RID litigation. That same day, another RID service provider filed an additional ancillary CERCLA lawsuit against certain of the defendants in the main RID litigation, but excluded APS and certain other parties as named defendants. Because the ancillary lawsuits concern past costs allegedly incurred
51

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
by these RID vendors, which were ruled unrecoverable directly by RID in November of 2016, the additional lawsuits do not increase APS’s exposure or risk related to these matters.

On April 5, 2018, RID and the defendants in that particular litigation executed a settlement agreement, fully resolving RID’s CERCLA claims concerning both past and future cost recovery. APS’s share of this settlement was immaterial. In addition, the two environmental and engineering vendors voluntarily dismissed their lawsuit against APS and the other named defendants without prejudice. An order to this effect was entered on April 17, 2018. With this disposition of the case, the vendors may file their lawsuit again in the future. On August 16, 2019, Maricopa County, one of the three direct defendants in the service provider lawsuit, filed a third-party complaint seeking contribution for its liability, if any, from APS and 28 other third-party defendants. We are unable to predict the outcome of these matters; however, we do not expect the outcome to have a material impact on our financial position, results of operations or cash flows.

Arizona Attorney General Matter

APS received civil investigative demands from the Attorney General seeking information pertaining to the rate plan comparison tool offered to APS customers and other related issues including implementation of rates from the 2017 Settlement Agreement and its Customer Education and Outreach Plan associated with the 2017 Settlement Agreement. APS fully cooperated with the Attorney General’s Office in this matter. On February 22, 2021 APS entered into a consent agreement with the Attorney General as a way to settle the matter. The settlement resulted in APS paying $24.75 million, $24 million of which is being returned to customers as restitution.

Four Corners SCR Cost Recovery

As part of APS's rate case filing in 2019, APS included recovery of the deferral and rate base effects of the Four Corners SCR project. On August 2, 2021, the 2019 Rate Case ROO recommended a disallowance of approximately $399 million of SCR plant investments and $61 million of SCR cost deferrals. The ACC has not issued a decision on this matter, but if the recommendation regarding the Four Corners SCR project in the 2019 Rate Case ROO is adopted and ordered by the ACC, APS would be required to record a write-off related to the SCR cost deferrals. As of June 30, 2021, the SCR cost deferral balance is approximately $75 million net of accumulated deferred income taxes. In addition, if the recommendation regarding the SCR plant investment disallowance in the 2019 Rate Case ROO is adopted and ordered by the ACC, the amount of any loss will be determined based on the value of the SCR plant investment assets at the time the disallowance is probable and estimable and could also be affected by other regulatory and legal considerations. As of June 30, 2021, the value of the SCR plant investments is approximately $320 million, net of accumulated deferred income taxes. If a disallowance of all or a portion of the SCR plant investments is determined to be estimable and probable, or if regulatory recovery of all or a portion of the deferred costs is determined to no longer be probable, it is reasonably possible that APS will recognize a material loss on the SCR investments and cost deferrals. For the period ended June 30, 2021, based on the fact that the 2019 Rate Case ROO is not a final decision and that APS intends to file exceptions to the 2019 Rate Case ROO related to the recommended disallowance of SCR plant investments and cost deferrals, among other factors, APS has not recorded any adjustments to write-off or write-down the SCR plant investments or cost deferrals. The pollution control assets are used and useful and are required to operate Four Corners and APS believes that these SCR investments were prudently incurred. APS cannot predict the final outcome of the decision on this matter nor reasonably estimate the amount of any potential loss.

Environmental Matters

APS is subject to numerous environmental laws and regulations affecting many aspects of its present and future operations, including air emissions of both conventional pollutants and greenhouse gases, water quality, wastewater discharges, solid waste, hazardous waste, and coal combustion residuals (“CCRs”).  These
52

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
laws and regulations can change from time to time, imposing new obligations on APS resulting in increased capital, operating, and other costs.  Associated capital expenditures or operating costs could be material.  APS intends to seek recovery of any such environmental compliance costs through our rates but cannot predict whether it will obtain such recovery.  The following proposed and final rules involve material compliance costs to APS.
 
Regional Haze Rules.  APS has received the final rulemaking imposing pollution control requirements on Four Corners. EPA required the plant to install pollution control equipment that constitutes best available retrofit technology (“BART”) to lessen the impacts of emissions on visibility surrounding the plant. In addition, EPA issued a final rule for Regional Haze compliance at Cholla that does not involve the installation of new pollution controls and that will replace an earlier BART determination for this facility. See below for details of the Cholla BART approval.

Four Corners. Based on EPA’s final standards, APS’s 63% share of the cost of required controls for Four Corners Units 4 and 5 was approximately $400 million, which has been incurred.  In addition, APS and El Paso Electric Company (“El Paso”) entered into an asset purchase agreement providing for the purchase by APS, or an affiliate of APS, of El Paso’s 7% interest in Four Corners Units 4 and 5. 4CA purchased the El Paso interest on July 6, 2016. Navajo Transitional Energy Company, LLC (“NTEC”) purchased the interest from 4CA on July 3, 2018. See “Four Corners — 4CA Matter” below for a discussion of the NTEC purchase. The cost of the pollution controls related to the 7% interest is approximately $45 million, which was assumed by NTEC through its purchase of the 7% interest.

Cholla. In early 2017, EPA approved a final rule containing a revision to Arizona’s State Implementation Plan (“SIP”) for Cholla that implemented BART requirements for this facility, which did not require the installation of any new pollution control capital improvements. In conjunction with the closure of Cholla Unit 2 in 2015, APS has committed to ceasing coal combustion within Units 1 and 3 by April 2025. PacifiCorp retired Cholla Unit 4 at the end of 2020. (See “Cholla” in Note 4 for information regarding future plans for Cholla and details related to the resulting regulatory asset).
 
Coal Combustion Waste. On December 19, 2014, EPA issued its final regulations governing the handling and disposal of CCR, such as fly ash and bottom ash. The rule regulates CCR as a non-hazardous waste under Subtitle D of the Resource Conservation and Recovery Act (“RCRA”) and establishes national minimum criteria for existing and new CCR landfills and surface impoundments and all lateral expansions. These criteria include standards governing location restrictions, design and operating criteria, groundwater monitoring and corrective action, closure requirements and post closure care, and recordkeeping, notification, and internet posting requirements. The rule generally requires any existing unlined CCR surface impoundment to stop receiving CCR and either retrofit or close, and further requires the closure of any CCR landfill or surface impoundment that cannot meet the applicable performance criteria for location restrictions or structural integrity. Such closure requirements are deemed “forced closure” or “closure for cause” of unlined surface impoundments and are the subject of recent regulatory and judicial activities described below.
Since these regulations were finalized, EPA has taken steps to substantially modify the federal rules governing CCR disposal. While certain changes have been prompted by utility industry petitions, others have resulted from judicial review, court-approved settlements with environmental groups, and statutory changes to RCRA. The following lists the pending regulatory changes that, if finalized, could have a material impact as to how APS manages CCR at its coal-fired power plants:
•Following the passage of the Water Infrastructure Improvements for the Nation Act in 2016, EPA possesses authority to either authorize states to develop their own permit programs for CCR management or issue federal permits governing CCR disposal both in states without their own permit programs and on tribal lands. Although ADEQ has taken steps to develop a CCR permitting program,
53

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
it is not clear when that program will be put into effect. On December 19, 2019, EPA proposed its own set of regulations governing the issuance of CCR management permits.

•On March 1, 2018, as a result of a settlement with certain environmental groups, EPA proposed adding boron to the list of constituents that trigger corrective action requirements to remediate groundwater impacted by CCR disposal activities. Apart from a subsequent proposal issued on August 14, 2019 to add a specific, health-based groundwater protection standard for boron, EPA has yet to take action on this proposal.

•Based on an August 21, 2018 D.C. Circuit decision, which vacated and remanded those provisions of the EPA CCR regulations that allow for the operation of unlined CCR surface impoundments, EPA recently proposed corresponding changes to federal CCR regulations. On July 29, 2020, EPA took final action on new regulations establishing revised deadlines for initiating the closure of unlined CCR surface impoundments, April 11, 2021 at the latest. All APS disposal units subject to these closure requirements were closed as of April 11, 2021.

•On November 4, 2019, EPA also proposed to change the manner by which facilities that have committed to cease burning coal in the near-term may qualify for alternative closure. Such qualification would allow CCR disposal units at these plants to continue operating, even though they would otherwise be subject to forced closure under the federal CCR regulations. EPA’s July 29, 2020 final regulation adopted this proposal and now requires explicit EPA approval for facilities to utilize an alternative closure deadline. With respect to the Cholla facility, APS’s application for alternative closure (which would allow the continued disposal of CCR within the facility’s existing unlined CCR surface impoundments until the required date for ceasing coal-fired boiler operations in April 2025) was submitted to EPA on November 30, 2020 and is currently pending. This application will be subject to public comment and, potentially, judicial review.

We cannot at this time predict the outcome of these regulatory proceedings or when the EPA will take final action on those matters that are still pending. Depending on the eventual outcome, the costs associated with APS’s management of CCR could materially increase, which could affect APS’s financial position, results of operations, or cash flows.

APS currently disposes of CCR in ash ponds and dry storage areas at Cholla and Four Corners. APS estimates that its share of incremental costs to comply with the CCR rule for Four Corners is approximately $27 million and its share of incremental costs to comply with the CCR rule for Cholla is approximately $16 million. The Navajo Plant disposed of CCR only in a dry landfill storage area. To comply with the CCR rule for the Navajo Plant, APS’s share of incremental costs was approximately $1 million, which has been incurred. Additionally, the CCR rule requires ongoing, phased groundwater monitoring.

As of October 2018, APS has completed the statistical analyses for its CCR disposal units that triggered assessment monitoring. APS determined that several of its CCR disposal units at Cholla and Four Corners will need to undergo corrective action. In addition, under the current regulations, all such disposal units must have ceased operating and initiated closure by April 11, 2021 at the latest (except for those disposal units subject to alternative closure). APS initiated an assessment of corrective measures on January 14, 2019 and expects such assessment will continue through late-2021. As part of this assessment, APS continues to gather additional groundwater data and perform remedial evaluations as to the CCR disposal units at Cholla and Four Corners undergoing corrective action. In addition, APS will solicit input from the public, host public hearings, and select remedies as part of this process. Based on the work performed to date, APS currently estimates that its share of corrective action and monitoring costs at Four Corners will likely range from $10 million to $15 million, which would be incurred over 30 years. The analysis needed to perform a similar cost estimate for Cholla remains ongoing at this time. As APS continues to implement the CCR rule’s corrective
54

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
action assessment process, the current cost estimates may change. Given uncertainties that may exist until we have fully completed the corrective action assessment process, we cannot predict any ultimate impacts to the Company; however, at this time we do not believe the cost estimates for Cholla and any potential change to the cost estimate for Four Corners would have a material impact on our financial position, results of operations or cash flows.

Clean Power Plan/Affordable Clean Energy Regulations. On June 19, 2019, EPA took final action on its proposals to repeal EPA’s 2015 Clean Power Plan (“CPP”) and replace those regulations with a new rule, the Affordable Clean Energy (“ACE”) regulations. EPA originally finalized the CPP on August 3, 2015, and such rules would have had far broader impact on the electric power sector than the ACE regulations. On January 19, 2021, the U.S. Court of Appeals for the D.C. Circuit vacated the ACE regulations and remanded them back to EPA to develop new existing power plant carbon regulations consistent with the court’s ruling. That ruling endorsed an expansive view of the federal Clean Air Act consistent with EPA’s 2015 CPP. While the Biden administration has expressed an intent to regulate carbon emissions in this sector more aggressively under the Clean Air Act, we cannot at this time predict the outcome of pending EPA rulemaking proceedings in response to the court’s recent ACE decision.

Other environmental rules that could involve material compliance costs include those related to effluent limitations, the ozone national ambient air quality standard and other rules or matters involving the Clean Air Act, Clean Water Act, Endangered Species Act, RCRA, Superfund, the Navajo Nation, and water supplies for our power plants. The financial impact of complying with current and future environmental rules could jeopardize the economic viability of our coal plants or the willingness or ability of power plant participants to fund any required equipment upgrades or continue their participation in these plants. The economics of continuing to own certain resources, particularly our coal plants, may deteriorate, warranting early retirement of those plants, which may result in asset impairments. APS would seek recovery in rates for the book value of any remaining investments in the plants as well as other costs related to early retirement, but cannot predict whether it would obtain such recovery.

Four Corners National Pollutant Discharge Elimination System (“NPDES”) Permit

The latest NPDES permit for Four Corners was issued on September 30, 2019. Based upon a November 1, 2019 filing by several environmental groups, the Environmental Appeals Board (“EAB”) took up review of the Four Corners NPDES Permit. Oral argument on this appeal was held on September 3, 2020 and the EAB denied the environmental group petition on September 30, 2020. On January 22, 2021, the environmental groups filed a petition for review of the EAB’s decision with the U.S. Court of Appeals for the Ninth Circuit. The September 2019 permit remains in effect pending this appeal. The parties are presently engaged in mediation to settle this dispute. We cannot predict the outcome of this appeal proceeding, the ongoing mediation, and, if such appeal is successful, whether that outcome will have a material impact on our financial position, results of operations, or cash flows.

Four Corners — 4CA Matter

On July 6, 2016, 4CA purchased El Paso’s 7% interest in Four Corners. NTEC purchased this 7% interest on July 3, 2018 from 4CA. NTEC purchased the 7% interest at 4CA’s book value, approximately $70 million, and is paying 4CA the purchase price over a period of four years pursuant to a secured interest-bearing promissory note. The note is secured by a portion of APS’s payments to be owed to NTEC under the 2016 Coal Supply Agreement. As of June 30, 2021, the note has a remaining balance of $18 million. NTEC continues to make payments in accordance with the terms of the note. Due to its short-remaining term, among other factors, there are no expected credit losses associated with the note.

55

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In connection with the sale, Pinnacle West guaranteed certain obligations that NTEC will have to the other owners of Four Corners, such as NTEC’s 7% share of capital expenditures and operating and maintenance expenses. Pinnacle West’s guarantee is secured by a portion of APS’s payments to be owed to NTEC under the 2016 Coal Supply Agreement.

The 2016 Coal Supply Agreement contained alternate pricing terms for the 7% interest in the event NTEC did not purchase the interest. Until the time that NTEC purchased the 7% interest, the alternate pricing provisions were applicable to 4CA as the holder of the 7% interest. These terms included a formula under which NTEC must make certain payments to 4CA for reimbursement of operations and maintenance costs and a specified rate of return, offset by revenue generated by 4CA’s power sales. The amount under this formula for calendar year 2018 (up to the date that NTEC purchased the 7% interest) was approximately $10 million, which was due to 4CA on December 31, 2019. Such payment was satisfied in January 2020 by NTEC directing to 4CA a prepayment from APS of future coal payment obligations of which the prepayment has been fully utilized as of June 2020.

Financial Assurances

In the normal course of business, we obtain standby letters of credit and surety bonds from financial institutions and other third parties. These instruments guarantee our own future performance and provide third parties with financial and performance assurance in the event we do not perform. These instruments support commodity contract collateral obligations and other transactions. As of June 30, 2021, standby letters of credit totaled $5.3 million and would have expired in 2021, subsequently in April of 2021 an extension was effective that reset the expiration dates to 2022. As of June 30, 2021, surety bonds expiring through 2022 totaled $16 million. The underlying liabilities insured by these instruments are reflected on our balance sheets, where applicable. Therefore, no additional liability is reflected for the letters of credit and surety bonds themselves.

We enter into agreements that include indemnification provisions relating to liabilities arising from or related to certain of our agreements.  Most significantly, APS has agreed to indemnify the equity participants and other parties in the Palo Verde sale leaseback transactions with respect to certain tax matters.  Generally, a maximum obligation is not explicitly stated in the indemnification provisions and, therefore, the overall maximum amount of the obligation under such indemnification provisions cannot be reasonably estimated.  Based on historical experience and evaluation of the specific indemnities, we do not believe that any material loss related to such indemnification provisions is likely.

Pinnacle West has issued parental guarantees and has provided indemnification under certain surety bonds for APS which were not material at June 30, 2021. In connection with the sale of 4CA’s 7% interest to NTEC, Pinnacle West is guaranteeing certain obligations that NTEC will have to the other owners of Four Corners. (See “Four Corners — 4CA Matter” above for information related to this guarantee). Pinnacle West has not needed to perform under this guarantee. A maximum obligation is not explicitly stated in the guarantee and, therefore, the overall maximum amount of the obligation under such guarantee cannot be reasonably estimated; however, we consider the fair value of this guarantee, including expected credit losses, to be immaterial.

In connection with BCE’s acquisition of minority ownership positions in the Clear Creek and Nobles 2 wind farms, Pinnacle West has issued parental guarantees to guarantee the obligations of BCE subsidiaries to make required equity contributions to fund project construction (the “Equity Contribution Guarantees”) and to make production tax credit funding payments to borrowers of the projects (the “PTC Guarantees”). The amounts guaranteed by Pinnacle West are reduced as payments are made under the respective guarantee agreements. The Equity Contribution Guarantees remaining as of June 30, 2021 are immaterial in amount (approximately $2 million) and the PTC Guarantees (approximately $38 million as of June 30, 2021) are
56

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
currently expected to be terminated ten years following the commercial operation date of the applicable project.

9.    Other Income and Other Expense

The following table provides detail of Pinnacle West’s Consolidated other income and other expense (dollars in thousands):
																								
	Three Months Ended
June 30,		Six Months Ended
June 30,	
	2021		2020		2021		2020	
Other income:								
Interest income	$	1,687 			$	2,755 			$	3,635 			$	6,032 		
Investment gains - net	— 			2,826 			— 			2,826 		
Debt return on Four Corners SCR deferrals (Note 4)	4,089 			4,249 			8,175 			7,389 		
Debt return on Ocotillo modernization project (Note 4)	6,391 			6,703 			12,783 			12,847 		
Miscellaneous	40 			137 			43 			145 		
Total other income	$	12,207 			$	16,670 			$	24,636 			$	29,239 		
Other expense:								
Non-operating costs	(4,102)			(2,290)			(6,039)			(4,948)		
Investment gains (losses) — net	(431)			— 			(774)			60 		
Miscellaneous	(651)			(1,746)			(2,224)			(3,932)		
Total other expense	$	(5,184)			$	(4,036)			$	(9,037)			$	(8,820)		

    The following table provides detail of APS’s other income and other expense (dollars in thousands):

 	Three Months Ended
June 30,		Six Months Ended
June 30,	
 	2021		2020		2021		2020	
Other income:	 		 		 		 	
Interest income	$	1,047 			$	2,183 			$	2,528 			$	4,524 		
Debt return on Four Corners SCR deferrals (Note 4)	4,089 			4,249 			8,175 			7,389 		
Debt return on Ocotillo modernization project (Note 4)	6,391 			6,703 			12,783 			12,847 		
Miscellaneous	36 			137 			37 			145 		
Total other income	$	11,563 			$	13,272 			$	23,523 			$	24,905 		
Other expense:	 				 			
Non-operating costs	(3,615)			(2,113)			(5,392)			(4,595)		
Miscellaneous	(646)			(1,746)			(2,219)			(3,932)		
Total other expense	$	(4,261)			$	(3,859)			$	(7,611)			$	(8,527)		

57

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
10.    Earnings Per Share

The following table presents the calculation of Pinnacle West’s basic and diluted earnings per share (in thousands, except per share amounts):

 	Three Months Ended June 30,		Six Months Ended June 30,	
 	2021		2020		2021		2020	
Net income attributable to common shareholders	$	215,697 			$	193,585 			$	251,338 			$	223,578 		
Weighted average common shares outstanding — basic	112,882 			112,638 			112,855 			112,616 		
Net effect of dilutive securities:								
Contingently issuable performance shares and restricted stock units	341 			241 			303 			255 		
Weighted average common shares outstanding — diluted	113,223 			112,879 			113,158 			112,871 		
Earnings per weighted-average common share outstanding								
Net income attributable to common shareholders — basic	$	1.91 			$	1.72 			$	2.23 			$	1.99 		
Net income attributable to common shareholders — diluted	$	1.91 			$	1.71 			$	2.22 			$	1.98 		

11.    Fair Value Measurements
 
We classify our assets and liabilities that are carried at fair value within the fair value hierarchy.  This hierarchy ranks the quality and reliability of the inputs used to determine fair values, which are then classified and disclosed in one of three categories.  The three levels of the fair value hierarchy are:
 
Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Other significant observable inputs, including quoted prices in active markets for similar assets or liabilities; quoted prices in markets that are not active, and model-derived valuations whose inputs are observable (such as yield curves).

Level 3 — Valuation models with significant unobservable inputs that are supported by little or no market activity.  Instruments in this category may include long-dated derivative transactions where valuations are unobservable due to the length of the transaction, options, and transactions in locations where observable market data does not exist.  The valuation models we employ utilize spot prices, forward prices, historical market data and other factors to forecast future prices.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Thus, a valuation may be classified in Level 3 even though the valuation may include significant inputs that are readily observable.  We maximize the use of observable inputs and minimize the use of unobservable inputs.  We rely primarily on the market approach of using prices and other market information for identical and/or comparable assets and liabilities.  If market data is not readily available, inputs may reflect our own assumptions about the inputs market participants would use.  Our assessment of the inputs and the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities as well as their placement within the fair value hierarchy levels.  We assess whether a market is active by obtaining observable broker quotes, reviewing actual market activity, and assessing the volume of transactions.  We consider broker quotes observable inputs when the quote is
58

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
binding on the broker, we can validate the quote with market activity, or we can determine that the inputs the broker used to arrive at the quoted price are observable.

Certain instruments have been valued using the concept of Net Asset Value (“NAV”) as a practical expedient. These instruments are typically structured as investment companies offering shares or units to multiple investors for the purpose of providing a return. These instruments are similar to mutual funds; however, their NAV is generally not published and publicly available, nor are these instruments traded on an exchange. Instruments valued using NAV as a practical expedient are included in our fair value disclosures; however, in accordance with GAAP are not classified within the fair value hierarchy levels.

Recurring Fair Value Measurements
 
We apply recurring fair value measurements to cash equivalents, derivative instruments, and investments held in the nuclear decommissioning trusts and other special use funds. On an annual basis, we apply fair value measurements to plan assets held in our retirement and other benefit plans.  See Note 8 in the 2020 Form 10-K for fair value discussion of plan assets held in our retirement and other benefit plans.
 
Cash Equivalents
 
Cash equivalents represent certain investments in money market funds that are valued using quoted prices in active markets.

Risk Management Activities — Derivative Instruments
 
Exchange traded commodity contracts are valued using unadjusted quoted prices.  For non-exchange traded commodity contracts, we calculate fair value based on the average of the bid and offer price, discounted to reflect net present value.  We maintain certain valuation adjustments for a number of risks associated with the valuation of future commitments.  These include valuation adjustments for liquidity and credit risks.  The liquidity valuation adjustment represents the cost that would be incurred if all unmatched positions were closed out or hedged.  The credit valuation adjustment represents estimated credit losses on our net exposure to counterparties, taking into account netting agreements, expected default experience for the credit rating of the counterparties and the overall diversification of the portfolio.  We maintain credit policies that management believes minimize overall credit risk.
 
Certain non-exchange traded commodity contracts are valued based on unobservable inputs due to the long-term nature of contracts, characteristics of the product, or the unique location of the transactions.  Our long-dated energy transactions consist of observable valuations for the near-term portion and unobservable valuations for the long-term portions of the transaction.  We rely primarily on broker quotes to value these instruments.  When our valuations utilize broker quotes, we perform various control procedures to ensure the quote has been developed consistent with fair value accounting guidance.  These controls include assessing the quote for reasonableness by comparison against other broker quotes, reviewing historical price relationships, and assessing market activity.  When broker quotes are not available, the primary valuation technique used to calculate the fair value is the extrapolation of forward pricing curves using observable market data for more liquid delivery points in the same region and actual transactions at more illiquid delivery points.
 
When the unobservable portion is significant to the overall valuation of the transaction, the entire transaction is classified as Level 3. 
 
59

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Investments Held in Nuclear Decommissioning Trusts and Other Special Use Funds

The nuclear decommissioning trusts and other special use funds invest in fixed income and equity securities. Other special use funds include the coal reclamation escrow account and the active union employee medical account. See Note 12 for additional discussion about our investment accounts.

We value investments in fixed income and equity securities using information provided by our trustees and escrow agent. Our trustees and escrow agent use pricing services that utilize the valuation methodologies described below to determine fair market value. We have internal control procedures designed to ensure this information is consistent with fair value accounting guidance. These procedures include assessing valuations using an independent pricing source, verifying that pricing can be supported by actual recent market transactions, assessing hierarchy classifications, comparing investment returns with benchmarks, and obtaining and reviewing independent audit reports on the trustees’ and escrow agent’s internal operating controls and valuation processes.

Fixed Income Securities

Fixed income securities issued by the U.S. Treasury are valued using quoted active market prices and are typically classified as Level 1.  Fixed income securities issued by corporations, municipalities, and other agencies, including mortgage-backed instruments, are valued using quoted inactive market prices, quoted active market prices for similar securities, or by utilizing calculations which incorporate observable inputs such as yield curves and spreads relative to such yield curves.  These fixed income instruments are classified as Level 2.  Whenever possible, multiple market quotes are obtained which enables a cross-check validation.  A primary price source is identified based on asset type, class, or issue of securities.

Fixed income securities may also include short-term investments in certificates of deposit, variable rate notes, time deposit accounts, U.S. Treasury and Agency obligations, U.S. Treasury repurchase agreements, commercial paper, and other short-term instruments. These instruments are valued using active market prices or utilizing observable inputs described above.

Equity Securities

The nuclear decommissioning trusts's equity security investments are held indirectly through commingled funds.  The commingled funds are valued using the funds’ NAV as a practical expedient. The funds’ NAV is primarily derived from the quoted active market prices of the underlying equity securities held by the funds. We may transact in these commingled funds on a semi-monthly basis at the NAV.  The commingled funds are maintained by a bank and hold investments in accordance with the stated objective of tracking the performance of the S&P 500 Index.  Because the commingled funds’ shares are offered to a limited group of investors, they are not considered to be traded in an active market. As these instruments are valued using NAV, as a practical expedient, they have not been classified within the fair value hierarchy.

The nuclear decommissioning trusts and other special use funds may also hold equity securities that include exchange traded mutual funds and money market accounts for short-term liquidity purposes. These short-term, highly-liquid, investments are valued using active market prices.

60

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fair Value Tables
 
The following table presents the fair value at June 30, 2021 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):

																																				
 	Level 1		Level 2		Level 3		Other		 		Total	
Assets	 		 		 		 		 		 	
	
Risk management activities — derivative instruments:												
Commodity contracts	$	— 			$	84,594 			$	26,388 			$	(1,368)			(a)		$	109,614 		
Nuclear decommissioning trust:												
Equity securities	22,749 			— 			— 			(9,506)			(b)		13,243 		
U.S. commingled equity funds	— 			— 			— 			702,836 			(c)		702,836 		
U.S. Treasury debt	167,584 			— 			— 			— 			 		167,584 		
Corporate debt	— 			150,681 			— 			— 			 		150,681 		
Mortgage-backed securities	— 			119,481 			— 			— 			 		119,481 		
Municipal bonds	— 			59,876 			— 			— 			 		59,876 		
Other fixed income	— 			9,387 			— 			— 			 		9,387 		
Subtotal nuclear decommissioning trust	190,333 			339,425 			— 			693,330 					1,223,088 		
												
Other special use funds:												
Equity securities	19,904 			— 			— 			952 			(b)		20,856 		
U.S. Treasury debt	324,418 			— 			— 			— 					324,418 		
Municipal bonds	— 			13,162 			— 			— 					13,162 		
Subtotal other special use funds	344,322 			13,162 			— 			952 					358,436 		
												
Total assets	$	534,655 			$	437,181 			$	26,388 			$	692,914 					$	1,691,138 		
Liabilities	 		 		 		 		 		 	
Risk management activities — derivative instruments:	 		 		 		 		 		 	
Commodity contracts	$	— 			$	(1,586)			$	(9)			$	83 			(a)		$	(1,512)		

(a)Represents counterparty netting, margin, and collateral. See Note 7.
(b)Represents net pending securities sales and purchases.
(c)Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.

61

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the fair value at December 31, 2020 of our assets and liabilities that are measured at fair value on a recurring basis (dollars in thousands):

																																				
 	Level 1		Level 2		Level 3		Other		 		Total	
Assets	 		 		 		 		 		 	
	
Risk management activities — derivative instruments:												
Commodity contracts	$	— 			$	9,016 			$	4 			$	(4,271)			(a)		$	4,749 		
Nuclear decommissioning trust:	 		 		 		 		 		 	
Equity securities	29,796 			— 			— 			(17,828)			(b)		11,968 		
U.S. commingled equity funds	— 			— 			— 			610,055 			(c)		610,055 		
U.S. Treasury debt	164,514 			— 			— 			— 					164,514 		
Corporate debt	— 			149,509 			— 			— 			 		149,509 		
Mortgage-backed securities	— 			99,623 			— 			— 			 		99,623 		
Municipal bonds	— 			89,705 			— 			— 			 		89,705 		
Other fixed income	— 			13,061 			— 			— 			 		13,061 		
Subtotal nuclear decommissioning trust	194,310 			351,898 			— 			592,227 					1,138,435 		
												
Other special use funds:												
Equity securities	37,337 			— 			— 			504 			(b)		37,841 		
U.S. Treasury debt	203,220 			— 			— 			— 					203,220 		
Municipal bonds	— 			13,448 			— 			— 					13,448 		
Subtotal other special use funds	240,557 			13,448 			— 			504 					254,509 		
												
Total assets	$	434,867 			$	374,362 			$	4 			$	588,460 					$	1,397,693 		
Liabilities	 		 		 		 		 		 	
Risk management activities — derivative instruments:	 		 		 		 		 		 	
Commodity contracts	$	— 			$	(20,498)			$	(1,107)			$	2,986 			(a)		$	(18,619)		

(a)Represents counterparty netting, margin, and collateral. See Note 7.
(b)Represents net pending securities sales and purchases.
(c)Valued using NAV as a practical expedient and, therefore, are not classified in the fair value hierarchy.

Fair Value Measurements Classified as Level 3
 
The significant unobservable inputs used in the fair value measurement of our energy derivative contracts include broker quotes that cannot be validated as an observable input primarily due to the long-term nature of the quote or other characteristics of the product.  Significant changes in these inputs in isolation would result in significantly higher or lower fair value measurements.  Changes in our derivative contract fair values, including changes relating to unobservable inputs, typically will not impact net income due to regulatory accounting treatment (see Note 4).
 
Because our forward commodity contracts classified as Level 3 are currently in a net purchase position, we would expect price increases of the underlying commodity to result in increases in the net fair value of the related contracts.  Conversely, if the price of the underlying commodity decreases, the net fair value of the related contracts would likely decrease.
 
62

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Other unobservable valuation inputs include credit and liquidity reserves which do not have a material impact on our valuations; however, significant changes in these inputs could also result in higher or lower fair value measurements.
 
Financial Instruments Not Carried at Fair Value
 
The carrying value of our short-term borrowings approximate fair value and are classified within Level 2 of the fair value hierarchy. See Note 3 for our long-term debt fair values. The NTEC note receivable related to the sale of 4CA’s interest in Four Corners bears interest at 3.9% per annum and has a book value of $18.2 million as of June 30, 2021 and $27.1 million as of December 31, 2020, as presented on the Condensed Consolidated Balance Sheets.  The carrying amount is not materially different from the fair value of the note receivable and is classified within Level 3 of the fair value hierarchy.  See Note 8 for more information on 4CA matters.

12.    Investments in Nuclear Decommissioning Trusts and Other Special Use Funds

We have investments in debt and equity securities held in Nuclear Decommissioning Trusts, Coal Reclamation Escrow Account, and an Active Union Employee Medical Account. Investments in debt securities are classified as available-for-sale securities. We record both debt and equity security investments at their fair value on our Condensed Consolidated Balance Sheets. See Note 11 for a discussion of how fair value is determined and the classification of the investments within the fair value hierarchy. The investments in each trust or account are restricted for use and are intended to fund specified costs and activities as further described for each fund below.

Nuclear Decommissioning Trusts — APS established external decommissioning trusts in accordance with NRC regulations to fund the future costs APS expects to incur to decommission Palo Verde.  Third-party investment managers are authorized to buy and sell securities per stated investment guidelines.  The trust funds are invested in fixed income securities and equity securities. Earnings and proceeds from sales and maturities of securities are reinvested in the trusts. Because of the ability of APS to recover decommissioning costs in rates, and in accordance with the regulatory treatment, APS has deferred realized and unrealized gains and losses (including credit losses) in other regulatory liabilities.

Coal Reclamation Escrow Account — APS has investments restricted for the future coal mine reclamation funding related to Four Corners. This escrow account is primarily invested in fixed income securities. Earnings and proceeds from sales of securities are reinvested in the escrow account. Because of the ability of APS to recover coal mine reclamation costs in rates, and in accordance with the regulatory treatment, APS has deferred realized and unrealized gains and losses (including credit losses) in other regulatory liabilities. Activities relating to APS coal mine reclamation escrow account investments are included within the other special use funds in the table below.

Active Union Employee Medical Account — APS has investments restricted for paying active union employee medical costs. These investments may be used to pay active union employee medical costs incurred in the current and future periods. In 2020 and 2019, APS was reimbursed $14 million and $15 million, respectively, for prior year active union employee medical claims from the active union employee medical account. The account is invested primarily in fixed income securities. In accordance with the ratemaking treatment, APS has deferred the unrealized gains and losses (including credit losses) in other regulatory liabilities. Activities relating to active union employee medical account investments are included within the other special use funds in the table below. On January 4, 2021, an additional $106 million of investments were transferred from APS other postretirement benefit trust assets into the active union employee medical account (see Note 5).
63

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

APS

The following tables present the unrealized gains and losses based on the original cost of the investment and summarizes the fair value of APS’s nuclear decommissioning trusts and other special use fund assets (dollars in thousands):  

	June 30, 2021	
 	Fair Value		Total
Unrealized
Gains		Total
Unrealized
Losses	
Investment Type:	Nuclear Decommissioning Trusts		Other Special Use Funds		Total					
Equity securities	$	725,585 			$	19,904 			$	745,489 			$	510,432 			$	— 		
Available for sale-fixed income securities	507,009 			337,580 			844,589 		(a)	31,269 			(1,357)		
Other	(9,506)			952 			(8,554)		(b)	— 			— 		
Total	$	1,223,088 			$	358,436 			$	1,581,524 			$	541,701 			$	(1,357)		

(a)As of June 30, 2021, the amortized cost basis of these available-for-sale investments is $815 million.
(b)Represents net pending securities sales and purchases.

	December 31, 2020	
 	Fair Value		Total
Unrealized
Gains		Total
Unrealized
Losses	
Investment Type:	Nuclear Decommissioning Trusts		Other Special Use Funds		Total					
Equity securities	$	639,851 			$	37,337 			$	677,188 			$	421,666 			$	— 		
Available for sale-fixed income securities	516,412 			216,668 			733,080 		(a)	46,581 			(398)		
Other	(17,828)			504 			(17,324)		(b)	— 			— 		
Total	$	1,138,435 			$	254,509 			$	1,392,944 			$	468,247 			$	(398)		

(a)As of December 31, 2020, the amortized cost basis of these available-for-sale investments is $687 million.
(b)Represents net pending securities sales and purchases.
64

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table sets forth APS’s realized gains and losses relating to the sale and maturity of available-for-sale debt securities and equity securities, and the proceeds from the sale and maturity of these investment securities (dollars in thousands):

 	Three Months Ended June 30,	
 	Nuclear Decommissioning Trusts		Other Special Use Funds		Total	
2021						
Realized gains	$	1,406 			$	— 			$	1,406 		
Realized losses	(1,146)			— 			(1,146)		
Proceeds from the sale of securities (a)	190,340 			17,524 			207,864 		
2020						
Realized gains	$	4,500 			$	— 			$	4,500 		
Realized losses	(1,621)			— 			(1,621)		
Proceeds from the sale of securities (a)	176,942 			19,830 			196,772 		

(a)    Proceeds are reinvested in the nuclear decommissioning trusts and other special use funds, excluding amounts reimbursed to the Company for active union employee medical claims from the active union employee medical account.    
																		
 	Six Months Ended June 30,	
 	Nuclear Decommissioning Trusts		Other Special Use Funds		Total	
2021						
Realized gains	$	4,374 			$	— 			$	4,374 		
Realized losses	(5,294)			— 			(5,294)		
Proceeds from the sale of securities (a)	425,068 			162,774 			587,842 		
2020						
Realized gains	$	7,813 			$	— 			$	7,813 		
Realized losses	(3,848)			— 			(3,848)		
Proceeds from the sale of securities (a)	355,138 			36,721 			391,859 		

(a)    Proceeds are reinvested in the nuclear decommissioning trusts and other special use funds, excluding amounts reimbursed to the Company for active union employee medical claims from the active union employee medical account.    

65

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Fixed Income Securities Contractual Maturities

The fair value of APS’s fixed income securities, summarized by contractual maturities, at June 30, 2021, is as follows (dollars in thousands):

 	Nuclear Decommissioning Trust		Coal Reclamation Escrow Account		Active Union Employee Medical Account		Total	
Less than one year	$	28,151 			$	26,123 			$	40,263 			$	94,537 		
1 year – 5 years	133,054 			35,880 			162,728 			331,662 		
5 years – 10 years	131,462 			2,676 			61,288 			195,426 		
Greater than 10 years	214,342 			8,622 			— 			222,964 		
Total	$	507,009 			$	73,301 			$	264,279 			$	844,589 		

66

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
13.     Changes in Accumulated Other Comprehensive Loss

The following table shows the changes in Pinnacle West’s consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component (dollars in thousands):

	 Pension and Other Postretirement Benefits				 Derivative Instruments				 Total	
Three Months Ended June 30										
Balance March 31, 2021	$	(59,703)					$	(1,809)					$	(61,512)		
OCI (loss) before reclassifications	(1,125)					870 					(255)		
Amounts reclassified from accumulated other comprehensive loss	1,189 			 (a)		— 					1,189 		
Balance June 30, 2021	$	(59,639)					$	(939)					$	(60,578)		
										
Balance March 31, 2020	$	(55,317)					$	(262)					$	(55,579)		
OCI (loss) before reclassifications	(2,008)					(1,549)					(3,557)		
Amounts reclassified from accumulated other comprehensive loss	999 			 (a)		262 			 (b)		1,261 		
	
Balance June 30, 2020	$	(56,326)					$	(1,549)					$	(57,875)		

	Pension and Other Postretirement Benefits				Derivative Instruments				Total	
Six Months Ended June 30										
Balance December 31, 2020	$	(60,725)					$	(2,071)					$	(62,796)		
OCI (loss) before reclassifications	(1,125)					1,132 					7 		
Amounts reclassified from accumulated other comprehensive loss	2,211 			(a)		— 					2,211 		
Balance June 30, 2021	$	(59,639)					$	(939)					$	(60,578)		
										
Balance December 31, 2019	$	(56,522)					$	(574)					$	(57,096)		
OCI (loss) before reclassifications	(2,008)					(1,257)					(3,265)		
Amounts reclassified from accumulated other comprehensive loss	2,204 			(a)		282 			(b)		2,486 		
	
Balance June 30, 2020	$	(56,326)					$	(1,549)					$	(57,875)		

(a)    These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost.  See Note 5.
(b)    These amounts primarily represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA.  See Note 7.

67

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table shows the changes in APS’s consolidated accumulated other comprehensive loss, including reclassification adjustments, net of tax, by component (dollars in thousands): 

	 Pension and Other Postretirement Benefits				 Derivative Instruments				 Total	
Three Months Ended June 30										
Balance March 31, 2021	$	(39,991)					$	— 					$	(39,991)		
OCI (loss) before reclassifications	(914)					— 					(914)		
Amounts reclassified from accumulated other comprehensive loss	1,073 			 (a)		— 					1,073 		
Balance June 30, 2021	$	(39,832)					$	— 					$	(39,832)		
										
Balance March 31, 2020	$	(33,935)					$	(262)					$	(34,197)		
OCI (loss) before reclassifications	(1,951)					— 					(1,951)		
Amounts reclassified from accumulated other comprehensive loss	861 			 (a)		262 			 (b)		1,123 		
	
Balance June 30, 2020	$	(35,025)					$	— 					$	(35,025)		

	 Pension and Other Postretirement Benefits				 Derivative Instruments				 Total	
Six Months Ended June 30										
Balance December 31, 2020	$	(40,918)					$	— 					$	(40,918)		
OCI (loss) before reclassifications	(914)					— 					(914)		
Amounts reclassified from accumulated other comprehensive loss	2,000 			(a)		— 					2,000 		
Balance June 30, 2021	$	(39,832)					$	— 					$	(39,832)		
										
Balance December 31, 2019	$	(34,948)					$	(574)					$	(35,522)		
OCI (loss) before reclassifications	(1,951)					292 					(1,659)		
Amounts reclassified from accumulated other comprehensive loss	1,874 			(a)		282 			 (b)		2,156 		
	
Balance June 30, 2020	$	(35,025)					$	— 					$	(35,025)		

(a) These amounts primarily represent amortization of actuarial loss and are included in the computation of net periodic pension cost.  See Note 5.
(b) These amounts primarily represent realized gains and losses and are included in the computation of fuel and purchased power costs and are subject to the PSA.  See Note 7.

68

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
14.     Income Taxes
 
The Tax Act reduced the corporate tax rate to 21% effective January 1, 2018. As a result of this rate reduction, the Company recognized a $1.14 billion reduction in its net deferred income tax liabilities as of December 31, 2017. In accordance with accounting for regulated companies, the effect of this rate reduction was substantially offset by a net regulatory liability.

Federal income tax laws require the amortization of a majority of the balance over the remaining regulatory life of the related property. As a result of the modifications made to the annual transmission formula rate during the second quarter of 2018, the Company began amortization of FERC jurisdictional net excess deferred tax liabilities in 2018. On March 13, 2019, the ACC approved the Company’s proposal to amortize non-depreciation related net excess deferred tax liabilities subject to its jurisdiction over a twelve-month period. As a result, the Company began amortization in March 2019. The Company recorded $14 million of income tax benefit related to the amortization of these non-depreciation related net excess deferred tax liabilities as of March 31, 2020, with these non-depreciation related net excess deferred tax liabilities being fully amortized as of March 31, 2020. On October 29, 2019, the ACC approved the Company’s proposal to amortize depreciation related net excess deferred tax liabilities subject to its jurisdiction over a 28.5-year period with amortization to retroactively begin as of January 1, 2018. The Company recorded $14 million of income tax benefit related to amortization of these depreciation related net excess deferred tax liabilities for the periods ending June 30, 2021 and June 30, 2020. See Note 4 for more details.

Net income associated with the Palo Verde sale leaseback VIEs is not subject to tax.  As a result, there is no income tax expense associated with the VIEs recorded on the Pinnacle West Consolidated and APS Consolidated Statements of Income. See Note 6 for additional details related to the Palo Verde sale leaseback VIEs.

As of the balance sheet date, the tax year ended December 31, 2017 and all subsequent tax years remain subject to examination by the IRS.  With a few exceptions, the Company is no longer subject to state income tax examinations by tax authorities for years before 2016.

69

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
15.     Leases
 
We lease certain land, buildings, vehicles, equipment and other property through operating rental agreements with varying terms, provisions, and expiration dates. APS also has certain purchased power agreements that qualify as lease arrangements. Our leases have remaining terms that expire in 2021 through 2050. Substantially all of our leasing activities relate to APS.

In 1986, APS entered into agreements with three separate lessor trust entities in order to sell and lease back interests in Palo Verde Unit 2 and related common facilities.  These lessor trust entities have been deemed VIEs for which APS is the primary beneficiary.  As the primary beneficiary, APS consolidated these lessor trust entities.  The impacts of these sale leaseback transactions are excluded from our lease disclosures as lease accounting is eliminated upon consolidation.  See Note 6 for a discussion of VIEs.

On May 1, 2021, APS had a new purchased power lease contract that commenced. The lease term ends on October 31, 2027.  This lease allows APS the right to the generation capacity from a  natural-gas fueled generator during the months of May through October over the contract term.  APS does not operate or maintain the leased asset. APS controls the dispatch of the leased asset during the months of May through October and is required to pay a fixed monthly capacity payment during these periods of use.  For these types of leased assets APS has elected to combine both the lease and non-lease payment components and accounts for the entire fixed payment as a lease obligation. This purchased power lease contract is accounted for as an operating lease. The contract does not contain a purchase option or a term extension option.  In addition to the fixed monthly capacity payment, APS must also pay variable charges based on the actual production volume of the asset. The variable consideration is not included in the measurement of our lease obligation.

The following tables provide information related to our lease costs (dollars in thousands):

		Three Months Ended
 June 30, 2021		Three Months Ended
 June 30, 2020	
		Purchased Power Lease Contracts		Land, Property & Equipment Leases		Total		Purchased Power Lease Contracts		Land, Property & Equipment Leases		Total	
Operating lease cost		$	29,514 			$	4,598 			$	34,112 			$	17,221 			$	4,651 			$	21,872 		
Variable lease cost		40,539 			256 			40,795 			40,821 			255 			41,076 		
Short-term lease cost		— 			1,260 			1,260 			— 			996 			996 		
Total lease cost		$	70,053 			$	6,114 			$	76,167 			$	58,042 			$	5,902 			$	63,944 		

		Six Months Ended
June 30, 2021		Six Months Ended
June 30, 2020	
		Purchased Power Lease Contracts		Land, Property & Equipment Leases		Total		Purchased Power Lease Contracts		Land, Property & Equipment Leases		Total	
Operating lease cost		$	29,514 			$	9,239 			$	38,753 			$	17,221 			$	9,304 			$	26,525 		
Variable lease cost		62,027 			510 			62,537 			61,394 			498 			61,892 		
Short-term lease cost		— 			2,249 			2,249 			— 			1,786 			1,786 		
Total lease cost		$	91,541 			$	11,998 			$	103,539 			$	78,615 			$	11,588 			$	90,203 		

70

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Lease costs are primarily included as a component of operating expenses on our Condensed Consolidated Statements of Income.  Lease costs relating to purchased power lease contracts are recorded in fuel and purchased power on the Condensed Consolidated Statements of Income, and are subject to recovery under the PSA or RES (see Note 4).  The tables above reflect the lease cost amounts before the effect of regulatory deferral under the PSA and RES.  Variable lease costs are recognized in the period the costs are incurred, and primarily relate to renewable purchased power lease contracts.  Payments under most renewable purchased power lease contracts are dependent upon environmental factors, and due to the inherent uncertainty associated with the reliability of the fuel source, the payments are considered variable and are excluded from the measurement of lease liabilities and right-of-use lease assets. Certain of our lease agreements have lease terms with non-consecutive periods of use. For these agreements, we recognize lease costs during the periods of use.  Leases with initial terms of 12 months or less are considered short-term leases and are not recorded on the balance sheet.

The following table provides information related to the maturity of our operating lease liabilities (dollars in thousands):

		June 30, 2021	
Year		Purchased Power Lease Contracts		Land, Property & Equipment Leases		Total	
2021 (remaining six months of 2021)		$	95,596 			$	7,762 			$	103,358 		
2022		103,744 			11,872 			115,616 		
2023		106,161 			9,544 			115,705 		
2024		108,634 			6,955 			115,589 		
2025		111,166 			5,181 			116,347 		
2026		75,099 			3,989 			79,088 		
Thereafter		39,106 			34,444 			73,550 		
Total lease commitments		639,506 			79,747 			719,253 		
Less imputed interest		25,803 			17,613 			43,416 		
Total lease liabilities		$	613,703 			$	62,134 			$	675,837 		

We recognize lease assets and liabilities upon lease commencement. At June 30, 2021, we have lease arrangements that have been executed, but have not yet commenced. These arrangements primarily relate to energy storage agreements, with lease commencement dates expected to begin in June 2022 with terms ending through December 2042. We expect the total fixed consideration paid for these arrangements, which includes both lease and nonlease payments, will approximate $392 million over the term of the arrangements.

71

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following tables provide other additional information related to operating lease liabilities (dollars in thousands):
												
	Six Months Ended
June 30, 2021		Six Months Ended June 30, 2020	
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows:	$	13,068 			$	7,624 		
Right-of-use operating lease assets obtained in exchange for operating lease liabilities	248,694 			434,997 		

	June 30, 2021		December 31, 2020	
Weighted average remaining lease term	6 years		6 years	
Weighted average discount rate (a)	1.72 	%		1.69 	%	

(a) Most of our lease agreements do not contain an implicit rate that is readily determinable. For these agreements we use our incremental borrowing rate to measure the present value of lease liabilities.  We determine our incremental borrowing rate at lease commencement based on the rate of interest that we would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. We use the implicit rate when it is readily determinable.

16.     Asset Retirement Obligations

During the six months ended June 30, 2021, the Company revised its cost estimates for existing Asset Retirement Obligations (ARO) at Cholla related to updated estimates for the closure of ponds and facilities, which resulted in an increase to the ARO of $11.1 million. (See additional details in Notes 4 and 8.)

The following schedule shows the change in our asset retirement obligations for the six months ended June 30, 2021 (dollars in thousands): 
						
 	2021	
Asset retirement obligations at January 1, 2021	$	705,083 		
Changes attributable to:		
Accretion expense	18,828 		
Settlements	(2,853)		
Estimated cash flow revisions	10,932 		
Asset retirement obligations at June 30, 2021	$	731,990 		

In accordance with regulatory accounting, APS accrues removal costs for its regulated utility assets, even if there is no legal obligation for removal.  See detail of regulatory liabilities in Note 4.
72

COMBINED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
17.    New Accounting Standard

ASU 2021-05, Leases: Certain Leases with Variable Lease Payments

In July 2021, a new accounting standard was issued that amends the lease accounting guidance. The amended guidance will require lessors to account for certain lease transactions, that contain variable lease payments, as operating leases. The amendments are intended to eliminate the recognition of any day-one loss associated with certain sales-type and direct-financing lease transactions. The changes do not impact lessee accounting. The new guidance is effective for us on January 1, 2022 and may be adopted using either a retrospective or prospective approach. As we typically are not the lessor in these type of lease transactions, we do not expect the adoption of this guidance will have a material impact on our financial statements.
    
73

ITEM 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
INTRODUCTION
 
The following discussion should be read in conjunction with Pinnacle West’s Condensed Consolidated Financial Statements and APS’s Condensed Consolidated Financial Statements and the related Combined Notes that appear in Item 1 of this report.  For information on factors that may cause our actual future results to differ from those we currently seek or anticipate, see “Forward-Looking Statements” at the front of this report and “Risk Factors” in Part 1, Item 1A of the 2020 Form 10-K, and Part II, Item 1A of this report.

OVERVIEW

Business Overview

Pinnacle West is an investor-owned electric utility holding company based in Phoenix, Arizona with consolidated assets of about $21 billion. For over 130 years, Pinnacle West and our affiliates have provided energy and energy-related products to people and businesses throughout Arizona.

Pinnacle West derives essentially all of our revenues and earnings from our principal subsidiary, APS. APS is Arizona’s largest and longest-serving electric company that generates safe, affordable and reliable electricity for approximately 1.3 million retail customers in 11 of Arizona’s 15 counties. APS is also the operator and co-owner of Palo Verde — a primary source of electricity for the southwest United States and the largest nuclear power plant in the United States.

COVID-19 Pandemic

The COVID-19 pandemic continues to be an evolving situation. The Company is operating under long-standing pandemic and business continuity plans that exist to address situations including pandemics like COVID-19. We are focused on ensuring the health and safety of our employees, contractors and the general public by helping limit the spread of this virus and ensuring continued, safe and reliable electric service for APS customers.

We identified business-critical positions in our operations and support organizations, with backup personnel ready to assist if an issue arose. Additionally, efforts to ensure the health and safety of our employees resulted in bifurcated control rooms, thus reducing the number of employees in mission-critical locations. We also established COVID-19 safety protocols, social distancing practices and offering virtual options whenever possible. The Company also took rapid action to implement an all Company COVID-19 hotline, a focused COVID-19 team, and procured on-site COVID-19 testing at key facilities early in the pandemic. Through this testing, case management and contact tracing, the Company has been able to significantly limit COVID-19 transmission in the workplace. As a result of these efforts, we were able to maintain the continuity of the essential services that we provide to our customers, while also managing the spread of the virus and promoting the health, physical and mental well-being and safety of our employees, customers and communities. In the summer of 2021, the Company began transitioning employees that were previously working remotely back to the workplace on a limited basis and began the reduction of our COVID-19 safety protocols and restrictions.

Essential planned work and capital investments are continuing during the pandemic with priority to support fire mitigation and summer storm efforts, as well as heat related outages. APS has measures in place to continue to monitor resource needs and supply chain adequacy. At this time, APS does not believe it has any material supply chain risks due to COVID-19 that would impact its ability to serve customers’ needs.
74

The Company’s operations and maintenance expenses, exclusive of bad debt expense, increased by approximately $3.4 million for the period ended June 30, 2021 due to costs for personal protective equipment and other health and safety-related costs related to COVID-19.  We expect the Company’s operation and maintenance expenses will continue to be impacted for 2021 by the need for additional personal protective equipment and other health and safety-related costs related to COVID-19.

While the total expected impact of COVID-19 on future sales is currently unknown, APS experienced higher electric residential sales and lower electric commercial and industrial sales from the outset of the pandemic through April 2021. Beginning in May 2021, electric sales to commercial and industrial customers increased to levels in line with pre-COVID sales. APS cannot predict whether sales from commercial and industrial customers has fully recovered, but it expects sales trends to continue normalizing during 2021 as business activity continues to recover and more people return to work. Based on past experience, a 1% variation in our annual kWh sales projections under normal business conditions can result in increases or decreases in annual net income of approximately $20 million.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to defer payments of the employer share of Social Security payroll taxes that would have otherwise been owed from March 27, 2020 through December 31, 2020. We deferred the cash payment of the employer’s portion of Social Security payroll taxes for the period July 1, 2020 through December 31, 2020 that was approximately $18 million. We will pay half of this cash deferral by December 31, 2021 and the remainder by December 31, 2022.

On June 30, 2020, FERC issued an order granting a waiver request related to the existing AFUDC rate calculation beginning March 1, 2020 through February 28, 2021.  On February 23, 2021, this waiver was extended until September 30, 2021. The order provides a simplified approach that companies may elect to implement in order to minimize the significant distorted effect on the AFUDC formula resulting from increased short-term debt financing during the COVID-19 pandemic.  APS has adopted this simplified approach to computing the AFUDC composite rate by using a simple average of the actual historical short-term debt balances for 2019, instead of current period short-term debt balances, and has left all other aspects of the AFUDC formula composite rate calculation unchanged. This change impacts the AFUDC composite rate in both 2020 and 2021, but does not impact prior years.  Furthermore, the change in the composite rate calculation does not impact our accounting treatment for these costs. The change did not have a material impact on our financial statements. See Note 1.

Due to the COVID-19 pandemic, APS voluntarily suspended disconnections of customers for nonpayment and waived late payment fees beginning March 13, 2020 until December 31, 2020. The suspension of disconnection of customers for nonpayment ended on January 1, 2021 and customers were automatically placed on eight-month payment arrangements if they had past due balances at the end of the disconnection period of $75 or greater. APS will continue to waive late payment fees until October 15, 2021. APS has experienced and is continuing to experience an increase in bad debt expense associated with the COVID-19 pandemic, the Summer Disconnection Moratorium and the related write-offs of customer delinquent accounts. APS currently estimates that the Summer Disconnection Moratorium, the suspension of disconnections during the COVID-19 pandemic and the increased bad debt expense associated with this will result in a negative impact to its 2021 operating results of approximately $20 million to $30 million pre-tax above the impact of disconnections on its operating results for years that did not have the Summer Disconnection Moratorium or COVID-19 pandemic. These estimated impact amounts for 2021 depend on certain current assumptions, including, but not limited to, customer behaviors, population and employment growth, and the impacts of COVID-19 on the economy. See Note 4.

75

In February 2021, due to COVID-19, APS delayed the annual reset of the PSA. Rather than the increase being effective February 2021, the PSA reset will be implemented with 50% of the increase effective April 2021 and the remaining 50% increase effective November 2021. See Note 4.

More detailed discussion of the impacts and future uncertainties related to the COVID‑19 pandemic can be found throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Combined Notes to Pinnacle West’s and APS’s financial statements that appear in Item 1 of this report.

Strategic Overview

Our strategy is to deliver shareholder value by creating a sustainable energy future for Arizona by serving our customers with clean, reliable and affordable energy.

Clean Energy Commitment

We are committed to doing our part to make the future clean and carbon-free. Our vision for APS and Arizona presents an opportunity to engage with customers, communities, employees, policymakers, shareholders and others to achieve a shared, sustainable vision for Arizona. This goal is based on sound science and supports continued growth and economic development while maintaining reliability and affordable prices for APS’s customers.

APS’s new clean energy goals consist of three parts:
•A 2050 goal to provide 100% clean, carbon-free electricity;
•A 2030 target of achieving a resource mix that is 65% clean energy, with 45% of the generation portfolio coming from renewable energy; and
•A commitment to end APS’s use of coal-fired generation by 2031.

APS’s ability to successfully execute its clean energy commitment is dependent upon a number of important external factors, some of which include a supportive regulatory environment, sales and customer growth, development of clean energy technologies and continued access to capital markets.

2050 Goal: 100% Clean, Carbon-Free Electricity. Achieving a fully clean, carbon-free energy mix by 2050 is our aspiration. The 2050 goal will involve new thinking and depends on improved and new technologies.

2030 Goal: 65% Clean Energy. APS has an energy mix that is already 50% clean with existing plans to add more renewables and energy storage before 2025. By building on those plans, APS intends to attain an energy mix that is 65% clean by 2030, with 45% of APS’s generation portfolio coming from renewable energy. “Clean” is measured as percent of energy mix which includes all carbon-free resources like nuclear and demand-side management, and “renewable” is expressed as a percent of retail sales. This target will serve as a checkpoint for our resource planning, investment strategy, and customer affordability efforts as APS moves toward 100% clean, carbon-free energy mix by 2050.

2031 Goal: End APS’s Use of Coal-Fired Generation. Our commitment to end APS’s use of coal-fired generation by 2031 will require APS to cease use of coal-generation at Four Corners. APS has permanently retired more than 1,000 MW of coal-fired electric generating capacity. These closures and other measures taken by APS have resulted in a total reduction of carbon emissions of 33% since 2005. In addition, APS has committed to end the use of coal at its remaining Cholla units by 2025.

76

APS understands that the transition away from coal-fired power plants toward a clean energy future will pose unique economic challenges for the communities around these plants. We worked collaboratively with stakeholders and leaders of the Navajo Nation to consider the impacts of ceasing operation of APS coal-fired power plants on the communities surrounding those facilities to propose a comprehensive Coal Community Transition (“CCT”) plan. The proposed framework provides substantial financial and economic development support to build new economic opportunities and addresses a transition strategy for plant employees. We are committed to continuing our long-running partnership with the Navajo Nation in other areas as well, including expanding electrification and developing tribal renewable projects. Our proposed CCT plan supports the Navajo Nation, where the Four Corners Power Plant is located, the communities surrounding the Cholla Power Plant and the Hopi Tribe, which is impacted by closure of the Navajo Plant. The CCT plan is currently pending ACC approval. See Note 4 for a discussion of the CCT plan.

In June 2021, APS and the owners of Four Corners entered into agreements to operate Four Corners seasonally beginning in Fall 2023, subject to the necessary approvals. Under seasonal operation, a single unit will remain on-line year-round, subject to market conditions as well as planned maintenance outages and unplanned outages. In addition, the other unit will be operational throughout the summer season of June through October when customer demand is the highest. APS believes that operating Four Corners seasonally will bring environmental benefits and ensure continued service reliability for its customers, especially during Arizona’s hot summer months, as APS transitions to ceasing to use coal-fired generation by 2031. By moving to seasonal operations, Four Corners will become a more flexible resource that supports increasing amounts of clean energy, helping to compensate for the intermittent output of renewable resources. This change also helps ensure reliability of a critical energy source while reducing operations and maintenance costs. APS estimates that the shift to seasonal operations will reduce annual carbon emissions at Four Corners by an estimated 20-25%, as compared to current conditions.

Renewables. APS intends to strengthen its already diverse energy mix by increasing its investments in carbon-free resources. Its near-term actions include competitive solicitations to procure clean energy resources such as solar, wind, energy storage, demand response and DSM resources, all of which lead to a cleaner grid.

APS has a diverse portfolio of existing and planned renewable resources, including solar, wind, geothermal, biomass and biogas. APS’s clean energy strategy includes executing purchased power contracts for new facilities, ongoing development of distributed energy resources and procurement of new facilities to be owned by APS.

In September 2019, APS issued a RFP that requested up to 250 MW of wind resources to be in service as soon as possible, but no later than 2022. As a result of this RFP, APS executed a 200 MW power purchase agreement for a wind resource that is expected to be in service in the fourth quarter of 2021. Also in September 2019, APS issued a RFP that sought competitive proposals for up to 150 MW of APS-owned solar resources, designed with the flexibility to add energy storage as a future option. Negotiations pursuant to this RFP were terminated in March 2021. In December 2020, APS issued two additional RFPs: (i) a battery storage RFP for projects to be located at two AZ Sun sites; and (ii) an “all source” RFP that solicits both standalone energy storage and renewable energy plus energy storage resources and additional peaking capacity resources (collectively, the “December 2020 RFPs”). In April 2021, the all source RFP portion of the December 2020 RFPs was expanded to seek proposals for the development of a solar generating resource to be owned by APS and sited on APS land. Such resources are expected to be in service during 2023 and 2024.

77

The following table summarizes the resources in APS’s renewable energy portfolio that are in operation and under development as of June 30, 2021. Agreements for the development and completion of future resources are subject to various conditions, including successful siting, permitting and interconnection of the projects to the electric grid.
															
 	Net Capacity in Operation
(MW)		Net Capacity Planned / Under
Development (MW)		
Total APS Owned: Solar	247 			— 			
Purchased Power Agreements Renewables:	 		 		
Solar	310 			160 			
Wind (a)	289 			110 			
Geothermal	10 			— 			
Biomass	14 			— 			
Biogas	3 			— 			
Total Purchased Power Agreements	626 			270 			
Total Distributed Energy: Solar (b) 	1,162 			52 		(c)	
Total Renewable Portfolio	2,035 			322 			

(a)         Includes 90 MW wind power purchase agreement that is currently in operation that will be decommissioned in 2021 and rebuilt in the same year, together with an additional 110 MW, for a total of 200 MW, as a result of a power purchase agreement executed in September 2020.
(b)         Includes rooftop solar facilities owned by third parties. Distributed generation is produced in Direct Current and is converted to Alternating Current for reporting purposes.
(c)    Applications received by APS that are not yet installed and online.

Energy Storage. APS deploys a number of advanced technologies on its system, including energy storage. Storage can provide capacity, improve power quality, be utilized for system regulation, integrate renewable generation and, in certain circumstances, be used to defer certain traditional infrastructure investments. Energy storage can also aid in integrating higher levels of renewables by storing excess energy when system demand is low and renewable production is high and then releasing the stored energy during peak demand hours later in the day and after sunset. APS is utilizing grid-scale energy storage projects to benefit customers, to increase renewable utilization, and to further our understanding of how storage works with other advanced technologies and the grid. We are preparing for additional energy storage in the future.

In early 2018, APS entered into a 15-year power purchase agreement for a 65 MW solar facility that charges a 50 MW solar-fueled battery. Service under the agreement was scheduled to begin in 2021; however, APS terminated the agreement, effective February 16, 2021, because project development could not be sufficiently advanced to support the expected in-service date. In 2018, APS issued an RFP for approximately 106 MW of energy storage to be located at up to five of its AZ Sun sites. Based upon its evaluation of the RFP responses, APS decided to expand the initial phase of battery deployment to 141 MW by adding a sixth AZ Sun site. These battery storage facilities are expected to be in service by June 2022. On August 2, 2021, APS executed a contract for an additional 60 megawatts of utility-owned energy storage to be located on APS's AZ Sun sites. This contract, with a 2023 in-service date, will complete the addition of storage on all of APS's current APS-owned utility-scale solar facilities.

Additionally, in February 2019, APS signed two 20-year PPAs for energy storage totaling 150 MW. In April 2019, a battery module in APS’s McMicken battery energy storage facility experienced an equipment failure, which prompted an internal investigation to determine the cause. APS completed its investigation of the McMicken battery incident and is working with all counterparties to ensure that the learnings from the investigation, and the corresponding safety requirements, are incorporated into all battery storage projects going forward, including the projects associated with the two above-referenced PPAs. These PPAs were also
78

subject to ACC approval in order to allow for cost recovery through the PSA. APS received the requested ACC approval on January 12, 2021, and service under both agreements is expected to begin in 2022.

APS currently plans to install at least 850 MW of energy storage by 2025, including the energy storage projects under PPAs and AZ Sun retrofits described above. The remaining energy storage is expected to be made up of resources solicited through current and future RFPs. Currently, APS is seeking energy storage resources through the December 2020 RFPs. Such resources are expected to be in service during 2023 and 2024.

The following table summarizes the resources in APS’s energy storage portfolio that are in operation and under development as of June 30, 2021. Agreements for the development and completion of future resources are subject to various conditions.

 	Net Capacity in Operation
(MW)		Net Capacity Planned / Under
Development (MW)	
APS Owned: Energy Storage	— 			201 		
Purchase Power Agreements Energy Storage	— 			150 		
Residential Energy Storage (a)	9 			— 		
Total Energy Storage Portfolio	9 			351 		

(a)    This includes 9 MW of APS customer owned batteries and 0.3 MW of APS owned residential batteries.

Palo Verde. Palo Verde, the nation’s largest carbon-free, clean energy resource, will continue to be a foundational part of APS’s resource portfolio. The plant currently supplies nearly 70% of our clean energy and provides the foundation for the reliable and affordable service for APS customers. Palo Verde is not just the cornerstone of our current clean energy mix, it also is a significant provider of clean energy to the southwest United States. The plant is a critical asset to the Southwest, generating more than 32 million megawatt-hours annually – enough power for more than 4 million people. Its continued operation is important to a carbon-free and clean energy future for Arizona and the region, as a reliable, continuous, affordable resource and as a large contributor to the local economy.

Affordable

We believe it is APS’s responsibility to deliver electric services to customers in the most cost-effective manner. Since January 2018 through June 2021, the average residential bill decreased by 6.7%, or $10.01, due to net reductions in cost recovery adjustor mechanisms.

Building upon existing cost management efforts, APS launched a customer affordability initiative in 2019. The initiative was implemented company-wide to thoughtfully and deliberately assess our business processes and organizational approaches to completing high-value work and internal efficiencies. Through the initiative and existing cost management practices, in 2020, APS met its goal of $20 million in cost savings. In 2021, APS continues to drive this initiative to identify opportunities to streamline its business processes and deliver sustainable cost savings.

Participation in the EIM continues to be an effective tool for creating savings for APS’s customers from the real-time, voluntary market. APS continues to expect that its participation in EIM will lower its fuel and purchased-power costs, improve visibility and situational awareness for system operations in the Western Interconnection power grid, and improve integration of APS’s renewable resources. APS continues to evaluate opportunities that benefit our customers and is in discussions with the EIM operator, California Independent
79

System Operator, Inc. (“CAISO”), and other EIM participants about the feasibility of creating a voluntary day-ahead market to achieve more cost savings and use the region’s renewable resources more efficiently.

Reliable

While our energy mix evolves, the obligation to deliver reliable service to our customers remains. Notwithstanding the challenges presented by the COVID-19 pandemic as well as the hottest summer on record, APS continued to provide reliable service to its customers in 2020, setting a new all-time high peak energy demand of 7,660 MW, exceeding the prior peak set in 2017 by nearly 300 MW and achieved strong reliability results.

Planned investments will support operating and maintaining the grid, updating technology, accommodating customer growth and enabling more renewable energy resources. Our advanced distribution management system allows operators to locate outages, control line devices remotely and helps them coordinate more closely with field crews to safely maintain an increasingly dynamic grid. The system also integrates a new meter data management system that increases grid visibility and gives customers access to more of their energy usage data.

Wildfire safety remains a critical focus for APS and other utilities. We increased investment in fire mitigation efforts to clear defensible space around our infrastructure, build partnerships with government entities and first responders and educate customers and communities. These programs contribute to customer reliability, responsible forest management and safe communities.

The new units at our modernized Ocotillo Power Plant provide cleaner-running and more efficient units. They support reliability by responding quickly to the variability of solar generation and delivering energy in the late afternoon and early evening, when solar production declines as the sun sets and customer demand peaks.

In April 2021, the CAISO sought FERC authorization for certain tariff changes intended to try to address risks associated with high heat weather events. Although APS is generally supportive of some of these changes, others would change the load, export, and wheeling priorities in a way that would unfairly benefit California entities at the expense of non-California entities. APS formally opposed those changes in front of FERC. On June 25, 2021, FERC issued an order accepting the CAISO’s proposed changes. On July 26, 2021, APS filed seeking a rehearing of FERC’s June 25, 2021 order. However, APS cannot predict the outcome of these proceedings. Nor can PNW or APS predict whether energy shortages, market priorities, and/or price spikes due to extreme weather conditions will have an impact on its financial position, results of operations or cash flows.

APS’s key elements to delivering reliable power include resource planning, sufficient reserve margins, customer partnerships to manage peak demand, fire mitigation, and operational preparedness. Seasonal readiness procedures at APS also include walkdowns to ensure good material conditions and critical control system surveys. APS also plans for the unexpected by conducting emergency operations drills and coordinating on fire and emergency management with federal, state, and local agencies.
80

Customer-Focused

Customers are at the core of what APS does every day and its focus remains on its customers and the communities it serves. It is APS’s goal to achieve an industry-leading best-in-class customer experience, including that APS improve its J.D. Power (“JDP”) customer satisfaction ratings to the first quartile nationally. APS's focus on customer experience has resulted in a measurable increase in its customer satisfaction. Its mid-year 2021 JDP customer satisfaction score represents APS's highest overall satisfaction score on record and continued incremental improvement from 2020 year-end scores, which were among the most improved nationally.

APS also convened a customer advisory board and stakeholder committee in 2020 to serve as a vehicle for gathering valuable qualitative insights, directly from customers and stakeholders, that intends to keep APS apprised of customer needs, wants, and perspectives. Additionally, the customer advisory board is leveraged to identify and diagnose potential customer pain points and to help shape and co-create customer solutions. The customer advisory board has met several times in 2021, addressing rate plan simplification, bill redesign and customer construction communications, among other things.

APS is also focused on educating customers on rate plans through monthly bill analysis and communicating to customers their most economical plan. APS continues to see an increase in rate plan digital engagement, rate plan changes and rate comparison volumes on its website. As of June 30, 2021, 53.3% of its customers are on their most economical plan (as determined based on the time of the calculation).

Developing Clean Energy Technologies

Electric Vehicles

APS is making electric vehicle charging more accessible for its customers and helping Arizona businesses, schools and governments electrify their fleets. In 2021, APS continued its expansion of its Take Charge AZ Pilot Program. As of July 1, 2021, APS has installed 256 dual-plug Level 2 charging stations at business customer locations with more stations expected to be added through 2022. The program provides charging equipment, installation, and maintenance to business customers, government agencies, and multifamily housing communities. In addition to the Level 2 charging stations, APS will begin construction of direct current fast charging stations that will be owned and operated by APS at five locations in Arizona. This project is projected to be completed during 2022, with each location including 2-150 kilowatt and 2-350 kilowatt DC fast charging stations. Charging at these stations will be accessible through the Electrify America charging network.

Additionally, as part of the 2020 DSM Plan, the ACC approved programs for electric vehicles, including a residential program to measure electric vehicle charging as well as a $100 rebate to home builders for new home 240V charging station garage outlets.

The ACC ordered the state’s public service corporations, including APS, to develop a long-term, comprehensive Statewide Transportation Electrification Plan (“TE Plan”) for Arizona. The TE Plan is intended to provide a roadmap for Transportation Electrification in Arizona, focused on realizing the associated air quality and economic development benefits for all residents in the state along with understanding the impact of electric vehicle charging on the grid. APS is actively participating in this process, which was submitted in April 2021 to the ACC for review and approval. The ACC will be holding workshops in August 2021 to discuss the TE Plan.

81

Hydrogen Production

Palo Verde, in partnership with Idaho National Laboratory (“INL”) and Energy Harbor Corporation and Xcel Energy Incorporated, has been chosen by the DOE’s Office of Nuclear Energy to participate in a hydrogen production project with the goal to improve the long-term economic competitiveness of the nuclear power industry. The multi-phase project is planned for 2020 through 2023. In the first phase, INL performed a technical and economic assessment of using electricity generated at Palo Verde to produce hydrogen.

Based on the experience from Palo Verde’s utility partners’ demonstration projects and from the Palo Verde-specific technical and economic assessment performed by INL, PNW Hydrogen LLC, a subsidiary of Pinnacle West, recently submitted a request for funding to the DOE’s Office of Nuclear Energy to support moving forward with a hydrogen production pilot.

Carbon Capture

Carbon capture technologies can isolate CO2 and either sequester it permanently in geologic formations or convert it for use in products. Currently, almost all existing fossil fuel generators do not control carbon emissions the way they control emissions of other air pollutants such as sulfur dioxide or oxides of nitrogen. Carbon capture technologies are still in the demonstration phase and while they show promise, they are still being tested in real-world conditions. These technologies could offer the potential to keep in operation existing generators that otherwise would need to be retired. APS will continue to monitor this emerging technology.

Regulatory Overview

On October 31, 2019, APS filed an application with the ACC seeking an increase in annual retail base rates of $69 million. This amount includes recovery of the deferral and rate base effects of the Four Corners SCR project that is currently the subject of a separate proceeding (see “SCR Cost Recovery” in Note 4). It also reflects a net credit to base rates of approximately $115 million primarily due to the prospective inclusion of rate refunds currently provided through the TEAM. The proposed total annual revenue increase in APS’s application is $184 million. The average annual customer bill impact of APS’s request is an increase of 5.6% (the average annual bill impact for a typical APS residential customer is 5.4%).

The principal provisions of APS’s application were:

•a test year comprised of twelve months ended June 30, 2019, adjusted as described below;
•an original cost rate base of $8.87 billion, which approximates the ACC-jurisdictional portion of the book value of utility assets, net of accumulated depreciation and other credits;
•the following proposed capital structure and costs of capital:

 	 	Capital Structure	 	Cost of Capital	 	
Long-term debt	 	45.3 		%	4.1	%	
Common stock equity	 	54.7 		%	10.15 		%	
Weighted-average cost of capital	 	 	 	7.41 		%	
 
•a 1% return on the increment of fair value rate base above APS’s original cost rate base, as provided for by Arizona law;
•a Base Fuel Rate of $0.030168 per kWh;
•authorization to defer until APS’s next general rate case the increase or decrease in its Arizona property taxes attributable to tax rate changes after the date the rate application is adjudicated;
82

•a number of proposed rate and program changes for residential customers, including:
▪a super off-peak period during the winter months for APS’s time-of-use with demand rates;
▪additional $1.25 million in funding for APS’s limited-income crisis bill program; and
▪a flat bill/subscription rate pilot program;
•proposed rate design changes for commercial customers, including an experimental program designed to provide access to market pricing for up to 200 MW of medium and large commercial customers;
•recovery of the deferral and rate base effects of the construction and operating costs of the Ocotillo modernization project (see Note 4 discussion of the 2017 Settlement Agreement); and
•continued recovery of the remaining investment and other costs related to the retirement and closure of the Navajo Plant (see Note 4 for details related to the resulting regulatory asset).

On October 2, 2020, the ACC Staff, the Residential Utility Consumer Office (“RUCO”) and other intervenors filed their initial written testimony with the ACC in this rate case. The ACC Staff recommends, among other things, a (i) $89.7 million revenue increase, (ii) average annual customer bill increase of 2.7%, (iii) return on equity of 9.4%, (iv) a 0.3% or, as an alternative, a 0% return on the increment of fair value rate base greater than original cost, (v) recovery of the deferral and rate base effects of the construction and operating costs of the Four Corners SCR project and (vi) recovery of the rate base effects of the construction and ongoing consideration of the deferral of the Ocotillo modernization project. RUCO recommends, among other things, a (i) $20.8 million revenue decrease, (ii) average annual customer bill decrease of 0.63%, (iii) return on equity of 8.74%, (iv) a 0% return on the increment of fair value rate base, (v) nonrecovery of the deferral and rate base effects of the construction and operating costs of the Four Corners SCR project pending further consideration, and (vi) recovery of the deferral and rate base effects of the construction and operating costs of the Ocotillo modernization project.

The filed ACC Staff and intervenor testimony include additional recommendations, some of which materially differ from APS’s filed application. On November 6, 2020, APS filed its rebuttal testimony and the principal provisions which differ from its initial application include, among other things, a (i) $169 million revenue increase, (ii) average annual customer bill increase of 5.14%, (iii) return on equity of 10%, (iv) return on the increment of fair value rate base of 0.8%, (v) new cost recovery adjustor mechanism, the Advanced Energy Mechanism (“AEM”), to enable more timely recovery of clean investments as APS pursues its clean energy commitment, (vi) recognition that securitization is a potentially useful financing tool to recover the remaining book value of retiring assets and effectuate a transition to a cleaner energy future that APS intends to pursue, provided legislative hurdles are addressed, and (vii) the CCT plan related to the closure or future closure of coal-fired generation facilities of which $25 million would be funds that are not recoverable through rates with a proposal that the remainder be funded by customers over 10 years.

The CCT plan includes the following proposed components: (i) $100 million that will be paid over 10 years to the Navajo Nation for a sustainable transition to a post-coal economy, which would be funded by customers, (ii) $1.25 million that will be paid over five years to the Navajo Nation to fund an economic development organization, which would be funds not recoverable through rates, (iii) $10 million to facilitate electrification projects within the Navajo Nation, which would be funded equally by funds not recoverable through rates and by customers, (iv) $2.5 million per year in transmission revenue sharing to be paid to the Navajo Nation beginning after the closure of the Four Corners Power Plant through 2038, which would be funds not recoverable through rates, (v) $12 million that will be paid over five years to the Navajo County Communities surrounding Cholla Power Plant, which would primarily be funded by customers, and (vi) $3.7 million that will be paid over five years to the Hopi Tribe related to APS’s ownership interests in the Navajo Generating Station, which would primarily be funded by customers.

On December 4, 2020, the ACC Staff and intervenors filed surrebuttal testimony. The ACC Staff reduced its recommended rate increase to $59.8 million, or an average annual customer bill increase of 1.82%.
83

In RUCO’s surrebuttal, the recommended revenue decrease changed to $50.1 million, or an average annual customer bill decrease of 1.52%.

The hearing concluded on March 3, 2021 and the post-hearing briefing schedule concluded on April 30, 2021. In May 2021, the ACC declined to re-open the evidentiary record in APS’s pending rate case to take additional evidence on topics raised by certain ACC Commissioners, including adjustor cost recovery mechanisms.

On August 2, 2021, the Administrative Law Judge issued a Recommended Opinion and Order in APS’s rate case (the “2019 Rate Case ROO”). The 2019 Rate Case ROO recommends, among other things, a (i) $111 million base revenue decrease, (ii) return on equity for original cost rate base of 9.16%, (iii) a 0.15% return on the increment of fair value rate base greater than original cost, with total fair value rate of return further adjusted to include a 0.10% reduction to return on equity resulting in an effective fair value return of 0.05%, (iv) nonrecovery of the deferral and rate base effects of the operating costs and construction of the Four Corners SCR project (see "Four Corners SCR Cost Recovery" in Note 4 for additional information), (v) recovery of the deferral and rate base effects of the operating costs and construction of the Ocotillo modernization project, which includes a reduction in the return on the deferral and (vi) a 15% disallowance of annual amortization of Navajo Plant regulatory asset recovery. The 2019 Rate Case ROO also recommended that the CCT plan include the following components: (i) $50 million that will be paid over 10 years to the Navajo Nation, (ii) $5 million that will be paid over five years to the Navajo County Communities surrounding Cholla Power Plant, and (iii) $1.675 million that will be paid to the Hopi Tribe related to APS’s ownership interests in the Navajo Generating Station. These amounts would be recoverable from APS’s customers through the RES. APS expects to file an exception regarding the disallowance of the SCR cost deferrals and plant investments that was recommended in the 2019 Rate Case ROO and APS is continuing to evaluate any additional exceptions it may file. The 2019 Rate Case ROO will be discussed at an upcoming ACC open meeting. APS cannot predict the outcome of this proceeding.

See Note 4 for information regarding additional regulatory matters.

Arizona Attorney General Matter

APS received civil investigative demands from the Office of the Arizona Attorney General, Civil Litigation Division, Consumer Protection & Advocacy Section (“Attorney General”) seeking information pertaining to the rate plan comparison tool offered to APS customers and other related issues including implementation of rates from the 2017 Settlement Agreement and its Customer Education and Outreach Plan associated with the 2017 Settlement Agreement. APS fully cooperated with the Attorney General’s Office in this matter. On February 22, 2021 APS entered into a consent agreement with the Attorney General as a way to settle the matter. The settlement resulted in APS paying $24.75 million, $24 million of which is being returned to customers as restitution. While this matter has been resolved with the Attorney General, APS cannot predict whether additional inquiries or actions may be taken by the ACC.

Financial Strength and Flexibility 

Pinnacle West and APS currently have ample borrowing capacity under their respective credit facilities, and may readily access these facilities ensuring adequate liquidity for each company.  Capital expenditures will be funded with internally generated cash and external financings, which may include issuances of long-term debt and Pinnacle West common stock.
 
84

Other Subsidiaries

Bright Canyon Energy. On July 31, 2014, Pinnacle West announced its creation of a wholly-owned subsidiary, BCE.  BCE’s strategy is to develop, own, operate and acquire energy infrastructure in a manner that leverages the Company’s core expertise in the electric energy industry.  In 2014, BCE formed a 50/50 joint venture with BHE U.S. Transmission LLC, a subsidiary of Berkshire Hathaway Energy Company.  The joint venture, named TransCanyon, is pursuing independent electric transmission opportunities within the 11 states that comprise the Western Electricity Coordinating Council, excluding opportunities related to transmission service that would otherwise be provided under the tariffs of the retail service territories of the venture partners’ utility affiliates.

On December 20, 2019, BCE acquired minority ownership positions in two wind farms under development by Tenaska Energy, Inc. and Tenaska Energy Holdings, LLC, the 242 MW Clear Creek wind farm in Missouri (“Clear Creek”) and the 250 MW Nobles 2 wind farm in Minnesota (“Nobles 2”). Clear Creek achieved commercial operation in May 2020 and Nobles 2 achieved commercial operation in December 2020. Both wind farms deliver power under long-term power purchase agreements. BCE indirectly owns 9.9% of Clear Creek and 5.1% of Nobles 2.

El Dorado. El Dorado is a wholly-owned subsidiary of Pinnacle West. El Dorado owns debt investments and minority interests in several energy-related investments and Arizona community-based ventures.  El Dorado committed to a $25 million investment in the Energy Impact Partners fund, which is an organization that focuses on fostering innovation and supporting the transformation of the utility industry. The investment will be made by El Dorado as investments are selected by the Energy Impact Partners fund. Additionally, El Dorado committed to a $25 million investment in invisionAZ Fund, which is a fund focused on analyzing, investing, managing and otherwise dealing with investments in privately held early stage and emerging growth technology companies and businesses primarily based in the State of Arizona, or based in other jurisdictions and having existing or potential strategic or economic ties to companies or other interests in the State of Arizona. The investment will be made by El Dorado as investments are selected by the invisionAZ Fund.

Key Financial Drivers
 
In addition to the continuing impact of the matters described above, many factors influence our financial results and our future financial outlook, including those listed below.  We closely monitor these factors to plan for the Company’s current needs, and to adjust our expectations, financial budgets and forecasts appropriately.
 
Electric Operating Revenues.  For the years 2018 through 2020, retail electric revenues comprised approximately 95% of our total operating revenues.  Our electric operating revenues are affected by customer growth or decline, variations in weather from period to period, customer mix, average usage per customer and the impacts of energy efficiency programs, distributed energy additions, electricity rates and tariffs, the recovery of PSA deferrals and the operation of other recovery mechanisms.  These revenue transactions are affected by the availability of excess generation or other energy resources and wholesale market conditions, including competition, demand and prices.
 
Actual and Projected Customer and Sales Growth. Retail customers in APS’s service territory increased 2.2% for the six-month period ended June 30, 2021 compared with the prior-year period. For the three years 2018 through 2020, APS’s customer growth averaged 2.0% per year. We currently project annual customer growth to be 1.5% to 2.5% for 2021 and for 2021 through 2023 based on our assessment of steady population growth in Arizona.

85

Retail electricity sales in kWh, adjusted to exclude the effects of weather variations, increased 3.3% for the six-month period ended June 30, 2021 compared with the prior-year period. While steady customer growth was offset by energy savings driven by customer conservation, energy efficiency, and distributed renewable generation initiatives, the main drivers of positive sales for this period were continued strong residential sales due to work-from-home policies, a strong improvement in sales to commercial and industrial customers, and the ramp-up of new data center customers. Though the total expected impact of COVID-19 on future sales is currently unknown, APS experienced higher electric residential sales and lower electric commercial and industrial sales from the outset of the pandemic through April 2021. Beginning in May 2021, electric sales to commercial and industrial customers increased to levels in line with pre-COVID sales. APS cannot predict whether sales from commercial and industrial customers has fully recovered, but it expects sales trends to continue normalizing during 2021 as business activity continues to recover and more people return to work.

For the three years 2018 through 2020, annual retail electricity sales were about flat, adjusted to exclude the effects of weather variations. We currently project that annual retail electricity sales in kWh will increase in the range of 1.0% to 2.0% for 2021 and for 2021 through 2023, including the effects of customer conservation, energy efficiency and distributed renewable generation initiatives, but excluding the effects of weather variations and excluding the impacts of several new, large manufacturing facilities opening operations in Metro Phoenix. The impact of the new, large manufacturing facilities is likely to increase the expected annual sales growth rate as early as 2022, but demand from these customers remains uncertain at this point. This projected sales growth range also includes our estimated contributions of several large data centers, but not all, and we will continue to estimate contributions and evaluate sales guidance as these customers develop more usage history. These estimates could be further impacted by slower than expected growth of the Arizona economy, slower than expected ramp-up of the new data centers, or acceleration of the expected effects of customer conservation, energy efficiency, distributed renewable generation initiatives.

Actual sales growth, excluding weather-related variations, may differ from our projections as a result of numerous factors, such as economic conditions, customer growth, usage patterns and energy conservation, ramp-up of data centers, impacts of energy efficiency programs and growth in distributed generation, and responses to retail price changes. Based on past experience, a 1% variation in our annual kWh sales projections attributable to such economic factors under normal business conditions can result in increases or decreases in annual net income of approximately $20 million.

Weather.  In forecasting the retail sales growth numbers provided above, we assume normal weather patterns based on historical data.  Historically, extreme weather variations have resulted in annual variations in net income in excess of $25 million.  However, our experience indicates that the more typical variations from normal weather can result in increases or decreases in annual net income of up to $15 million.
 
Fuel and Purchased Power Costs. Fuel and purchased power costs included on our Condensed Consolidated Statements of Income are impacted by our electricity sales volumes, existing contracts for purchased power and generation fuel, our power plant performance, transmission availability or constraints, prevailing market prices, new generating plants being placed in service in our market areas, changes in our generation resource allocation, our hedging program for managing such costs and PSA deferrals and the related amortization.

Operations and Maintenance Expenses. Operations and maintenance expenses are impacted by customer and sales growth, power plant operations, maintenance of utility plant (including generation, transmission, and distribution facilities), inflation, unplanned outages, planned outages (typically scheduled in the spring and fall), renewable energy and demand side management related expenses (which are offset by the same amount of operating revenues) and other factors.

Depreciation and Amortization Expenses.  Depreciation and amortization expenses are impacted by net additions to utility plant and other property (such as new generation, transmission, and distribution
86

facilities), and changes in depreciation and amortization rates.  See “Liquidity and Capital Resources” below for information regarding the planned additions to our facilities.

Property Taxes.  Taxes other than income taxes consist primarily of property taxes, which are affected by the value of property in-service and under construction, assessment ratios, and tax rates.  The average property tax rate in Arizona for APS, which owns essentially all of our property, was 10.8% of the assessed value for 2020, 10.9% for 2019 and 11.0% for 2018. We expect property taxes to increase as we add new generating units and continue with improvements and expansions to our existing generating units and transmission and distribution facilities. 

Pension and other postretirement non-service credits - net.  Pension and other postretirement non-service credits can be impacted by changes in our actuarial assumptions. The most relevant actuarial assumptions are the discount rate used to measure our net periodic costs/credit, the expected long-term rate of return on plan assets used to estimate earnings on invested funds over the long-term, the mortality assumptions and the assumed healthcare cost trend rates. We review these assumptions on an annual basis and adjust them as necessary.

Interest Expense.  Interest expense is affected by the amount of debt outstanding and the interest rates on that debt (see Note 3).  The primary factors affecting borrowing levels are expected to be our capital expenditures, long-term debt maturities, equity issuances and internally generated cash flow.  An allowance for borrowed funds used during construction offsets a portion of interest expense while capital projects are under construction.  We stop accruing AFUDC on a project when it is placed in commercial operation.
 
Income Taxes.  Income taxes are affected by the amount of pretax book income, income tax rates, certain deductions and non-taxable items, such as AFUDC.  In addition, income taxes may also be affected by the settlement of issues with taxing authorities. On December 22, 2017, the Tax Act was enacted and was generally effective on January 1, 2018. Changes impacting the Company include a reduction in the corporate tax rate to 21%, revisions to the rules related to tax bonus depreciation, limitations on interest deductibility and an associated exception for certain public utilities, and requirements that certain excess deferred tax amounts of regulated utilities be normalized. See Note 14 for details of the impacts on the Company as of June 30, 2021. In APS’s 2017 rate case decision, the ACC approved a Tax Expense Adjustor Mechanism which will be used to pass through the income tax effects to retail customers of the Tax Act. (See Note 4 for details of the TEAM.)

RESULTS OF OPERATIONS

Pinnacle West’s only reportable business segment is our regulated electricity segment, which consists of traditional regulated retail and wholesale electricity businesses (primarily sales supplied under traditional cost-based rate regulation) and related activities and includes electricity generation, transmission and distribution.

87

Operating Results — Three-month period ended June 30, 2021 compared with three-month period ended June 30, 2020.

Our consolidated net income attributable to common shareholders for the three months ended June 30, 2021 was $216 million, compared with consolidated net income attributable to common shareholders of $194 million for the prior-year period.  The results reflect an increase of approximately $25 million for the regulated electricity segment primarily due to higher revenue driven by customer usage and growth and the effects of weather, and higher pension and other postretirement non-service credits, partially offset by higher operations and maintenance expense, higher depreciation expense and higher income taxes, including lower amortization of excess deferred taxes.  

The following table presents net income attributable to common shareholders by business segment compared with the prior-year period:
																		
 	Three Months Ended
June 30,		 	
 	2021		2020		Net Change	
 	(dollars in millions)	
Regulated Electricity Segment:	 		 		 	
Operating revenues less fuel and purchased power expenses	$	726 			$	690 			$	36 		
Operations and maintenance	(228)			(218)			(10)		
Depreciation and amortization	(158)			(152)			(6)		
Taxes other than income taxes	(60)			(57)			(3)		
Pension and other postretirement non-service credits - net	28 			14 			14 		
All other income and expenses, net	18 			19 			(1)		
Interest charges, net of allowance for borrowed funds used during construction	(58)			(58)			— 		
Income taxes	(47)			(41)			(6)		
Less income related to noncontrolling interests (Note 6)	(4)			(5)			1 		
Regulated electricity segment income	217 			192 			25 		
All other	(1)			2 			(3)		
Net Income Attributable to Common Shareholders	$	216 			$	194 			$	22 		

88

Operating revenues less fuel and purchased power expenses. Regulated electricity segment operating revenues less fuel and purchased power expenses were $36 million higher for the three months ended June 30, 2021 compared with the prior-year period. The following table summarizes the major components of this change:

	Increase (Decrease)	
	Operating
revenues		Fuel and
purchased
power expenses		Net change	
	(dollars in millions)	

	
Higher retail revenue due to customer growth and changes in customer usage patterns, partially offset by the impacts of energy efficiency and distributed generation	$	39 			$	12 			$	27 		
Effects of weather	9 			3 			6 		
Higher renewable energy regulatory surcharges, partially offset by operations and maintenance costs	2 			(1)			3 		
Higher transmission revenues (Note 4)	1 			— 			1 		
Changes in net fuel and purchased power costs, including off-system sales margins and related deferrals	19 			20 			(1)		
	
Miscellaneous items, net	(2)			(2)			— 		
Total	$	68 			$	32 			$	36 		

Operations and maintenance. Operations and maintenance expenses increased $10 million for the three months ended June 30, 2021 compared with the prior-year period primarily because of:

•An increase of $12 million related to employee benefits;

•An increase of $4 million primarily related to a decreased recovery from contributions of administrative and general costs from Palo Verde owners;

•An increase of $3 million primarily related to costs for renewable energy and similar regulatory programs, which are partially offset in operating revenues and purchased power;

•A decrease of $6 million primarily related to customer support funds, personal protective equipment and other health and safety-related costs for COVID-19 response;

•A decrease of $5 million for costs related to transmission and distribution; and

•An increase of $2 million for corporate resources and other miscellaneous factors.

Depreciation and amortization. Depreciation and amortization expenses were $6 million higher for the three months ended June 30, 2021 compared to the prior-year period primarily due to increased plant in service of $7 million, partially offset by the regulatory deferrals for the Ocotillo modernization project and the Four Corners SCR project of $1 million.

Pension and other postretirement non-service credits, net. Pension and other postretirement non-service credits, net were $14 million higher for the three months ended June 30, 2021 compared to the prior-year period primarily due to actual market returns exceeding estimated returns in 2020.
89

Income taxes.  Income taxes were $6 million higher for the three months ended June 30, 2021 compared with the prior-year period primarily due to higher pre-tax income.

Operating Results — Six-month period ended June 30, 2021 compared with six-month period ended June 30, 2020.

Our consolidated net income attributable to common shareholders for the six months ended June 30, 2021 was $251 million, compared with consolidated net income attributable to common shareholders of $224 million for the prior-year period.  The results reflect an increase of approximately $32 million for the regulated electricity segment, primarily due to higher revenue driven by higher customer growth and usage, lower refunds in the current year related to the Tax Act, the effects of weather and higher transmission revenue, and higher pension and other postretirement non-service credits, partially offset by higher income taxes, including lower amortization of excess deferred taxes, higher operations and maintenance expense and higher depreciation expense.  

The following table presents net income attributable to common shareholders by business segment compared with the prior-year period:
																		
 	Six Months Ended
June 30,		 	
 	2021		2020		Net Change	
 	(dollars in millions)	
Regulated Electricity Segment:	 		 		 	
Operating revenues less fuel and purchased power expenses	$	1,222 			$	1,162 			$	60 		
Operations and maintenance	(458)			(439)			(19)		
Depreciation and amortization	(317)			(307)			(10)		
Taxes other than income taxes	(118)			(113)			(5)		
Pension and other postretirement non-service credits - net	56 			28 			28 		
All other income and expenses, net	33 			34 			(1)		
Interest charges, net of allowance for borrowed funds used during construction	(114)			(113)			(1)		
Income taxes	(42)			(21)			(21)		
Less income related to noncontrolling interests (Note 6)	(9)			(10)			1 		
Regulated electricity segment income	253 			221 			32 		
All other	(2)			3 			(5)		
Net Income Attributable to Common Shareholders	$	251 			$	224 			$	27 		

90

Operating revenues less fuel and purchased power expenses.  Regulated electricity segment operating revenues less fuel and purchased power expenses were $60 million higher for the six months ended June 30, 2021 compared with the prior-year period.  The following table summarizes the major components of this change:

	Increase (Decrease)	
	Operating
revenues		Fuel and
purchased
power expenses		Net change	
	(dollars in millions)	

	
Higher retail revenue due to customer growth and changes in customer usage patterns, partially offset by the impacts of energy efficiency and distributed generation	$	40 			$	13 			$	27 		
Lower refunds in the current year related to the Tax Act (Note 4)	17 			— 			17 		
Effects of weather	14 			4 			10 		
Higher transmission revenues (Note 4)	5 			— 			5 		
Higher renewable energy regulatory surcharges, partially offset by operations and maintenance costs	3 			(1)			4 		
Changes in net fuel and purchased power costs, including off-system sales margins and related deferrals	25 			27 			(2)		
Miscellaneous items, net	(3)			(2)			(1)		
Total	$	101 			$	41 			$	60 		

Operations and maintenance.  Operations and maintenance expenses increased $19 million for the six months ended June 30, 2021 compared with the prior-year period primarily because of:

•An increase of $19 million related to employee benefits;

•An increase of $9 million in fossil generation costs primarily due to higher planned outages and higher operating costs;

•An increase of $3 million primarily related to costs for renewable energy and similar regulatory programs, which are partially offset in operating revenues and purchased power;

•A decrease of $5 million primarily related to customer support funds, personal protective equipment and other health and safety-related costs for COVID-19 response; and

•A decrease of $7 million for corporate resources and other miscellaneous factors.

Depreciation and amortization. Depreciation and amortization expenses were $10 million higher for the six months ended June 30, 2021 compared to the prior-year period primarily due to increased plant in service of $13 million, partially offset by the regulatory deferrals for the Ocotillo modernization project and the Four Corners SCR project of $3 million.

Pension and other postretirement non-service credits, net. Pension and other postretirement non-service credits, net were $28 million higher for the six months ended June 30, 2021 compared to the prior-year period primarily due to actual market returns exceeding estimated returns in 2020.

91

Income taxes.  Income taxes were $21 million higher for the six months ended June 30, 2021 compared with the prior-year period primarily due to lower amortization of excess deferred taxes and higher pre-tax income, partially offset by a net operating loss carryback benefit that the Company recognized during the first quarter of 2021.

LIQUIDITY AND CAPITAL RESOURCES
 
Overview
 
Pinnacle West’s primary cash needs are for dividends to our shareholders and principal and interest payments on our indebtedness.  The level of our common stock dividends and future dividend growth will be dependent on declaration by our Board of Directors and based on a number of factors, including our financial condition, payout ratio, free cash flow and other factors.
 
Our primary sources of cash are dividends from APS and external debt and equity issuances.  An ACC order requires APS to maintain a common equity ratio of at least 40%.  As defined in the related ACC order, the common equity ratio is defined as total shareholder equity divided by the sum of total shareholder equity and long-term debt, including current maturities of long-term debt.  At June 30, 2021, APS’s common equity ratio, as defined, was 51%.  Its total shareholder equity was approximately $6.3 billion, and total capitalization was approximately $12.3 billion.  Under this order, APS would be prohibited from paying dividends if such payment would reduce its total shareholder equity below approximately $4.9 billion, assuming APS’s total capitalization remains the same.  This restriction does not materially affect Pinnacle West’s ability to meet its ongoing cash needs or ability to pay dividends to shareholders.
 
APS’s capital requirements consist primarily of capital expenditures and maturities of long-term debt.  APS funds its capital requirements with cash from operations and, to the extent necessary, external debt financing and equity infusions from Pinnacle West.

92

Summary of Cash Flows
 
Our consolidated change in cash and cash equivalents for the period ended June 30, 2021 compared to December 31, 2020 was a decrease of $46 million. The change is primarily driven by cash used for capital expenditures, fuel and purchased power and operations and maintenance cost, which is partially offset by higher cash receipts of electric revenues, increased short-term debt borrowings and lower long-term debt repayments. The following tables present net cash provided by (used for) operating, investing and financing activities (dollars in millions):
 
Pinnacle West Consolidated

 	Six Months Ended
June 30,		Net	
 	2021		2020		Change	
Net cash flow provided by operating activities	$	313 			$	370 			$	(57)		
Net cash flow used for investing activities	(650)			(653)			3 		
Net cash flow provided by financing activities	291 			280 			11 		
Net change in cash and cash equivalents	$	(46)			$	(3)			$	(43)		

Arizona Public Service Company

 	Six Months Ended
June 30,		Net	
 	2021		2020		Change	
Net cash flow provided by operating activities	$	315 			$	378 			$	(63)		
Net cash flow used for investing activities	(657)			(656)			(1)		
Net cash flow provided by financing activities	297 			274 			23 		
Net change in cash and cash equivalents	$	(45)			$	(4)			$	(41)		
 
Operating Cash Flows
 
Six-month period ended June 30, 2021 compared with six-month period ended June 30, 2020.  Pinnacle West’s consolidated net cash provided by operating activities was $313 million in 2021, compared to $370 million in 2020, a decrease of $57 million in net cash provided by operating activities primarily due to $109 million higher fuel and purchased power costs and $10 million higher payments for operations and maintenance cost, partially offset by $18 million higher cash receipts from electric revenues and $45 million other changes in working capital.

Retirement plans and other postretirement benefits. Pinnacle West sponsors a qualified defined benefit pension plan and a non-qualified supplemental excess benefit retirement plan for the employees of Pinnacle West and our subsidiaries.  The requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”) require us to contribute a minimum amount to the qualified plan.  We contribute at least the minimum amount required under ERISA regulations, but no more than the maximum tax-deductible amount.  The minimum required funding takes into consideration the value of plan assets and our pension benefit obligations.  Under ERISA, the qualified pension plan was 124% funded as of January 1, 2021 and 117% as of January 1, 2020.  Under GAAP, the qualified pension plan was 104% funded as of January 1, 2021 and 97% funded as of January 1, 2020. See Note 5 for additional details. The assets in the plan are comprised of fixed-income, equity, real estate, and short-term investments.  Future year contribution amounts are dependent on plan asset performance and plan actuarial assumptions.  We have not made voluntary contributions to our pension plan in 2021. The minimum required contributions for the pension plan are zero for the next three
93

years. We expect to make voluntary contributions up to $100 million in 2021 and zero in 2022 and 2023. We do not expect to make any contributions over this period to our other postretirement benefit plans. We continue to monitor COVID-19 and its impact on our retirement plans and other postretirement benefits but we believe, due to our liability driven investment strategy, which helps to minimize the impact of market volatility on our plan’s funded status, our pension plan’s funded status, as measured for GAAP purposes, is still above 95% funded as of June 30, 2021.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allows employers to defer payments of the employer share of Social Security payroll taxes that would have otherwise been owed from March 27, 2020 through December 31, 2020. We deferred the cash payment of the employer’s portion of Social Security payroll taxes for the period July 1, 2020 through December 31, 2020 that was approximately $18 million. We will pay half of this cash deferral by December 31, 2021 and the remainder by December 31, 2022.

Investing Cash Flows
 
Six-month period ended June 30, 2021 compared with six-month period ended June 30, 2020.  Pinnacle West’s consolidated net cash used for investing activities was $650 million in 2021, compared to $653 million in 2020, a decrease of $3 million primarily related to investing cash activity related to 4CA, partially offset by increased capital expenditures.
 
Capital Expenditures.  The following table summarizes the estimated capital expenditures for the next three years:

Capital Expenditures
(dollars in millions) 

	Estimated for the Year Ended
December 31,	
 	2021		2022		2023	
APS	 		 		 	
Generation:	 		 		 	
Clean:						
Nuclear Generation	$	114 			$	116 			$	125 		
Renewables and Energy Storage Systems (“ESS”) (a)	200 			276 			281 		
	
Other Generation (b)	203 			190 			187 		
Distribution	577 			556 			549 		
Transmission	185 			181 			179 		
Other (c)	221 			181 			179 		
Total APS	$	1,500 			$	1,500 			$	1,500 		

(a)APS Solar Communities program, energy storage, renewable projects, and other clean energy projects
(b)Includes generation environmental projects
(c)Primarily information systems and facilities projects

Generation capital expenditures are comprised of various additions and improvements to APS’s clean resources, including nuclear plants, renewables and ESS. Generation capital expenditures also include improvements to existing fossil plants. Examples of the types of projects included in the forecast of generation capital expenditures are additions of renewable and energy storage, and upgrades and capital replacements of
94

various nuclear and fossil power plant equipment, such as turbines, boilers and environmental equipment.  We are monitoring the status of environmental matters, which, depending on their final outcome, could require modification to our planned environmental expenditures.

Distribution and transmission capital expenditures are comprised of infrastructure additions and upgrades, capital replacements, and new customer construction.  Examples of the types of projects included in the forecast include power lines, substations, and line extensions to new residential and commercial developments.

Capital expenditures will be funded with internally generated cash and external financings, which may include issuances of long-term debt and Pinnacle West common stock.

Financing Cash Flows and Liquidity
 
Six-month period ended June 30, 2021 compared with six-month period ended June 30, 2020.  Pinnacle West’s consolidated net cash provided by financing activities was $291 million in 2021, compared to $280 million in 2020, an increase of $11 million in net cash provided.  The increase in net cash provided by
financing activities is primarily due to lower long-term debt repayments of $800 million, partially offset by $939 million in lower issuances of long-term debt and a net increase in short-term borrowing of $158 million, partially offset by higher dividend payment of $11 million.

APS’s consolidated net cash provided by financing activities was $297 million in 2021, compared to $274 million in 2020, an increase of $23 million in net cash provided.  The increase in net cash provided by
financing activities is primarily due to lower long-term debt repayments of $350 million, partially offset by $592 million in lower issuances of long-term debt and a net increase in short-term borrowing of $275 million, partially offset by higher dividend payment of $11 million.

Significant Financing Activities.  On June 23, 2021, the Pinnacle West Board of Directors declared a dividend of $0.83 per share of common stock, payable on September 1, 2021 to shareholders of record on August 2, 2021.

Available Credit Facilities.  Pinnacle West and APS maintain committed revolving credit facilities in order to enhance liquidity and provide credit support for their commercial paper programs, to finance indebtedness, and other general corporate purposes.

On May 5, 2020, Pinnacle West refinanced its 364-day $50 million term loan agreement with a new 364-day $31 million term loan agreement that would have matured May 4, 2021. Borrowings under the agreement bore interest at Eurodollar Rate plus 1.40% per annum. Pinnacle West repaid this agreement on April 27, 2021.

On December 23, 2020, Pinnacle West entered into a $150 million term loan facility that matures June 30, 2022. The proceeds were received on January 4, 2021 and used for general corporate purposes. We recognized the term loan facility as long-term debt upon settlement on January 4, 2021.

On May 28, 2021, Pinnacle West replaced its $200 million revolving credit facility that would have matured on July 11, 2023, with a new $200 million revolving credit facility that matures on May 28, 2026. Pinnacle West has the option to increase the amount of the facility up to a maximum of $300 million upon the satisfaction of certain conditions and with the consent of the lenders.  Interest rates are based on Pinnacle West’s senior unsecured debt credit ratings and the agreement includes a sustainability-linked pricing metric which permits an interest rate reduction or increase by meeting or missing targets related to specific
95

environmental and employee health and safety sustainability objectives. The facility is available to support Pinnacle West’s general corporate purposes, including support for Pinnacle West's $200 million commercial paper program, for bank borrowings or for issuances of letters of credits. At June 30, 2021, Pinnacle West had no outstanding borrowings under its credit facility, no letters of credit outstanding under the credit facility and $9.7 million of outstanding commercial paper borrowings.

On May 28, 2021, APS replaced its two $500 million revolving credit facilities that would have matured in June 2022 and July 2023, with two new $500 million revolving credit facilities that total $1 billion and that mature on May 28, 2026.  APS may increase the amount of each facility up to a maximum of $700 million, for a total of $1.4 billion, upon the satisfaction of certain conditions and with the consent of the lenders.  Interest rates are based on APS’s senior unsecured debt credit ratings and the agreement includes a sustainability-linked pricing metric which permits an interest rate reduction or increase by meeting or missing targets related to specific environmental and employee health and safety sustainability objectives. These facilities are available to support APS’s general corporate purposes, including support for APS's $750 million commercial paper program, for bank borrowings or for issuances of letters of credit.  At June 30, 2021, APS had no outstanding borrowings under its revolving credit facilities, no letters of credit outstanding under the credit facilities and $495 million of outstanding commercial paper borrowings.

See “Financial Assurances” in Note 8 for a discussion of separate outstanding letters of credit and surety bonds.
 
Other Financing Matters. See Note 7 for information related to the change in our margin and collateral accounts.

Debt Provisions

Pinnacle West’s and APS’s debt covenants related to their respective bank financing arrangements include maximum debt to capitalization ratios.  Pinnacle West and APS comply with these covenants.  For both Pinnacle West and APS, these covenants require that the ratio of consolidated debt to total consolidated capitalization not exceed 65%.  At June 30, 2021, the ratio was approximately 55% for Pinnacle West and 50% for APS.  Failure to comply with such covenant levels would result in an event of default which, generally speaking, would require the immediate repayment of the debt subject to the covenants and could “cross-default” other debt.  See further discussion of “cross-default” provisions below.

Neither Pinnacle West’s nor APS’s financing agreements contain “rating triggers” that would result in an acceleration of the required interest and principal payments in the event of a rating downgrade.  However, our bank credit agreements contain a pricing grid in which the interest rates we pay for borrowings thereunder are determined by our current credit ratings.
 
All of Pinnacle West’s loan agreements contain “cross-default” provisions that would result in defaults and the potential acceleration of payment under these loan agreements if Pinnacle West or APS were to default under certain other material agreements.  All of APS’s bank agreements contain “cross-default” provisions that would result in defaults and the potential acceleration of payment under these bank agreements if APS were to default under certain other material agreements.  Pinnacle West and APS do not have a material adverse change restriction for credit facility borrowings.

On December 17, 2020, the ACC issued a financing order that, subject to specified parameters and procedures, increased APS’s long-term debt limit from $5.9 billion to $7.5 billion, and authorized APS’s short-term debt authorization equal to the sum of (i) 7% of APS’s capitalization, and (ii) $500 million (which is required to be used for costs relating to purchases of natural gas and power).

96

Credit Ratings

The ratings of securities of Pinnacle West and APS as of July 29, 2021 are shown below.  We are disclosing these credit ratings to enhance understanding of our cost of short-term and long-term capital and our ability to access the markets for liquidity and long-term debt.  The ratings reflect the respective views of the rating agencies, from which an explanation of the significance of their ratings may be obtained.  There is no assurance that these ratings will continue for any given period of time.  The ratings may be revised or withdrawn entirely by the rating agencies if, in their respective judgments, circumstances so warrant.  Any downward revision or withdrawal may adversely affect the market price of Pinnacle West’s or APS’s securities and/or result in an increase in the cost of, or limit access to, capital.  Such revisions may also result in substantial additional cash or other collateral requirements related to certain derivative instruments, insurance policies, natural gas transportation, fuel supply, and other energy-related contracts.  At this time, we believe we have sufficient available liquidity resources to respond to a downward revision to our credit ratings.

 	Moody’s	 	Standard & Poor’s	 	Fitch	
Pinnacle West	 	 	 	 	 	
Corporate credit rating	A3	 	A-	 	A-	
Senior unsecured	A3	 	BBB+	 	A-	
Commercial paper	P-2	 	A-2	 	F2	
Outlook	Negative	 	Stable	 	Negative	
 	 	 	 	 	 	
APS	 	 	 	 	 	
Corporate credit rating	A2	 	A-	 	A-	
Senior unsecured	A2	 	A-	 	A	
Commercial paper	P-1	 	A-2	 	F2	
Outlook	Negative	 	Stable	 	Negative	
 
Off-Balance Sheet Arrangements

See Note 6 for a discussion of the impacts on our financial statements of consolidating certain VIEs.
 
Contractual Obligations

As of June 30, 2021, our fuel and purchased power commitments have increased from the information provided in our 2020 Form 10-K. The increase is primarily due to new purchased power and energy storage commitments of approximately $624 million. The majority of the changes relate to 2026 and thereafter.

Other than the item described above, there have been no material changes, as of June 30, 2021, outside the normal course of business in contractual obligations from the information provided in our 2020 Form 10-K. See Note 3 for discussion regarding changes in our short-term and long-term debt obligations. See Note 6 for discussion regarding changes to our contractual obligations related to the Palo Verde sale leaseback transactions.

97

CRITICAL ACCOUNTING POLICIES
 
In preparing the financial statements in accordance with GAAP, management must often make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period.  Some of those judgments can be subjective and complex, and actual results could differ from those estimates.  There have been no changes to our critical accounting policies since our 2020 Form 10-K.  See “Critical Accounting Policies” in Item 7 of the 2020 Form 10-K for further details about our critical accounting policies.

OTHER ACCOUNTING MATTERS

In July 2021, a new accounting standard, ASU 2021-05, was issued that amends lessor’s accounting treatment for certain lease transactions with variable lease payments. The new guidance will be effective for us on January 1, 2022, with no expected material impacts. See Note 17 for additional information related to this new accounting standard.

MARKET AND CREDIT RISKS

Market Risks

Our operations include managing market risks related to changes in interest rates, commodity prices, investments held by our Nuclear Decommissioning Trusts, other special use funds and benefit plan assets.

Interest Rate and Equity Risk

We have exposure to changing interest rates.  Changing interest rates will affect interest paid on variable-rate debt and the market value of fixed income securities held by our Nuclear Decommissioning Trusts, other special use funds (see Note 11 and Note 12), and benefit plan assets.  The Nuclear Decommissioning Trusts, other special use funds and benefit plan assets also have risks associated with the changing market value of their equity and other non-fixed income investments.  Nuclear decommissioning and benefit plan costs are recovered in regulated electricity prices.

Commodity Price Risk

We are exposed to the impact of market fluctuations in the commodity price and transportation costs of electricity and natural gas.  Our risk management committee, consisting of officers and key management personnel, oversees company-wide energy risk management activities to ensure compliance with our stated energy risk management policies.  We manage risks associated with these market fluctuations by utilizing various commodity instruments that may qualify as derivatives, including futures, forwards, options and swaps.  As part of our risk management program, we use such instruments to hedge purchases and sales of electricity and natural gas.  The changes in market value of such contracts have a high correlation to price changes in the hedged commodities.

98

The following table shows the net pretax changes in mark-to-market of our derivative positions (dollars in millions):

 	Six Months Ended
June 30,	
 	2021		2020	
Mark-to-market of net positions at beginning of period	$	(13)			$	(71)		
Decrease in regulatory asset	122 			1 		
Recognized in OCI:				
Mark-to-market losses realized during the period	— 			1 		
Change in valuation techniques	— 			— 		
Mark-to-market of net positions at end of period	$	109 			$	(69)		

The table below shows the fair value of maturities of our derivative contracts (dollars in millions) at June 30, 2021 by maturities and by the type of valuation that is performed to calculate the fair values, classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  See Note 1, “Derivative Accounting” and “Fair Value Measurements” in Item 8 of our 2020 Form 10-K and Note 11 for more discussion of our valuation methods.

Source of Fair Value		2021		2022		2023		2024		2025		Total 
Fair 
Value	
Observable prices provided by other external sources		$	40 			$	30 			$	10 			$	3 			$	— 			$	83 		
Prices based on unobservable inputs		26 			— 			— 			— 			— 			26 		
Total by maturity		$	66 			$	30 			$	10 			$	3 			$	— 			$	109 		

The table below shows the impact that hypothetical price movements of 10% would have on the market value of our risk management assets and liabilities included on Pinnacle West’s Condensed Consolidated Balance Sheets (dollars in millions):
																								
	June 30, 2021		December 31, 2020	
 	Gain (Loss)		Gain (Loss)	
 	Price Up 10%		Price Down 10%		Price Up 10%		Price Down 10%	
Mark-to-market changes reported in:	 		 		 		 	
Regulatory asset (liability) (a)	 		 		 		 	
Electricity	$	6 			$	(6)			$	4 			$	(4)		
Natural gas	47 			(47)			49 			(49)		
Total	$	53 			$	(53)			$	53 			$	(53)		

(a)These contracts are economic hedges of our forecasted purchases of natural gas and electricity.  The impact of these hypothetical price movements would substantially offset the impact that these same price movements would have on the physical exposures being hedged.  To the extent the amounts are eligible for inclusion in the PSA, the amounts are recorded as either a regulatory asset or liability.

99

Credit Risk

We are exposed to losses in the event of non-performance or non-payment by counterparties.  See Note 7 for a discussion of our credit valuation adjustment policy.

Item 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
See “Key Financial Drivers” and “Market and Credit Risks” in Item 2 above for a discussion of quantitative and qualitative disclosures about market risks.

Item 4.         CONTROLS AND PROCEDURES
 
(a)                                 Disclosure Controls and Procedures
 
The term “disclosure controls and procedures” means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (15 U.S.C. 78a et seq.), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Pinnacle West’s management, with the participation of Pinnacle West’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of Pinnacle West’s disclosure controls and procedures as of June 30, 2021.  Based on that evaluation, Pinnacle West’s Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, Pinnacle West’s disclosure controls and procedures were effective.
 
APS’s management, with the participation of APS’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of APS’s disclosure controls and procedures as of June 30, 2021.  Based on that evaluation, APS’s Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, APS’s disclosure controls and procedures were effective.
 
(b)                                 Changes in Internal Control Over Financial Reporting
 
The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
 
No change in Pinnacle West’s or APS’s internal control over financial reporting occurred during the fiscal quarter ended June 30, 2021 that materially affected, or is reasonably likely to materially affect, Pinnacle West’s or APS’s internal control over financial reporting.

100

PART II — OTHER INFORMATION

Item 1.        LEGAL PROCEEDINGS
 
See “Business of Arizona Public Service Company — Environmental Matters” in Item 1 of the 2020 Form 10-K with regard to pending or threatened litigation and other matters.
 
See Note 4 for ACC and FERC-related matters.
 
See Note 8 for information regarding environmental matters, Superfund-related matters and other disputes.

Item 1A.    RISK FACTORS
 
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A — Risk Factors in the 2020 Form 10-K, which could materially affect the business, financial condition, cash flows or future results of Pinnacle West and APS.  The risks described in the 2020 Form 10-K are not the only risks facing Pinnacle West and APS.  Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect the business, financial condition, cash flows and/or operating results of Pinnacle West and APS. 

Item 5.    OTHER INFORMATION

In July and August 2021, the Company entered into an amended Key Executive Employment and Severance Agreements (“KEESA”) with Ms. Maria Lacal, Executive Vice President and Chief Nuclear Officer of Palo Verde Generating Station, APS, Mr. Theodore Geisler, Senior Vice President and Chief Financial Officer of Pinnacle West and APS, and Mr. Robert E. Smith, Executive Vice President General Counsel and Chief Development Officer of Pinnacle West and APS and other select officers. The KEESA was amended to better align it with current market practice, including adding the following provisions: (i) providing for a Section 280G “net better” cutback provision; and (ii) providing for the severance benefits to also apply in the event of certain involuntary terminations that occur within six months prior to a Change of Control (as defined in the KEESA). The foregoing description of the terms of the KEESA does not purport to be complete, and is qualified in its entirety by reference to the full text thereof, a copy of which is filed as Exhibit 10.4 to this Form 10-Q, and incorporated herein by reference.

101

Item 6.         EXHIBITS

(a) Exhibits

Exhibit No.	 	Registrant(s)	 	Description	
					
10.1		Pinnacle West		Amended and Restated Five-Year Credit Agreement dated as of May 28, 2021, among Pinnacle West, as Borrower, Barclays Bank PLC, as Agent, Co-Sustainability Structuring Agent and Issuing Bank, and the lenders and other parties thereto	
					
10.2		Pinnacle West APS		Amended and Restated Five-Year Credit Agreement dated as of May 28, 2021, among APS, as Borrower, Barclays Bank PLC, as Agent, Co-Sustainability Structuring Agent and Issuing Bank, and the lenders and other parties thereto	
					
10.3		Pinnacle West APS		Five-Year Credit Agreement dated as of May 28, 2021, among APS, as Borrower, Barclays Bank PLC, as Agent, Co-Sustainability Structuring Agent and Issuing Bank, and the lenders and other parties thereto	
					
10.4		Pinnacle West APS		Key Executive Employment and Severance Agreement between Pinnacle West and certain executive officers of Pinnacle West and its subsidiaries	
					
10.5		Pinnacle West APS		Four Corners Project Co-Tenancy Agreement, conformed copy up through and including Amendment No. 13, dated June 25, 2021, among APS, Public Service Company of New Mexico, SRP, Tucson Electric Power Company and Navajo Transitional Energy Company, LLC	
					
31.1	 	Pinnacle West	 	Certificate of Jeffrey B. Guldner, Chief Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended	
					
31.2	 	Pinnacle West	 	Certificate of Theodore N. Geisler, Chief Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended	
					
31.3	 	APS	 	Certificate of Jeffrey B. Guldner, Chief Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended	
					
31.4	 	APS	 	Certificate of Theodore N. Geisler, Chief Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended	
					
32.1*	 	Pinnacle West	 	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
					
32.2*	 	APS	 	Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	
					
101.INS	 	Pinnacle West
APS	 	XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.	
					
102

															
101.SCH	 	Pinnacle West
APS	 	XBRL Taxonomy Extension Schema Document	
					
101.CAL	 	Pinnacle West
APS	 	XBRL Taxonomy Extension Calculation Linkbase Document	
					
101.LAB	 	Pinnacle West
APS	 	XBRL Taxonomy Extension Label Linkbase Document	
					
101.PRE	 	Pinnacle West
APS	 	XBRL Taxonomy Extension Presentation Linkbase Document	
					
101.DEF	 	Pinnacle West
APS	 	XBRL Taxonomy Definition Linkbase Document	
					
104		Pinnacle West
APS		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	
________________________________
*Furnished herewith as an Exhibit.
103

In addition, Pinnacle West and APS hereby incorporate the following Exhibits pursuant to Exchange Act Rule 12b-32 and Regulation §229.10(d) by reference to the filings set forth below:

																											
Exhibit No.	 	Registrant(s)	 	Description	 	Previously Filed as Exhibit(1)	 	Date Filed	
 	 	 	 	 	 	 	 	 	
3.1 		 	Pinnacle West	 	Pinnacle West Capital Corporation Bylaws, amended as of February 19, 2020	 	3.1 to Pinnacle West/APS February 25, 2020 Form 8-K Report, File Nos. 1-8962 and 1-4473	 	2/25/2020	
 	 	 	 	 	 	 	 	 	
3.2 		 	Pinnacle West	 	Articles of Incorporation, restated as of May 21, 2008	 	3.1 to Pinnacle West/APS June 30, 2008 Form 10-Q Report, File Nos. 1-8962 and 1-4473	 	8/7/2008	
 	 	 	 	 	 	 	 	 	
3.3 		 	APS	 	Articles of Incorporation, restated as of May 25, 1988	 	4.2 to APS’s Form S-3 Registration Nos. 33-33910 and 33-55248 by means of September 24, 1993 Form  8-K Report, File No. 1-4473	 	9/29/1993	
 	 	 	 	 	 		 	 	
3.4 		 	APS	 	Amendment to the Articles of Incorporation of Arizona Public Service Company, amended May 16, 2012	 	3.1 to Pinnacle West/APS May 22, 2012 Form 8-K Report, File Nos. 1-8962 and 1-4473	 	5/22/2012	
 	 	 	 	 	 	 	 	 	
3.5 		 	APS	 	Arizona Public Service Company Bylaws, amended as of December 16, 2008	 	3.4 to Pinnacle West/APS December 31, 2008 Form 10-K, File Nos. 1-8962 and 1-4473	 	2/20/2009	
_______________________________
(1)  Reports filed under File Nos. 1-4473 and 1-8962 were filed in the office of the Securities and Exchange Commission located in Washington, D.C.
104

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

															
			PINNACLE WEST CAPITAL CORPORATION	
			(Registrant)	

Dated:	August 5, 2021		By:	/s/ Theodore N. Geisler	
				Theodore N. Geisler	
				Senior Vice President and	
				Chief Financial Officer	
				(Principal Financial Officer and	
				Officer Duly Authorized to sign this Report)	

			ARIZONA PUBLIC SERVICE COMPANY	
			(Registrant)	

Dated:	August 5, 2021		By:	/s/ Theodore N. Geisler	
				Theodore N. Geisler	
				Senior Vice President and	
				Chief Financial Officer	
				(Principal Financial Officer and	
				Officer Duly Authorized to sign this Report)	

105

U.S. $200,000,000
AMENDED AND RESTATED FIVE-YEAR CREDIT AGREEMENT
Dated as of May 28, 2021
among
PINNACLE WEST CAPITAL CORPORATION,
as Borrower,

THE LENDERS PARTY HERETO,

BARCLAYS BANK PLC,
as Agent and Issuing Bank,

MIZUHO BANK, LTD.,
as Syndication Agent,

BARCLAYS BANK PLC,
MIZUHO BANK, LTD.,
as Co-Sustainability Structuring Agents,

MIZUHO BANK, LTD.,
BANK OF AMERICA, N.A.,
BNP PARIBAS,
JPMORGAN CHASE BANK, N.A.,
MUFG BANK, LTD.,
TRUIST BANK
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Issuing Banks,

BANK OF AMERICA, N.A.,
BNP PARIBAS,
JPMORGAN CHASE BANK, N.A.,
MUFG BANK, LTD.,
TRUIST BANK
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Co-Documentation Agents,

BARCLAYS BANK PLC,
MIZUHO BANK, LTD.,
BNP PARIBAS SECURITIES CORP.,
BOFA SECURITIES, INC.,
JPMORGAN CHASE BANK, N.A.,
MUFG BANK, LTD.,
TRUIST SECURITIES, INC.
and
WELLS FARGO SECURITIES, LLC,
as Joint Lead Arrangers and Joint Book Runners

TABLE OF CONTENTS

						
ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS	
Section 1.01    Certain Defined Terms	1	
Section 1.02    Other Interpretive Provisions	24	
Section 1.03    Accounting Terms	25	
Section 1.04    Rounding	25	
Section 1.05    Times of Day	25	
Section 1.06    Sustainability Adjustments	25	
ARTICLE II
 
AMOUNTS AND TERMS OF THE ADVANCES and
LETTERS OF CREDIT	
Section 2.01    The Revolving Advances and Letters of Credit	27	
Section 2.02    Making the Revolving Advances	28	
Section 2.03    Letters of Credit	29	
Section 2.03A    Swingline Advances	36	
Section 2.04    Fees	37	
Section 2.05    Optional Termination or Reduction of the Commitments	38	
Section 2.06    Repayment of Advances	39	
Section 2.07    Interest on Advances	39	
Section 2.08    Interest Rate Determination	40	
Section 2.09    Optional Conversion of Revolving Advances	42	
Section 2.10    Prepayments of Advances	43	
Section 2.11    Increased Costs.	43	
Section 2.12    Illegality	45	
Section 2.13    Payments and Computations	45	
Section 2.14    Taxes	46	
Section 2.15    Sharing of Payments, Etc	50	
Section 2.16    Evidence of Debt	50	
Section 2.17    Use of Proceeds	51	
Section 2.18    Increase in the Aggregate Revolving Credit Commitments.	51	
Section 2.19    Affected Lenders	53	
Section 2.20    Replacement of Lenders	54	
Section 2.21    Extension of Termination Date	55	
i

						
ARTICLE III
 
CONDITIONS PRECEDENT	
Section 3.01    Conditions Precedent to Effectiveness	56	
Section 3.02    Conditions Precedent to Each Credit Extension and Commitment Increase.	58	
Section 3.03    Determinations Under Section 3.01	58	
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES	
Section 4.01    Representations and Warranties of the Borrower	59	
ARTICLE V
 
COVENANTS OF THE BORROWER	
Section 5.01    Affirmative Covenants	63	
Section 5.02    Negative Covenants	66	
Section 5.03    Financial Covenant	67	
ARTICLE VI
 
EVENTS OF DEFAULT	
Section 6.01    Events of Default	67	
Section 6.02    Actions in Respect of Letters of Credit upon Default	69	
ARTICLE VII
 
THE AGENT	
Section 7.01    Appointment and Authority	70	
Section 7.02    Rights as a Lender	70	
Section 7.03    Exculpatory Provisions	70	
Section 7.04    Reliance by Agent	71	
Section 7.05    Delegation of Duties	71	
Section 7.06    Resignation of Agent	71	
Section 7.07    Non-Reliance on Agent and Other Lenders	72	
Section 7.08    No Other Duties, Etc	72	
Section 7.09    Issuing Banks	72	
Section 7.10    Certain ERISA Matters	72	
Section 7.11    Erroneous Payments	73	
ARTICLE VIII
 
MISCELLANEOUS	
ii

						
Section 8.01    Amendments, Etc	74	
Section 8.02    Notices, Etc	76	
Section 8.03    No Waiver; Cumulative Remedies; Enforcement	77	
Section 8.04    Costs and Expenses; Indemnity; Damage Waiver	78	
Section 8.05    Right of Set-off	79	
Section 8.06    Effectiveness; Binding Effect	80	
Section 8.07    Successors and Assigns	80	
Section 8.08    Confidentiality	84	
Section 8.09    Governing Law	84	
Section 8.10    Counterparts; Integration	84	
Section 8.11    Jurisdiction, Etc	84	
Section 8.12    Payments Set Aside	85	
Section 8.13    Patriot Act and Beneficial Ownership Regulation	85	
Section 8.14    Waiver of Jury Trial	85	
Section 8.15    No Advisory or Fiduciary Responsibility	85	
Section 8.16    Survival of Representations and Warranties	86	
Section 8.17    Severability	86	
Section 8.18    Acknowledgement and Consent to Bail-In of Affected Financial Institutions	86	
Section 8.19    Acknowledgement Regarding Any Supported QFCs	87	
Section 8.20    Amendment and Restatement; Departing Lenders	88	

Schedules

Schedule 1.01(a) Commitments and Ratable Shares
Schedule 1.01(b) Sustainability Table
Schedule 4.01(j) Subsidiaries
Schedule 4.01(k) Existing Indebtedness
Schedule 8.02 Certain Address for Notices

Exhibits

Exhibit A Form of Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Assignment and Assumption
Exhibit D Form of Pricing Certificate

iii

AMENDED AND RESTATED FIVE-YEAR CREDIT AGREEMENT

Dated as of May 28, 2021

PINNACLE WEST CAPITAL CORPORATION, an Arizona corporation (the “Borrower”), the banks, financial institutions and other institutional lenders (the “Initial Lenders”) and initial issuing banks (the “Initial Issuing Banks”) listed on the signature pages hereof, the other Lenders (as hereinafter defined), BARCLAYS BANK PLC, as Agent for the Lenders (as hereinafter defined), MIZUHO BANK, LTD., as Syndication Agent, BARCLAYS BANK PLC and MIZUHO BANK, LTD., as Co-Sustainability Structuring Agents and BANK OF AMERICA, N.A., BNP PARIBAS, JPMORGAN CHASE BANK, N.A., MUFG BANK, LTD., TRUIST BANK and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Documentation Agents, agree as follows:

The Borrower, the banks, financial institutions party thereto and other institutional lenders party thereto (collectively, the “Existing Lenders”), the issuing banks party thereto (collectively, the “Existing Issuing Banks”), Barclays Bank PLC, as Agent for the Existing Lenders, Mizuho Bank, Ltd., as Syndication Agent and the other agents party thereto, are parties to that certain Five-Year Credit Agreement, dated as of July 12, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”), whereby the Existing Lenders made certain advances (collectively, the “Existing Advances”) to, and the Existing Issuing Banks issued letters of credit for the benefit of (collectively, the “Existing Letters of Credit”), the Borrower.
The Borrower has requested that the Lenders (as hereinafter defined), the Swingline Lender (as hereinafter defined) and the Issuing Lenders (as hereinafter defined) make advances and extend credit to it in an aggregate principal amount at any one time outstanding not exceeding the aggregate amount of the Lenders’ Commitments (as hereinafter defined), which can be increased hereunder in accordance with Section 2.18 and subject to the terms and conditions set forth herein, and that the Existing Advances and the Existing Letters of Credit outstanding on the date hereof be continued as Advances and Letters of Credit hereunder, respectively.
The Lenders, the Swingline Lender and the Issuing Lenders are willing to continue the Existing Advances made to, and the Existing Letters of Credit issued for the account of, the Borrower under the Existing Credit Agreement as Advances to and Letters of Credit for the account of the Borrower hereunder, and to make further extensions of credit as provided herein.
It is the intent of the parties hereto that this Agreement shall not constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or constitute a repayment of any such obligations and liabilities, and that this Agreement shall amend and restate the Existing Credit Agreement in its entirety.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
ARTICLE I

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

“Additional Commitment Lender” has the meaning specified in Section 2.21(d).
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Agent.
“Advance” means a Revolving Advance or a Swingline Advance.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affected Lender” means any Lender, as reasonably determined by the Agent or if the Agent is the Affected Lender, by the Required Lenders, that (a) has failed to (i) fund all or any portion of any Revolving Advance within three (3) Business Days of the date such Revolving Advances were required to be funded hereunder unless such Lender notifies the Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in writing) has not been satisfied, or (ii) pay to the Agent, any Issuing Bank, the Swingline Lender, if any, or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit and funding obligations in respect of Swingline Advances) within three (3) Business Days of the date when due, (b) has notified the Borrower, the Agent, any Issuing Bank or any Lender in writing of its intention not to fund any Revolving Advance or any of its other funding obligations under this Agreement, (c) has failed, within three Business Days after written request by the Agent, or if the Agent is the Affected Lender, by the Required Lenders, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Revolving Advances and other funding obligations under this Agreement, (d) shall (or whose parent company shall) generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or shall have had any proceeding instituted by or against such Lender (or its parent company) seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian for, it or for any substantial part of its property) shall occur, or shall take (or whose parent company shall take) any corporate action to authorize any of the actions set forth above in this subsection (d) or (e) has become the subject of a Bail-In Action, provided that a Lender shall not be deemed to be an Affected Lender solely by virtue of the ownership or acquisition of any equity interest in any Lender or any Person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct
2

or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.
“Agent” means Barclays in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
“Agent’s Account” means the account of the Agent designated on Schedule 8.02 under the heading “Agent’s Account” or such other account as the Agent may designate to the Lenders and the Borrower from time to time.
“Agent’s Office” means the Agent’s address and, as appropriate, the Agent’s Account, or such other address or account as the Agent may from time to time notify the Borrower and the Lenders.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery, corruption or money laundering.
“Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Base Rate Advance and such Lender’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
“Applicable Rate” means, from time to time, the following percentages per annum determined by reference to the Public Debt Rating as set forth below:

Public Debt Rating S&P/Moody’s	Eurodollar Rate Advances	Base Rate Advances	Commitment Fee	
Level 1
AA-/Aa3 or above	0.750%	0.000%	0.060%	
Level 2
A+/A1	0.875%	0.000%	0.075%	
Level 3
A/A2	1.000%	0.000%	0.100%	
Level 4
A-/A3	1.125%	0.125%	0.125%	
Level 5
BBB+/Baa1	1.250%	0.250%	0.175%	
Level 6
BBB/Baa2 or below	1.500%	0.500%	0.225%	

It is hereby understood and agreed that the Applicable Rate shall be adjusted from time to time based upon the Sustainability Margin Adjustment (to be calculated and applied as set forth in Section 1.06); provided that in no event shall the Applicable Rate be less than zero.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of any entity that administers or manages a Lender.
“APS” means Arizona Public Service Company, an Arizona corporation.
3

“Arrangers” means, collectively, Barclays, Mizuho Bank, Ltd., BNP Paribas Securities Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A. (together with any affiliates it deems appropriate to provide the services contemplated herein), MUFG Bank, Ltd., Truist Securities, Inc. and Wells Fargo Securities, LLC.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto.
“Assuming Lender” has the meaning specified in Section 2.18(d).
“Assumption Agreement” has the meaning specified in Section 2.18(d)(ii).
“Authorized Officer” means the chairman of the board, chief executive officer, chief operating officer, chief financial officer, chief accounting officer, president, any vice president, treasurer, controller or any assistant treasurer of the Borrower.
“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Barclays” means Barclays Bank PLC.
“Base Rate” means for any day a fluctuating rate per annum equal to the highest of:
(a)    the rate of interest in effect for such day as publicly announced from time to time by the Agent as its “prime rate”;
(b)    the Federal Funds Rate plus 0.50%; and
(c)    an amount equal to (i) the Eurodollar Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus (ii) 1%; provided that clause (c) shall not be applicable during any period in which the Eurodollar Rate is unavailable or
4

unascertainable; provided further that, if the Base Rate shall be less than 1%, such rate shall be deemed to be 1% for purposes of this Agreement.
“Base Rate Advance” means a Revolving Advance that bears interest as provided in Section 2.07(a)(i).
“Benchmark” means, initially, LIBO Rate; provided that if a replacement of the Benchmark has occurred pursuant to Section 2.08(c), then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor:
(1)    For purposes of Section 2.08(c)(i), the first alternative set forth below that can be determined by the Agent:
(a)    the sum of: (i) Term SOFR and (ii) 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available Tenor of three-months’ duration, and 0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration, or
(b)    the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of LIBO Rate with a SOFR-based rate having approximately the same length as the interest payment period specified in Section 2.08(c)(i); and
(2)    For purposes of Section 2.08(c)(ii), the sum of (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time;
provided that, if the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
5

“Benchmark Transition Event” means, with respect to any then-current Benchmark other than LIBO Rate, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation in form and substance acceptable to the Agent in its discretion.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Internal Revenue Code to which Section 4975 of the Internal Revenue Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Internal Revenue Code) the assets of any such “employee benefit plan” or “plan”.
“Borrower” has the meaning given to such term in the introductory paragraph hereof.
“Borrower Information” has the meaning specified in Section 8.08.
“Borrowing” means (a) a borrowing consisting of simultaneous Revolving Advances of the same Type made by each of the Lenders pursuant to Section 2.01(a) or (b) Swingline Advances.
“Business Day” means a day of the year on which banks are not required or authorized by Law to close in New York City or Phoenix, Arizona and, if the applicable Business Day relates to any Advance in which interest is calculated by reference to the Eurodollar Rate, on which dealings are carried on in the London interbank market.
“Capital Lease Obligations” means, subject to Section 1.03, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease or a finance lease on the balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
“Carbon Intensity” shall mean, for any Reference Year, the measurement of total carbon emissions, measured in pounds, per megawatt hour of energy delivered by APS to its customers, and determined on a basis consistent with the determination of the Carbon Intensity Target (Minimum) and Carbon Intensity Target (Maximum) as of the Effective Date, as reported on the applicable Pricing Certificate pursuant to Section 1.06(f) and reflected in the Borrower’s publicly-available Corporate
6

Responsibility webpage (or similar publicly-available webpage) for such Reference Year. For the avoidance of doubt, energy delivered by APS to customers also includes energy efficiency (consisting of total kilowatt hour sales lost due to programs designed to help customers avoid using electricity) and distributed generation (consisting of total kilowatt hour sales lost to customer-installed electricity generation and storage technologies) as determined on a basis consistent with the determination of the Carbon Intensity Target (Minimum) and Carbon Intensity Target (Maximum) as of the Effective Date (the “Energy Efficiency and Distributed Generation Amounts”).
“Carbon Intensity Applicable Rate Adjustment Amount” means, with respect to any period between Sustainability Pricing Adjustment Dates:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances:
(i)negative 0.025%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the Carbon Intensity Target (Minimum) for such Reference Year;
(ii) 0.00%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the Carbon Intensity Target (Minimum) for such Reference Year but less than the Carbon Intensity Target (Maximum) for such Reference Year; and
(iii)positive 0.025%, if (A) the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the Carbon Intensity Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report the Carbon Intensity on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f);
(b)with respect to the Commitment Fee:
(i)negative 0.005%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the Carbon Intensity Target (Minimum) for such Reference Year;
(ii)0.000%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the Carbon Intensity Target (Minimum) for such Reference Year but less than the Carbon Intensity Target (Maximum) for such Reference Year; and
(iii)positive 0.005%, if (A) the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the Carbon Intensity Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report the Carbon Intensity on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
“Carbon Intensity Target (Maximum)” means, with respect to any Reference Year, the Carbon Intensity Target (Maximum) for such Reference Year as set forth in the Sustainability Table.
7

“Carbon Intensity Target (Minimum)” means, with respect to any Reference Year, the Carbon Intensity Target (Minimum) for such Reference Year as set forth in the Sustainability Table.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption of any Law, (b) any change in any Law or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided, however, that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed a “Change in Law” regardless of the date enacted, adopted, issued or implemented.

“Commitment” means a Revolving Credit Commitment or a Letter of Credit Commitment.
“Commitment Date” has the meaning specified in Section 2.18(b).
“Commitment Fee” has the meaning specified in Section 2.04(a).
“Commitment Increase” has the meaning specified in Section 2.18(a).
“Consolidated” refers to the consolidation of accounts in accordance with GAAP.
“Consolidated Indebtedness” means, at any date, the Indebtedness of the Borrower and its Consolidated Subsidiaries determined on a Consolidated basis as of such date; provided, however, that so long as the creditors of the VIE Lessor Trusts have no recourse to the assets of APS, “Consolidated Indebtedness” shall not include any Indebtedness or other obligations of the VIE Lessor Trusts.
“Consolidated Net Worth” means, at any date, the sum as of such date of (a) the par value (or value stated on the books of the Borrower) of all classes of capital stock of the Borrower and its Subsidiaries, excluding the Borrower’s capital stock owned by the Borrower and/or its Subsidiaries, plus (or minus in the case of a surplus deficit) (b) the amount of the Consolidated surplus, whether capital or earned, of the Borrower, determined in accordance with GAAP as of the end of the most recent calendar month (excluding the effect on the Borrower’s accumulated other comprehensive income/loss of the ongoing application of Accounting Standards Codification Topic 815).
“Consolidated Subsidiary” means, at any date, any Subsidiary or other entity the accounts of which would be Consolidated with those of the Borrower on its Consolidated financial statements if such financial statements were prepared as of such date; provided that in no event will Consolidated Subsidiaries include the VIE Lessor Trusts.
“Controlled Affiliate” has the meaning specified in Section 4.01(n).
“Convert”, “Conversion”, “Converted” and “Converting” each refers to a conversion of Revolving Advances of one Type into Revolving Advances of the other Type pursuant to Section 2.08, Section 2.09 or Section 2.12.
8

“Credit Extension” means each of the following: (a) a Borrowing and (b) the issuance of a Letter of Credit.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Agent in accordance with the conventions for this rate recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Agent decides that any such convention is not administratively feasible for the Agent, then the Agent may establish another convention in its reasonable discretion.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“Departing Lender” means each Lender under the Existing Credit Agreement that executes and delivers to the Agent a Departing Lender Signature Page.
“Departing Lender Signature Page” means each signature page to this Agreement on which it is indicated that such person is signing as a “Departing Lender”.
“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
“Dollars” or “$” means dollars of the United States of America.
“Domestic Lending Office” means, with respect to any Lender, the office of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Agent.
“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Agent has not received, by 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.
“Early Opt-in Election” means the occurrence of:
(1)    a notification by the Agent to (or the request by the Borrower to the Agent to notify) each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
(2)    the joint election by the Agent and the Borrower to trigger a fallback from LIBO Rate and the provision by the Agent of written notice of such election to the Lenders.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this
9

definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” has the meaning specified in Section 3.01.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 8.07(b)(iii) and Section 8.07(b)(v) (subject to such consents, if any, as may be required under Section 8.07(b)(iii)).
“Energy Efficiency and Distributed Generation Amounts” has the meaning set forth in the definition of Carbon Intensity.
“Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment and relating to any Environmental Law, including, without limitation, (a) by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any Governmental Authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.
“Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, natural resources or, to the extent relating to exposure to Hazardous Materials, human health or safety, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating to Section 412 of the Internal Revenue Code).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a
10

Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Agent.
“Eurodollar Rate” means, subject to the implementation of a Benchmark Replacement in accordance with Section 2.08(c), for any Interest Period as to any Eurodollar Rate Advance, (i) the rate per annum determined by the Agent to be the offered rate which appears on the page of the Reuters Screen which displays the London interbank offered rate administered by ICE Benchmark Administration Limited (such page currently being the LIBOR01 page) (the “LIBO Rate”) for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time), two Business Days prior to the commencement of such Interest Period, or (ii) in the event the rate referenced in the preceding clause (i) does not appear on such page or service or if such page or service shall cease to be available, the rate determined by the Agent to be the offered rate on such other page or other service which displays the LIBO Rate for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period; provided that if LIBO Rates are quoted under either of the preceding clauses (i) or (ii), but there is no such quotation for the Interest Period elected, the LIBO Rate shall be equal to the Interpolated Rate; and provided, further, that if any such rate determined pursuant to this definition is below zero, the Eurodollar Rate will be deemed to be zero.
“Eurodollar Rate Advance” means a Revolving Advance that bears interest at a rate based on the Eurodollar Rate (other than a Base Rate Advance bearing interest at a rate based on the Eurodollar Rate).
“Events of Default” has the meaning specified in Section 6.01.
“Excluded Taxes” means, with respect to the Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) Taxes imposed on or measured by its overall net income (however denominated), and franchise Taxes imposed on it (in lieu of net income Taxes), by the United States of America or the jurisdiction (or any political subdivision thereof) under the Laws of which such recipient is organized or does business or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which the Borrower is located, (c) any backup withholding Tax that is required by the Internal Revenue Code to be withheld from amounts payable to a Lender that has failed to comply with clause (A) of Section 2.14(e)(ii), (d) in the case of a Foreign Lender (other than as agreed to between any assignee and the Borrower pursuant to a request by the Borrower under Section 2.20), any United States of America withholding Tax that (i) is required to be imposed on amounts payable to such
11

Foreign Lender pursuant to the Laws in force at the time such Foreign Lender becomes a party hereto (or designates a new Applicable Lending Office) or (ii) is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with clause (B) of Section 2.14(e)(ii), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Applicable Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.14(a)(i) or (ii) and (v) any United States withholding Tax imposed by FATCA.
“Executive Order” has the meaning specified in Section 4.01(p).
“Existing Advances” has the meaning given to such term in the preamble.
“Existing Credit Agreement” has the meaning given to such term in the preamble.
“Existing Issuing Banks” has the meaning given to such term in the preamble.
“Existing Lenders” has the meaning given to such term in the preamble.
“Existing Letters of Credit” has the meaning given to such term in the preamble.
“Existing Termination Date” has the meaning specified in Section 2.21(a).
“Extending Lender” has the meaning specified in Section 2.21(b).
“Extension Date” has the meaning specified in Section 2.21(a).
“FATCA” means Section 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Internal Revenue Code.
“FCA” has the meaning specified in Section 2.08(c)(i).
“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Agent on such day on such transactions as determined by the Agent, and (c) solely for purposes for determining the Money Market Rate, any such other publication or means of determining the rate for federal funds as agreed to between the Borrower and Swingline Lender; provided further, that if the Federal Funds Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

12

“Fee Letters” means (a) each of the following letters to the Borrower dated May 10, 2021: (i) the letter from Barclays and Mizuho Bank, Ltd., (ii) the letter from Bank of America, N.A., BNP Paribas, BNP Paribas Securities Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A., MUFG Bank, Ltd., Truist Securities, Inc., Wells Fargo Bank, National Association and Wells Fargo Securities, LLC and (iii) the agent fee letter from Barclays, as Agent, each relating to certain fees payable by the Borrower to such parties in respect of the transactions contemplated by this Agreement and (b) any letter between the Borrower and any Issuing Bank other than an Initial Issuing Bank relating to certain fees payable to such Issuing Bank in its capacity as such, each as amended, modified, restated or supplemented from time to time.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to LIBO Rate.
“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes (including such a Lender when acting in the capacity of an Issuing Bank or a Swingline Lender). For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
“Four Corners Acquisition” means the acquisition by APS from Southern California Edison Company (“SCE”) of SCE’s interests in Units 4 and 5 of the Four Corners Power Plant near Farmington, New Mexico, pursuant to the Purchase and Sale Agreement, dated as of November 8, 2010, by and between SCE and APS.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
“GAAP” has the meaning specified in Section 1.03.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

“Government Official” shall mean (a) an executive, official, employee or agent of a governmental department, agency or instrumentality, (b) a director, officer, employee or agent of a wholly or partially government-owned or -controlled company or business, (c) a political party or official thereof, or candidate for political office or (d) an executive, official, employee or agent of a public international organization (e.g., the International Monetary Fund or the World Bank).

“Guarantee” means as to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for
13

the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, agreements to keep well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise), provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.
“Hedge Agreement” means any interest rate swap, cap or collar agreement, interest rate future or option contract, currency swap agreement, currency future or option contract, commodity future or option contract, commodity forward contract or other similar agreement.
“IBA” has the meaning specified in Section 2.08(c)(i).
“Increase Date” has the meaning specified in Section 2.18(a).
“Increasing Lender” has the meaning specified in Section 2.18(b).
“Indebtedness” means as to any Person at any date (without duplication): (a) indebtedness created, issued, incurred or assumed by such Person for borrowed money or evidenced by bonds, debentures, notes or similar instruments; (b) all obligations of such Person to pay the deferred purchase price of property or services, excluding, however, trade accounts payable (other than for borrowed money) arising in, and accrued expenses incurred in, the ordinary course of business of such Person so long as such trade accounts payable are paid within 180 days (unless subject to a good faith dispute) of the date incurred; (c) all Indebtedness secured by a Lien on any asset of such Person, to the extent such Indebtedness has been assumed by, or is a recourse obligation of, such Person; (d) all Guarantees by such Person; (e) all Capital Lease Obligations of such Person; and (f) the amount of all reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers’ acceptances, surety or other bonds and similar instruments in support of Indebtedness; provided that Indebtedness, in accordance with Section 1.03, shall exclude any obligation or liability arising from the application or interpretation of ASC Topic 840 or 842 or any related, similar or successor pronouncement, guideline, publication or rule, or which is otherwise excluded in accordance with Section 1.03.
“Indemnified Taxes” means Taxes other than Excluded Taxes.
“Ineligible Institution” means (a) a natural person, (b) any Affected Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute an Affected Lender or a Subsidiary thereof, (c) the Borrower, any of its Subsidiaries or any of its Affiliates, or (d) a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof.
“Initial Issuing Banks” has the meaning given to such term in the introductory paragraph hereof.
“Initial Lenders” has the meaning given to such term in the introductory paragraph hereof.
“Interest Period” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on (i) the date such Eurodollar Rate Advance is disbursed, (ii) the
14

date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance or (iii) the effective date of the most recent continuation of such Eurodollar Rate Advance, as the case may be, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, as the Borrower may, upon notice received by the Agent not later than 12:00 noon on the third Business Day prior to the first day of such Interest Period, select; provided, however, that:
(a)    the Borrower may not select any Interest Period that ends after the Termination Date;
(b)    Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration;
(c)    whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and
(d)    whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“Interpolated Rate” means, in relation to the LIBO Rate, the rate which results from interpolating on a linear basis between:
(a)    the applicable LIBO Rate for the longest period (for which that LIBO Rate is available) which is less than the Interest Period of that Advance; and
(b)    the applicable LIBO Rate for the shortest period (for which that LIBO Rate is available) which exceeds the Interest Period of that Advance,
each as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period of that Advance.
“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).
“Issuing Bank” means the Initial Issuing Banks or any other Lender approved by the Borrower that may agree to issue Letters of Credit pursuant to an Assignment and Assumption or other agreement in form satisfactory to the Borrower and the Agent, so long as such Lender expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be
15

performed by it as an Issuing Bank and notifies the Agent of its Applicable Lending Office (which information shall be recorded by the Agent in the Register), for so long as such Initial Issuing Bank or Lender, as the case may be, shall have a Letter of Credit Commitment.
“KPI Metric Target” means each of the Carbon Intensity Target (Maximum), the Carbon Intensity Target (Minimum), the OSHA Incident Target (Maximum) and the OSHA Incident Target (Minimum).
“L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Ratable Share.
“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made nor refinanced as a Base Rate Advance.
“L/C Cash Deposit Account” means an interest bearing cash deposit account to be established and maintained by the Agent, over which the Agent shall have sole dominion and control, upon terms as may be satisfactory to the Agent.
“L/C Obligations” means, as at any date of determination, the aggregate Available Amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“L/C Related Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by any Issuing Bank and the Borrower or in favor of any Issuing Bank and relating to such Letter of Credit.
“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, licenses, authorizations and permits of, and agreements with, any Governmental Authority.
“Lender Notice Date” has the meaning specified in Section 2.21(a).
“Lenders” means the Initial Lenders, each Issuing Bank, the Swingline Lender, if any, each Assuming Lender that shall become a party hereto pursuant to Section 2.18 and each Person that shall become a party hereto pursuant to Section 8.07. For the avoidance of doubt, the term “Lenders” excludes the Departing Lenders.
“Letter of Credit” has the meaning specified in Section 2.01(b).
“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by any Issuing Bank.
“Letter of Credit Commitment” means, with respect to each Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower from time to time in an aggregate amount equal to (a) for each of the Initial Issuing Banks, $20,000,000 and (b) for any other Issuing Bank,
16

as separately agreed to by such Issuing Bank and the Borrower. The Letter of Credit Commitment is part of, and not in addition to, the Revolving Credit Commitments.
“Letter of Credit Expiration Date” means the day that is five Business Days prior to the Termination Date.
“LIBO Rate” has the meaning specified in the definition of “Eurodollar Rate.”
“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge or other security interest or preferential arrangement that has the practical effect of creating a security interest, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property, and any capital lease having substantially the same economic effect as any of the foregoing.
“Loan Documents” mean this Agreement, each Note, each L/C Related Document and the Fee Letters.
“Material Adverse Effect” means a material adverse effect on (a) the financial condition, operations, business or property of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender under this Agreement or any Note or (c) the ability of the Borrower to perform its obligations under this Agreement or any Note.
“Material Subsidiary” means APS, at any time, and each other Subsidiary of the Borrower which as of such time meets the definition of a “significant subsidiary” included as of the date hereof in Regulation S-X of the Securities and Exchange Commission or whose assets at such time exceed 10% of the assets of the Borrower and the Subsidiaries (on a consolidated basis).
“Money Market Rate” means (a) the Federal Funds Rate plus (b) the Applicable Rate for Eurodollar Rate Advances.
“Money Market Rate Advance” means a Swingline Advance that bears interest at a rate based on the Money Market Rate.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
“Non-Extending Lender” has the meaning specified in Section 2.21(b).
“Note” means a promissory note of the Borrower payable to the order of any Lender, delivered pursuant to a request made under Section 2.16 in substantially the form of Exhibit A hereto.
“Notice of Borrowing” has the meaning specified in Section 2.02(a).
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under any Loan Document or otherwise with respect to any Revolving Advance,
17

Swingline Advance or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue under any Loan Document after the commencement by or against the Borrower of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
“OFAC” means Office of Foreign Assets Control of the United States Department of the Treasury.
“OSHA Incident Amount” shall mean, for any Reference Year, the total number of injuries or illnesses, excluding COVID-19, that meet the general recording criteria, and are therefore “recordable” for such Reference Year in accordance with the recordkeeping and reporting rules of the United States Department of Labor – Occupational Safety and Health Administration Severe Injury Reports (or any replacement(s) thereof) pursuant to 29 C.F.R. §1904, as reported on the applicable Pricing Certificate pursuant to Section 1.06(f) and reflected in the Borrower’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage); it being understood and agreed that on the date hereof the Borrower applies the US-OSHA Recordkeeping rules (www.osha.gov/recordkeeping (as in effect on the date of this Agreement) to determine recordable injuries for the Borrower and its Subsidiaries in the aggregate, and reported numbers include the performance of the Borrower’s and its Subsidiaries’ employees and supervised contractors (e.g., agency temp workers and other workers under the direct supervision of the Borrower or any of its Subsidiaries); provided that in the event that (i) the methodologies or other basis upon which such reporting shall change from the methodologies and basis for the determination of the OSHA Incident Target (Maximum) and OSHA Incident Target (Minimum) or (ii) OSHA shall cease to require the recording of the total number of injuries or illnesses, excluding COVID-19, that are “recordable” by the Borrower, the OSHA Incident Amount shall be deemed to be equal to an amount that will result in no adjustment to the Applicable Rate for the applicable Reference Year; provided, further, that in the event that the combined number of employees and supervised contractors (e.g., agency temp workers and other workers under the direct supervision of the Borrower or any of its Subsidiaries) of the Borrower and its subsidiaries for any Reference Year increases or decreases by ten percent (10%) or more over the combined number of employees and supervised contractors of the Borrower and its subsidiaries for the immediately preceding Reference Year, the OSHA Incident Amount shall be deemed to be equal to an amount that will result in no adjustment to the Applicable Rate for the applicable Reference Year and each Reference Year thereafter unless otherwise agreed in writing by the Borrower, the Agent and the Required Lenders.
“OSHA Incident Amount (Three-Year Average)” shall mean, for any Reference Year, an amount equal to (a) the sum of (i) the OSHA Incident Amount for the immediately preceding two (2) fiscal years prior to such Reference Year plus (ii) the OSHA Incident Amount for such Reference Year divided by (b) three (3). For purposes of calculating the OSHA Incident Amount (Three-Year Average) for the Reference Years ending on December 31, 2021 and December 31, 2022, the OSHA Incident Amount for the fiscal years ending December 31, 2019 and December 31, 2020 shall be as set forth in the Sustainability Table.
“OSHA Incident Applicable Rate Adjustment Amount” means, with respect to any period between Sustainability Pricing Adjustment Dates:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances:
18

(i)negative 0.025%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the OSHA Incident Target (Minimum) for such Reference Year;
(ii)0.00%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the OSHA Incident Target (Minimum) for such Reference Year but less than the OSHA Incident Target (Maximum) for such Reference Year; and
(iii)positive 0.025%, if (A) the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the OSHA Incident Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report an OSHA Incident Amount (Three-Year Average) on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
(b)with respect to the Commitment Fee:
(i)negative 0.005%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the OSHA Incident Target (Minimum) for such Reference Year;
(ii)0.000%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the OSHA Incident Target (Minimum) for such Reference Year but less than the OSHA Incident Target (Maximum) for such Reference Year; and
(iii)positive 0.005%, if (A) the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the OSHA Incident Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report an OSHA Incident Amount (Three-Year Average) on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
“OSHA Incident Target (Maximum)” means, with respect to any Reference Year, the OSHA Incident Target (Maximum) for such Reference Year as set forth in the Sustainability Table.
“OSHA Incident Target (Minimum)” means, with respect to any Reference Year, the OSHA Incident Target (Minimum) for such Reference Year as set forth in the Sustainability Table.
“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
“Participant” has the meaning specified in Section 8.07(d).
“Participant Register” has the meaning specified in Section 8.07(d).
19

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended.
“Payment” has the meaning specified in Section 7.11(a).
“Payment Notice” has the meaning specified in Section 7.11(b).
“PBGC” means the Pension Benefit Guaranty Corporation.
“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.
“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Internal Revenue Code or Title IV of ERISA, any ERISA Affiliate.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Pricing Certificate” means a certificate substantially in the form of Exhibit D executed by an officer of the Borrower setting forth in reasonable detail the calculation of Carbon Intensity (including the Energy Efficiency and Distributed Generation Amounts), the OSHA Incident Amount and the Sustainability Margin Adjustment, in each case, for the Reference Year covered thereby, and confirming the website for the concurrent public reporting of such information on the Borrower’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage) for such Reference Year.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Agent) or any similar release by the Federal Reserve Board (as determined by the Agent).
“Prohibited Person” means any Person (a) listed in the Annex to the Executive Order or identified pursuant to Section 1 of the Executive Order; (b) that is owned or controlled by, or acting for or on behalf of, any Person listed in the Annex to the Executive Order or identified pursuant to the provisions of Section 1 of the Executive Order; (c) with whom a Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-laundering law, including the Executive Order; (d) who commits, threatens, conspires to commit, or support “terrorism” as defined in the Executive Order; (e) who is named as a “Specially designated national or blocked person” on the most current list published by the OFAC at its official website, at http://www.treas.gov/offices/enforcement/ofac/sdn/
20

t11sdn.pdf or any replacement website or other replacement official publication of such list; or (f) who is owned or controlled by a Person listed above in clause (c) or (e).
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public Debt Rating” means, as of any date, the rating that has been most recently announced by either S&P or Moody’s, as the case may be, applicable to any outstanding class of non-credit enhanced long-term senior unsecured debt issued by, or, if no such senior unsecured debt is outstanding at the time of determination, such rating for bank credit facilities for, the Borrower or, if any such rating agency shall have issued more than one such rating, the lowest such rating issued by such rating agency. For purposes of the foregoing, (a) if only one of S&P and Moody’s shall have in effect a Public Debt Rating, the Applicable Rate shall be determined by reference to the available rating; (b) except as set forth in the proviso at the end of this definition, if neither S&P nor Moody’s shall have in effect a Public Debt Rating, the Applicable Rate will be set in accordance with Level 6 under the definition of “Applicable Rate”; (c) if the ratings established by S&P and Moody’s shall fall within different levels, the Applicable Rate shall be based upon the higher rating unless such ratings differ by two or more levels, in which case the applicable level will be deemed to be one level below the higher of such levels; and (d) if any rating established by S&P or Moody’s shall be changed (other than as a result of a change in the basis on which ratings are established), such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; provided that if the Public Debt Rating system of S&P or Moody’s shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend the definition of “Applicable Rate” to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate will be set in accordance with the level most recently in effect under the definition of “Applicable Rate” prior to such change or cessation.
“PVNGS” means the Palo Verde Nuclear Generating Station.
“Ratable Share” of any amount means, with respect to any Lender at any time but subject to the provisions of Section 2.19, the product of such amount times a fraction the numerator of which is the amount of such Lender’s Revolving Credit Commitment at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or Section 6.01, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the aggregate amount of all Revolving Credit Commitments at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or Section 6.01, the aggregate amount of all Revolving Credit Commitments as in effect immediately prior to such termination).
“Reference Year” means, with respect to any Pricing Certificate, the fiscal year ending immediately prior to the date of such Pricing Certificate.
“Register” has the meaning specified in Section 8.07(c).
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of
21

Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30-day notice period has been waived under the final regulations issued under Section 4043, as in effect as of the date of this Agreement (the “Section 4043 Regulations”). Any changes made to the Section 4043 Regulations that become effective after the Effective Date shall have no impact on the definition of Reportable Event as used herein unless otherwise amended by the Borrower and the Required Lenders.
“Required Lenders” means, at any time, but subject to Section 2.19, Lenders holding in the aggregate more than 50% of (a) the Revolving Credit Commitments or (b) if the Revolving Credit Commitments have been terminated, the Total Outstandings.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Revolving Advance” means an advance by a Lender to the Borrower as part of a Borrowing, including a Base Rate Advance made pursuant to Section 2.03(c), but excluding any L/C Advance made as part of an L/C Borrowing and any Swingline Advance, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a Type of Revolving Advance).
“Revolving Credit Commitment” means, as to any Lender, its obligation to (a) make Revolving Advances to the Borrower pursuant to Section 2.01 and Section 2.03(c), (b) purchase participations in L/C Obligations and (c) make Revolving Advances pursuant to Section 2.03A(c) for the purpose of repaying Swingline Advances, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 1.01(a) under the column “Revolving Credit Commitment” or if such Lender has become a Lender hereunder pursuant to an Assumption Agreement or if such Lender has entered into any Assignment and Assumption, the amount set forth for such Lender in the Register, in each case as such amount may be reduced pursuant to Section 2.05 or increased pursuant to Section 2.18.
“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc.
“Sale Leaseback Obligation Bonds” means any bonds issued by or on behalf of the Borrower in connection with a sale/leaseback transaction and any refinancing or refunding of such obligations.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by OFAC and any similar economic or financial sanctions or trade embargoes of the type described in Sections 4.01(n) through (q) and imposed, administered or enforced from time to time by the U.S. government, including the U.S. Department of State, or any other applicable Governmental Authority.
“SEC Reports” means the Borrower’s (i) Form 10-K Report for the year ended December 31, 2020, (ii) Form 10-Q Report for the quarter ended March 31, 2021 and (iii) Form 8-K Reports filed on March 3, 2021, April 1, 2021, May 7, 2021, and May 21, 2021.
“SOFR” means a rate per annum equal to the secured overnight financing rate for such Business Day published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://
22

www.newyorkfed.org (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time).
“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding Voting Stock, (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries; provided that in no event will Subsidiaries include the VIE Lessor Trusts.
“Sustainability Pricing Adjustment Date” has the meaning specified in Section 1.06(a).
“Sustainability Margin Adjustment” means with respect to any Pricing Certificate for any period between Sustainability Pricing Adjustment Dates, an amount (whether negative, zero or positive), expressed as a percentage, equal to:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances, the sum of (i) the Carbon Intensity Applicable Rate Adjustment Amount and (ii) the OSHA Incident Applicable Rate Adjustment Amount, in each case for Eurodollar Rate Advances and Base Rate Advances; and
(b)with respect to the Commitment Fee, the sum of (i) the Carbon Intensity Applicable Rate Adjustment Amount and (ii) the OSHA Incident Applicable Rate Adjustment Amount, in each case for the Commitment Fee.
“Sustainability Table” means the Sustainability Table set forth on Schedule 1.01(b).
“Swingline Advance” means an advance made by the Swingline Lender, if any, to the Borrower pursuant to Section 2.03A.
“Swingline Eurodollar Rate Advance” means a Swingline Advance that bears interest at a rate equivalent to (a) clause (ii) under the definition of Eurodollar Rate, plus (b) the Applicable Rate for Eurodollar Rate Advances.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Advances outstanding at such time. The Swingline Exposure of any Lender shall be its Ratable Share of the total Swingline Exposure at such time.
“Swingline Lender” means, upon notice to the Agent by such Lender and the Borrower, any Lender approved by the Borrower and the Agent from time to time that may agree to fund Swingline Advances.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Termination Date” means the earlier of (a) May 28, 2026, subject to extension (in the case of, and solely with respect to, each Lender consenting thereto) as provided in Section 2.21 in which case one
23

or more different Termination Dates may exist which shall relate to individual Lender Commitments and (b) the date of termination in whole of the Commitments pursuant to Section 2.05 or Section 6.01.
“Term SOFR” means, for the applicable corresponding tenor, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Total Outstandings” means the sum of (a) the aggregate principal amount of all Revolving Advances plus (b) all L/C Obligations outstanding plus (c) the aggregate Swingline Exposure.
“Type” means a Base Rate Advance or a Eurodollar Rate Advance.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).
“Unissued Letter of Credit Commitment” means, with respect to any Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower in an amount equal to the excess of (a) the amount of its Letter of Credit Commitment over (b) the aggregate Available Amount of all Letters of Credit issued by such Issuing Bank.
“Unused Commitment” means, with respect to each Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Advances made by such Lender (in its capacity as a Lender) and outstanding at such time and (ii) such Lender’s Ratable Share of the aggregate L/C Obligations and, other than for the purposes of calculation of the Commitment Fees, such Lender’s Ratable Share of the aggregate Swingline Exposure outstanding at such time.
“VIE Lessor Trusts” means the three (3) separate variable-interest entity lessor trusts that purchased from, and leased back to, APS certain interests in the PVNGS Unit 2 and related common facilities, as described in Note 6 of Combined Notes to Condensed Consolidated Financial Statements in Borrower’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021.
“Voting Stock” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which
24

that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
Section 1.02    Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s permitted successors and permitted assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
(b)In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”
(c)Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
Section 1.03    Accounting Terms. Unless otherwise specified herein, and subject to the provision below, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the most recent audited Consolidated financial statements of the Borrower delivered to the Agent (“GAAP”). If at any time any change in GAAP or in the interpretation thereof would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or in the interpretation thereof (subject to the approval of the Required Lenders); provided that, unless and until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein. Notwithstanding the foregoing, (a) for purposes of all financial or covenant calculations made under this Agreement and for purposes of defining and calculating
25

Capital Lease Obligations, Indebtedness and Consolidated Indebtedness hereunder for such purposes, all leases or other agreements of any Person deemed to be a lease or other obligation under GAAP (as in effect from time to time) (whether such lease or other agreement is existing as of the date hereof or hereafter entered into) that would not be characterized as (i) a Capital Lease Obligation, (ii) Indebtedness or (iii) Consolidated Indebtedness, in each case, under this Agreement based on GAAP as in effect as of December 31, 2015, will not be deemed to be (i) a Capital Lease Obligation, (ii) Indebtedness or (iii) Consolidated Indebtedness, respectively, as a result of any change in GAAP, or the interpretation or application thereof required or approved by such Person’s independent certified public accountants, occurring or coming into or taking effect after December 31, 2015, including ASC Topic 840 or 842 or any related, similar or successor pronouncement, guidance, publication or rule and (b) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Person at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.
Section 1.04    Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
Section 1.05    Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
Section 1.06    Sustainability Adjustments.
(a)Following the date on which Borrower provides a Pricing Certificate in respect of the most recently ended Reference Year, the Applicable Rate shall be adjusted, as applicable, pursuant to the Sustainability Margin Adjustment as set forth in such Pricing Certificate. For purposes of the foregoing, (i) the Sustainability Margin Adjustment shall be determined as of the fifth Business Day following receipt by the Agent of a Pricing Certificate delivered pursuant to Section 1.06(f) based upon the Carbon Intensity and OSHA Incident Amount (Three-Year Average) for the applicable Reference Year set forth in such Pricing Certificate and the calculations of the Sustainability Margin Adjustment, therein (such day, the “Sustainability Pricing Adjustment Date”) and (ii) each change in the Applicable Rate resulting from a Pricing Certificate (or the non-delivery or delivery of an incomplete Pricing Certificate) shall be effective during the period commencing on and including the applicable Sustainability Pricing Adjustment Date and ending on the date immediately preceding the next such Sustainability Pricing Adjustment Date (or, in the case of non-delivery of a Pricing Certificate, the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 1.06(f)).
(b)For the avoidance of doubt, only one Pricing Certificate may be delivered in respect of any Reference Year. It is further understood and agreed that the Applicable Rate (i) with respect to Eurodollar Rate Advances and Base Rate Advances will never be reduced or increased by more than 0.05% and (ii) with respect to the Commitment Fee will never be reduced or increased by more than 0.01%, in each case, pursuant to the Sustainability Margin Adjustment during any calendar year. For the avoidance of doubt, any adjustment to the Applicable Rate by reference to the KPI Metric Targets in any
26

year shall not be cumulative year-over-year. Each applicable adjustment shall only apply until the date on which the next adjustment is due to take place.
(c)It is hereby understood and agreed that if no such Pricing Certificate is delivered, or any Pricing Certificate shall be incomplete and fail to include the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year, within the period set forth in Section 1.06(f), the Sustainability Margin Adjustment will be made to the Applicable Rate commencing on the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 1.06(f).
(d)If (i)(A) the Borrower or any Lender becomes aware of any material inaccuracy in the Sustainability Margin Adjustment, the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) as reported in a Pricing Certificate (any such material inaccuracy, a “Pricing Certificate Inaccuracy”) and, in the case of any Lender, such Lender delivers, not later than ten (10) Business Days after obtaining knowledge thereof, a written notice to the Agent describing such Pricing Certificate Inaccuracy in reasonable detail (which description shall be shared with each Lender and the Borrower), or (B) the Borrower and the Lenders agree that there was a Pricing Certificate Inaccuracy at the time of delivery of a Pricing Certificate, and (ii) a proper calculation of the Sustainability Margin Adjustment, the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) would have resulted in no adjustment or an increase to the Applicable Rate for any period, the Borrower shall be obligated to pay to the Agent for the account of the applicable Lenders or the applicable Issuing Banks, as the case may be, promptly on demand by the Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under any Debtor Relief Laws, automatically and without further action by the Agent, any Lender or any Issuing Bank), but in any event within ten (10) Business Days after the Borrower has received written notice of, or has agreed in writing that there was, a Pricing Certificate Inaccuracy, an amount equal to the excess of (1) the amount of interest and fees that should have been paid for such period over (2) the amount of interest and fees actually paid for such period.
It is understood and agreed that any Pricing Certificate Inaccuracy shall not constitute a Default or Event of Default or otherwise result in the failure of any condition precedent to any advance or the issuance of any Letter of Credit; provided, that, the Borrower complies with the terms of this Section 1.06(d) with respect to such Pricing Certificate Inaccuracy. Notwithstanding anything to the contrary herein, unless such amounts shall be due upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code (or any comparable event under non-U.S. Debtor Relief Laws), (a) any additional amounts required to be paid pursuant to the immediate preceding paragraph shall not be due and payable until a written demand is made for such payment by the Agent in accordance with such paragraph, (b) any nonpayment of such additional amounts prior to or concurrently with such demand for payment by the Agent shall not constitute a Default (whether retroactively or otherwise) and (c) none of such additional amounts shall be deemed overdue prior to such a demand or shall accrue interest at the default rate pursuant to Section 2.07(b) prior to such a demand.
(e)Each party hereto hereby agrees that neither the Agent nor any Co-Sustainability Structuring Agent shall have any responsibility for (or liability in respect of) reviewing, auditing or otherwise evaluating any calculation by the Borrower of any Sustainability Margin Adjustment (or any of the data or computations that are part of or related to any such calculation) set forth in any Pricing Certificate (and the Agent may rely conclusively on any such certificate, without further inquiry).
(f)As soon as available and in any event within 120 days following the end of each calendar year (commencing with the calendar year ending December 31, 2021), the Borrower may deliver a Pricing Certificate to the Agent (and the Agent shall promptly provide a copy to each Lender) for the
27

most recently-ended Reference Year; provided, that, for any Reference Year the Borrower may elect not to deliver a Pricing Certificate, and such election shall not constitute a Default or Event of Default (but such failure to so deliver a Pricing Certificate by the end of such 120-day period shall result in the Sustainability Margin Adjustment being applied as set forth in Section 1.06(c)). In the event the Borrower’s fiscal year is changed to a non-calendar year fiscal year, the Borrower will be permitted to adjust the timing of delivery of the Pricing Certificate at its election in a manner intended to maintain consistency with the foregoing.
ARTICLE II

AMOUNTS AND TERMS OF THE ADVANCES AND
LETTERS OF CREDIT
Section 2.01The Revolving Advances and Letters of Credit.
(a)The Revolving Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Advances in Dollars to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an amount not to exceed such Lender’s Unused Commitment. Each Borrowing (other than a Swingline Advance) shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Advances of the same Type made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. Within the limits of each Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.10 and reborrow under this Section 2.01(a). Any Swingline Advance shall be made and repaid in accordance with the procedures set forth in Section 2.03A.
(b)Letters of Credit. Each Issuing Bank agrees, on the terms and conditions hereinafter set forth, in reliance upon the agreements of the other Lenders set forth in this Agreement, to issue standby letters of credit (each a “Letter of Credit”) for the account of the Borrower from time to time on any Business Day during the period from the Effective Date until 30 days before the Termination Date in an aggregate Available Amount for all Letters of Credit issued by each Issuing Bank not to exceed at any time such Issuing Bank’s Letter of Credit Commitment, provided that after giving effect to the issuance of any Letter of Credit, (i) the Total Outstandings shall not exceed the aggregate Revolving Credit Commitments and (ii) each Lender’s Ratable Share of the Total Outstandings shall not exceed such Lender’s Revolving Credit Commitment. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the Letter of Credit Expiration Date. Within the limits referred to above, the Borrower may from time to time request the issuance of Letters of Credit under this Section 2.01(b). The terms “issue”, “issued”, “issuance” and all similar terms, when applied to a Letter of Credit, shall include any renewal, extension or amendment thereof.
Section 2.02Making the Revolving Advances.
(a)Except as otherwise provided in Section 2.03(c), each Borrowing (other than a Swingline Advance) shall be made on notice, given not later than (x) 12:00 noon on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances or (y) 1:00 p.m. on the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by facsimile. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be in writing or by facsimile in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing,
28

(ii) Type of Revolving Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Revolving Advance. Each Lender shall, in the case of a Borrowing consisting of Base Rate Advances, before 2:00 p.m. on the date of such Borrowing, and in the case of a Borrowing consisting of Eurodollar Rate Advances, before 11:00 a.m. on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds, such Lender’s Ratable Share of such Borrowing. After the Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent’s address referred to in Section 8.02 or as requested by the Borrower in the applicable Notice of Borrowing.
(b)Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or Section 2.12 and (ii) at no time shall there be more than fifteen different Interest Periods outstanding for Eurodollar Rate Advances.
(c)Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense reasonably incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Revolving Advance to be made by such Lender as part of such Borrowing when such Revolving Advance, as a result of such failure, is not made on such date.
(d)Unless the Agent shall have received notice from a Lender prior to the time of the applicable Borrowing that such Lender will not make available to the Agent such Lender’s Ratable Share of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Share available to the Agent, such Lender and the Borrower severally agree to repay to the Agent within one Business Day after demand for such Lender and within three Business Days after demand for the Borrower such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Revolving Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If the Borrower and such Lender shall pay such interest to the Agent for the same or an overlapping period, the Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Revolving Advance as part of such Borrowing for purposes of this Agreement.
(e)The failure of any Lender to make the Revolving Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Advance to be made by such other Lender on the date of any Borrowing.
29

Section 2.03Letters of Credit.
(a)General.
(i)No Issuing Bank shall issue any Letter of Credit, if the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.
(ii)No Issuing Bank shall be under any obligation to issue any Letter of Credit if:
(A)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any Law applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital and liquidity requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which, in each such case, such Issuing Bank in good faith deems material to it;
(B)except as otherwise agreed by the Borrower and such Issuing Bank, such Letter of Credit is in an initial stated amount less than $100,000;
(C)such Letter of Credit is to be denominated in a currency other than Dollars;
(D)such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder;
(E)subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension; or
(F)any Lender is at such time an Affected Lender hereunder, unless the applicable Issuing Bank is satisfied that the related exposure will be 100% covered by the Commitments of the non-Affected Lenders or, if not so covered, until such Issuing Bank has entered into arrangements satisfactory to it in its sole discretion with the Borrower or such Affected Lender to eliminate such Issuing Bank’s risk with respect to such Affected Lender, and participating interests in any such newly issued
30

Letter of Credit shall be allocated among non-Affected Lenders in a manner consistent with Section 2.19(c)(i) (and Affected Lenders shall not participate therein).
(iii)No Issuing Bank shall amend any Letter of Credit if such Issuing Bank would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.
(iv)No Issuing Bank shall be under any obligation to amend any Letter of Credit if (A) such Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
(b)Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.
(i)Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the applicable Issuing Bank (with a copy to the Agent) in the form of a Letter of Credit Application appropriately completed and signed by an Authorized Officer of the Borrower, together with agreed-upon draft language for such Letter of Credit reasonably acceptable to the applicable Issuing Bank. Such Letter of Credit Application must be received by such Issuing Bank and the Agent not later than 11:00 a.m. at least three Business Days (or such later date and time as the Agent and such Issuing Bank may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the applicable Issuing Bank: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as such Issuing Bank may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the applicable Issuing Bank (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as such Issuing Bank may require. Additionally, the Borrower shall furnish to the applicable Issuing Bank and the Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any L/C Related Documents, as the applicable Issuing Bank or the Agent may require. In the event and to the extent that the provisions of any Letter of Credit Application or other L/C Related Document shall conflict with this Agreement, the provisions of this Agreement shall govern. Without limitation of the immediately preceding sentence, to the extent that any such Letter of Credit Application or other L/C Related Document shall impose any additional conditions on the maintenance of a Letter of Credit, any additional default provisions, collateral requirements or other obligations of the Borrower to any Issuing Bank, other than as stated in this Agreement, such additional conditions, provisions, requirements or other obligations shall not have effect so long as this Agreement shall be in effect, except to the extent as expressly agreed to by the Borrower and such Issuing Bank.
31

(ii)Promptly after receipt of any Letter of Credit Application, the applicable Issuing Bank will confirm with the Agent (in writing) that the Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such Issuing Bank will provide the Agent with a copy thereof. Unless the applicable Issuing Bank has received written notice from the Required Lenders, the Agent or the Borrower, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article III shall not then be satisfied, then, subject to the terms and conditions hereof and any applicable Letter of Credit Application, such Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with such Issuing Bank’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from such Issuing Bank a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Ratable Share times the amount of such Letter of Credit.
(iii)If the Borrower so requests in any applicable Letter of Credit Application, the applicable Issuing Bank may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit such Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the applicable Issuing Bank, the Borrower shall not be required to make a specific request to the applicable Issuing Bank for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable Issuing Bank to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the applicable Issuing Bank shall not permit any such extension (or may issue a Notice of Non-Extension) if (A) such Issuing Bank has determined that it would not be permitted at such time to issue such Letter of Credit in its revised form (as extended) by reason of the provisions of clause (i) of Section 2.03(a) (or would have no obligation to issue such Letter of Credit by reason of the provisions of clause (ii) of Section 2.03(a)), or (B) it has received notice (which shall be in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Agent that the Required Lenders have elected not to permit such extension pursuant to Section 6.02 or (2) from the Agent, the Required Lenders or the Borrower that one or more of the applicable conditions specified in Section 3.02 is not then satisfied, and in each such case directing such Issuing Bank not to permit such extension.
(iv)Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable Issuing Bank will also deliver to the Borrower and the Agent a true and complete copy of such Letter of Credit or amendment.
(c)Drawings and Reimbursements; Funding of Participations.
(i)Subject to the provisions below, not later than 2:30 p.m. on the date (the “Honor Date”) that any Issuing Bank makes any payment on a drawing on any Letter of Credit, if the Borrower shall have received notice of such payment prior to 11:30 a.m. on such date, or, if such
32

notice has not been received by the Borrower prior to such time on such date, then not later than 2:30 p.m. on the next Business Day, the Borrower shall reimburse such Issuing Bank through the Agent in an amount equal to the amount of such drawing together with interest thereon. If the Borrower fails to so reimburse such Issuing Bank by such time, unless the Borrower shall have advised the Agent that it does not meet the conditions specified in clause (B) below, the Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Ratable Share thereof. In such event, the Borrower shall be deemed to have requested a Base Rate Advance to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.01(a) or the delivery of a Notice of Borrowing but subject to (A) the amount of the aggregate Unused Commitments and (B) no Event of Default having occurred and be continuing, or resulting therefrom and, to the extent so financed, the Borrower's obligation to satisfy the reimbursement obligation created by such payment by the Issuing Bank on the Honor Date shall be discharged and replaced by the resulting Base Rate Advance. Any notice given by any Issuing Bank or the Agent pursuant to this Section 2.03(c)(i) shall be given in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii)Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Agent for the account of the applicable Issuing Bank at the Agent’s Office in an amount equal to its Ratable Share of the Unreimbursed Amount not later than 4:00 p.m. on the Business Day specified in such notice by the Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Advance to the Borrower in such amount. The Agent shall remit the funds so received to the applicable Issuing Bank.
(iii)With respect to any Unreimbursed Amount that is not fully refinanced by a Base Rate Advance because any of the conditions set forth in clauses (A) or (B) of Section 2.03(c)(i) cannot be satisfied or for any other reason, then not later than 2:30 p.m. on the next Business Day after the day notice of the drawing is given to the Borrower, in the case of a failure to meet any such condition, or in any other case, after notice of the event resulting in the outstanding Unreimbursed Amount, the Borrower shall reimburse such Issuing Bank through the Agent in an amount equal to the amount of such outstanding Unreimbursed Amount with interest thereon. If the Borrower fails to so reimburse such Issuing Bank by such time, the Borrower shall be deemed to have incurred from the applicable Issuing Bank an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time plus 2% per annum. In such event, each Lender’s payment to the Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.
(iv)Until each Lender funds its Base Rate Advance or L/C Advance pursuant to this Section 2.03(c) to reimburse the applicable Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Ratable Share of such amount shall be solely for the account of the applicable Issuing Bank.
33

(v)Each Lender’s obligation to make Base Rate Advances or L/C Advances to reimburse the applicable Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against such Issuing Bank, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Base Rate Advances pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 2.03(c)(i). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the applicable Issuing Bank for the amount of any payment made by such Issuing Bank under any Letter of Credit, together with interest as provided herein.
(vi)If any Lender fails to make available to the Agent for the account of the applicable Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such Issuing Bank shall be entitled to recover from such Lender (acting through the Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Issuing Bank at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by such Issuing Bank in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by such Issuing Bank in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Base Rate Advance included in the relevant Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the applicable Issuing Bank submitted to any Lender (through the Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.
(d)Repayment of Participations.
(i)At any time after the applicable Issuing Bank has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Agent receives for the account of such Issuing Bank any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral (as defined in Section 2.03(h)) applied thereto by the Agent), the Agent will distribute to such Lender its Ratable Share thereof in the same funds as those received by the Agent.
(ii)If any payment received by the Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 8.12 (including pursuant to any settlement entered into by such Issuing Bank in its discretion), each Lender shall pay to the Agent for the account of such Issuing Bank its Ratable Share thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e)Failure to Make Revolving Advances. The failure of any Lender to make the Revolving Advance to be made by it on the date specified in Section 2.03(c) or any L/C Advance shall not relieve
34

any other Lender of its obligation hereunder to make its Revolving Advance or L/C Advance, as the case may be, to be made by such other Lender on such date.
(f)Obligations Absolute. The obligation of the Borrower to reimburse the applicable Issuing Bank for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
(i)any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
(ii)the existence of any claim, counterclaim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
(iii)any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
(iv)any payment by the applicable Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the applicable Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
(v)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.
provided, however, that nothing in this Section 2.03(f) shall limit the rights of the Borrower under Section 2.03(g).
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity that is known to the Borrower in connection with any draw under such Letter of Credit of which the Borrower has reasonable notice, the Borrower will immediately notify the applicable Issuing Bank. To the extent allowed by applicable Law, Borrower shall be conclusively deemed to have waived any such claim against the applicable Issuing Bank and its correspondents unless such notice is given as aforesaid. Nothing herein shall require the Borrower to make any determination as to whether the drawing is in accordance with the requirements of the Letter of Credit, provided that the Borrower may waive any discrepancies in the drawing on any such Letter of Credit.
(g)Role of Issuing Bank. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the applicable Issuing Bank shall not have any responsibility to obtain any
35

document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the applicable Issuing Bank, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of such Issuing Bank shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct as determined by a final, non-appealable judgment by a court of competent jurisdiction; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or L/C Related Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at Law or under any other agreement. None of the applicable Issuing Bank, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of such Issuing Bank shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(f); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the applicable Issuing Bank, and such Issuing Bank may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such Issuing Bank’s willful misconduct or gross negligence as determined by a final, non-appealable judgment by a court of competent jurisdiction or such Issuing Bank’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the applicable Issuing Bank may accept documents that appear on its face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and such Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
(h)Cash Collateral. Upon the request of the Agent or the applicable Issuing Bank, if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then outstanding L/C Obligations. Section 6.02 sets forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.10(b)(ii), Section 2.19(c) (ii), (iv) and (v) and Section 6.02, “Cash Collateralize” means to pledge and deposit with or deliver to the Agent, for the benefit of the Issuing Banks and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Agent and each Issuing Bank (which documents are hereby consented to by the Lenders) in an amount equal to 100% of the amount of the L/C Obligations as of such date plus any accrued and unpaid interest and fees thereon. Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Agent, for the benefit of the Issuing Banks and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts with the Agent.
(i)Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Agent on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all such Letters of Credit and (B) to the Agent on the first Business Day of each calendar quarter a written
36

report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank.
(j)Interim Interest. Except as provided in Section 2.03(c)(ii) with respect to Unreimbursed Amounts refinanced as Base Rate Advances and Section 2.03(c)(iii) with respect to L/C Borrowings, unless the Borrower shall reimburse each payment by an Issuing Bank pursuant to a Letter of Credit in full on the Honor Date, the Unreimbursed Amount thereof shall bear interest, for each day from and including the Honor Date to but excluding the date that the Borrower reimburses such Issuing Bank for the Unreimbursed Amount in full, at the rate per annum equal to (i) the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time, to but excluding the next Business Day after the Honor Date and (ii) from and including the next Business Day after the Honor Date, the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time plus 2% per annum.
Section 2.03A    Swingline Advances.
(a)Amount of Swingline Advances. Subject to the terms and conditions set forth herein, the Swingline Lender will make Swingline Advances in Dollars to the Borrower from time to time during the period from the Effective Date until the Termination Date, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of all outstanding Swingline Advances exceeding $25,000,000 (or such lesser amount as agreed between the Borrower and the Swingline Lender) or (ii) the Total Outstandings exceeding the aggregate Revolving Credit Commitment. Each Swingline Advance shall be in an aggregate amount of $500,000 or an integral multiple of $100,000 in excess thereof or such greater amounts as agreed between the Borrower and the Swingline Lender. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Advances. The Swingline Lender shall be under no obligation to make a Swingline Advance if any Lender is at such time an Affected Lender hereunder, unless the Swingline Lender is satisfied that the related exposure will be 100% covered by the Commitments of the non-Affected Lenders or, if not so covered, until the Swingline Lender has entered into arrangements satisfactory to it in its sole discretion with the Borrower or such Affected Lender to eliminate the Swingline Lender’s risk with respect to such Affected Lender, and participating interests in any such newly made Swingline Advance shall be allocated among non-Affected Lenders in a manner consistent with Section 2.19(c)(i) (and Affected Lenders shall not participate therein).
(b)Borrowing Notice and Making of Swingline Advances. To request a Swingline Advance, the Borrower shall notify the Swingline Lender and the Agent of such request in writing, not later than 2:00 p.m. (or such later time as the Swingline Lender may determine in its sole discretion), on the day of such Swingline Advance. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Advance. The Swingline Lender shall promptly notify the Borrower and the Agent (and the Agent shall promptly notify each Lender) and the Swingline Lender shall make each Swingline Advance available to the Borrower by 2:30 p.m. (or such later time as may be agreed by the Swingline Lender and the Borrower) on the requested date of such Swingline Advance in a manner agreed upon by the Borrower and the Swingline Lender. Each Swingline Advance shall bear interest at the Base Rate, or, at the option of the Borrower and subject to prior agreement between the Borrower and the Swingline Lender, shall be a Swingline Eurodollar Rate Advance or a Money Market Rate Advance.
(c)Repayment of Swingline Advances. Each Swingline Advance shall be paid in full by the Borrower on the earlier of (x) on or before the fourteenth (14th) Business Day after the date such
37

Swingline Advance was made by the Swingline Lender or (y) the Termination Date. A Swingline Advance may not be repaid with the proceeds from another Swingline Advance. In addition, the Swingline Lender (i) may at any time in its sole discretion with respect to any outstanding Swingline Advance, or (ii) shall, on the fourteenth (14th) Business Day after the date any Swingline Advance is made and which has not been otherwise repaid, require each Lender (including the Swingline Lender) to make a Revolving Advance in the amount of such Lender’s Ratable Share of such Swingline Advance (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swingline Advance. Not later than 2:00 p.m. on the date of any notice received pursuant to this Section 2.03A(c), each Lender shall make available to the Agent its required Revolving Advance, in immediately available funds in the same manner as provided in Section 2.02(a) with respect to Revolving Advances made by such Lender. Revolving Advances made pursuant to this Section 2.03A(c) shall initially be Base Rate Advances and thereafter may be continued as Base Rate Advances or converted into Eurodollar Rate Advances in the manner provided in Section 2.09 and subject to the other conditions and limitations set forth in this Article II. Each Lender’s obligation to make Revolving Advances pursuant to this Section 2.03A(c) to repay Swingline Advances shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Swingline Lender or any other Person, (b) the occurrence or continuance of a Default or an Event of Default, (c) any adverse change in the condition (financial or otherwise) of the Borrower, or (d) any other circumstance, happening or event whatsoever. In the event that any Lender fails to make payment to the Agent of any amount due under this Section 2.03A(c), the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Agent of any amount due under this Section 2.03A(c), such Lender shall be deemed, at the option of the Agent, to have unconditionally and irrevocably purchased from the Swingline Lender without recourse or warranty, an undivided interest and participation in the applicable Swingline Advance in the amount of such Revolving Advance, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Rate for each day during the period commencing on the date of demand and ending on the date such amount is received.
(d)    Swingline Advances Reports. The Swingline Lender shall furnish to the Agent on each Business Day a written report summarizing outstanding Swingline Advances made by the Swingline Lender and the due date for the repayment of such Swingline Advances; provided that if no Swingline Advances are outstanding, no such report shall be required to be delivered.
(e)    Successor Swingline Lender. Subject to the appointment and acceptance of a successor Swingline Lender as provided in this paragraph, the Borrower may, upon not less than ten (10) Business Days prior notice to the Agent and the Lenders, replace the existing Swingline Lender with the consent of the Agent (which consent shall not unreasonably be withheld). Upon the acceptance of its appointment as Swingline Lender hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the replaced Swingline Lender, and the replaced Swingline Lender shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Swingline Lender shall be as agreed between the Borrower and such successor. After the Swingline Lender’s replacement hereunder, the provisions of this Article and Section 8.04 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Swingline Lender.
38

Section 2.05Fees.
(a)Commitment Fee. The Borrower agrees to pay to the Agent for the account of each Lender a commitment fee (the “Commitment Fee”) on such Lender’s Unused Commitment (provided that, for the avoidance of doubt, and without duplication, such Lender’s Unused Commitment shall be calculated exclusive of such Lender’s Swingline Exposure and, if such Lender is the Swingline Lender, without giving effect to the Swingline Advances, and in no event shall the aggregate of such Commitment Fees exceed an amount calculated based on the product of (a) the aggregate Revolving Credit Commitments minus the aggregate principal amount of all Revolving Advances and aggregate L/C Obligations and (b) the Applicable Rate for Commitment Fees) from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assumption Agreement or in the Assignment and Assumption pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Rate for Commitment Fees in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing June 30, 2021, and on the Termination Date, provided that no Commitment Fee shall accrue with respect to the Unused Commitment of an Affected Lender so long as such Lender shall be an Affected Lender.
(b)Letter of Credit Fees.
(i)The Borrower shall pay to the Agent for the account of each Lender a commission on such Lender’s Ratable Share of the average daily aggregate Available Amount of all Letters of Credit outstanding from time to time at a rate per annum equal to the Applicable Rate for Eurodollar Rate Advances in effect from time to time, during such calendar quarter, payable in arrears quarterly on the last day of each March, June, September and December, commencing with the quarter ended June 30, 2021, and on the Termination Date; provided that the Applicable Rate for Eurodollar Rate Advances shall be 2% above such Applicable Rate in effect upon the occurrence and during the continuation of an Event of Default if the Borrower is required to pay default interest pursuant to Section 2.07(b).
(ii)The Borrower shall pay to each Issuing Bank, for its own account, a fronting fee with respect to each Letter of Credit issued by such Issuing Bank, payable in the amounts and at the times specified in the applicable Fee Letter between the Borrower and such Issuing Bank, and such other commissions, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree promptly following receipt of an invoice therefor.
(c)Agent’s Fees. The Borrower shall pay to the Agent for its own account such fees as are agreed between the Borrower and the Agent pursuant to the Fee Letter between the Borrower and the Agent.
Section 2.05Optional Termination or Reduction of the Commitments.
(a)The Borrower shall have the right, upon at least three Business Days’ notice to the Agent, to terminate in whole or permanently reduce ratably in part the Unused Commitments or the Unissued Letter of Credit Commitments, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b)So long as no Default or Event of Default shall be continuing, the Borrower shall have the right, at any time, upon at least ten Business Days’ notice to an Affected Lender (with a copy to the
39

Agent), to terminate in whole such Lender’s Revolving Credit Commitment and, if applicable, its Letter of Credit Commitment, without affecting the Commitments of any other Lender. Such termination shall be effective, (x) with respect to such Lender’s Unused Commitment, on the date set forth in such notice, provided, however, that such date shall be no earlier than ten Business Days after receipt of such notice and (y) with respect to each Revolving Advance outstanding to such Lender, in the case of Base Rate Advances, on the date set forth in such notice and, in the case of Eurodollar Rate Advances, on the last day of the then current Interest Period relating to such Revolving Advance. Upon termination of a Lender’s Commitments under this Section 2.05(b), the Borrower will pay or cause to be paid all principal of, and interest accrued to the date of such payment on, Revolving Advances (and if such Lender is the Swingline Lender, the Swingline Advances) owing to such Lender and, subject to Section 2.19, pay any accrued Commitment Fees or Letter of Credit fees payable to such Lender pursuant to the provisions of Section 2.04, and all other amounts payable to such Lender hereunder (including, but not limited to, any increased costs or other amounts owing under Section 2.11 and any indemnification for Taxes under Section 2.14); and, if such Lender is an Issuing Bank, shall pay to such Issuing Bank for deposit in an escrow account an amount equal to the Available Amount of all Letters of Credit issued by such Issuing Bank, whereupon all Letters of Credit issued by such Issuing Bank shall be deemed to have been issued outside of this Agreement on a bilateral basis and shall cease for all purposes to constitute a Letter of Credit issued under this Agreement, and upon such payments, except as otherwise provided below, the obligations of such Lender hereunder shall, by the provisions hereof, be released and discharged; provided, however, that (i) such Lender’s rights under Section 2.11, Section 2.14 and Section 8.04, and, in the case of an Issuing Bank, Section 8.04(c), and its obligations under Section 8.04 and 8.08, in each case in accordance with the terms thereof, shall survive such release and discharge as to matters occurring prior to such date and (ii) such escrow agreement shall be in a form reasonably agreed to by the Borrower and such Issuing Bank, but in no event shall either the Borrower or such Issuing Bank require any waivers, covenants, events of default or other provisions that are more restrictive than or inconsistent with the provisions of this Agreement. Subject to Section 2.18, the aggregate amount of the Commitments of the Lenders once reduced pursuant to this Section 2.05(b) may not be reinstated. The termination of the Commitments of an Affected Lender pursuant to this Section 2.05(b) will not be deemed to be a waiver of any right that the Borrower, the Agent, any Issuing Bank, the Swingline Lender or any other Lender may have against the Affected Lender that arose prior to the date of such termination. Upon any such termination, the Ratable Share of each remaining Lender will be revised.
Section 2.06Repayment of Advances. The Borrower shall repay to the Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Advances made by such Lender and then outstanding. The Borrower shall repay Swingline Advances in accordance with Section 2.03A(c).
Section 2.07Interest on Advances.
(a)Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender (including the Swingline Lender) from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(i)Base Rate Advances. During such periods as such Revolving Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Rate for Base Rate Advances in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full.
40

(ii)Eurodollar Rate Advances. During such periods as such Revolving Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Revolving Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Revolving Advance plus (y) the Applicable Rate for Eurodollar Rate Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full.
(iii)Swingline Advances. During such period as such Swingline Advance remains outstanding, the Base Rate or, as agreed to by the Swingline Lender and the Borrower, the Money Market Rate or the Eurodollar Rate, payable on the date such Swingline Advance is required to be repaid.
(b)Default Interest. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a), the Agent may, and upon the request of the Required Lenders shall, require the Borrower to pay interest (“Default Interest”) on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and (ii) to the fullest extent permitted by Law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above, provided, however, that following acceleration of the Advances pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not previously required by the Agent.
(c)Interest Rate Limitation. Nothing contained in this Agreement or in any other Loan Document shall be deemed to establish or require the payment of interest to any Lender at a rate in excess of the maximum rate permitted by applicable Law. If the amount of interest payable for the account of any Lender on any interest payment date would exceed the maximum amount permitted by applicable Law to be charged by such Lender, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. In the event of any such reduction affecting any Lender, if from time to time thereafter the amount of interest payable for the account of such Lender on any interest payment date would be less than the maximum amount permitted by applicable Law to be charged by such Lender, then the amount of interest payable for its account on such subsequent interest payment date shall be automatically increased to such maximum permissible amount, provided that at no time shall the aggregate amount by which interest paid for the account of any Lender has been increased pursuant to this sentence exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to the previous sentence.
Section 2.08Interest Rate Determination.
(a)The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a).
(b)Subject to Section 2.08(c), if the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Advance or a Conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the
41

applicable amount and Interest Period of such Eurodollar Rate Advance, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate (including, without limitation, because the LIBO Rate is not available or published on a current basis) for any requested Interest Period with respect to a proposed Eurodollar Rate Advance; provided that no Benchmark Transition Event shall have occurred at such time, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Advance does not adequately and fairly reflect the cost to such Lenders of funding such Revolving Advance, the Agent will promptly so notify the Borrower and each Lender, whereupon each Eurodollar Rate Advance will automatically on the last day of the then existing Interest Period therefor Convert into a Base Rate Advance. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Advances shall be suspended until the Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, Conversion to or continuation of Eurodollar Rate Advances or, failing that, will be deemed to have Converted such request into a request for a Base Rate Advance in the amount specified therein.
(c)Benchmark Replacement Setting. Notwithstanding anything to the contrary herein or in any other Loan Document (and any Hedge Agreement shall be deemed not to be a “Loan Document” for purposes of this Section):
(i)Replacing LIBO Rate. On March 5, 2021 the Financial Conduct Authority (“FCA”), the regulatory supervisor of the LIBO Rate’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12-month LIBO Rate tenor settings. On the earlier of (i) the date that all Available Tenors of LIBO Rate have either permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (ii) the Early Opt-in Effective Date, if the then-current Benchmark is LIBO Rate, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a quarterly basis.
(ii)Replacing Future Benchmarks. Upon the occurrence of a Benchmark Transition Event, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Advances to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to
42

Base Rate Advances. During the period referenced in the foregoing sentence, the component of Base Rate based upon the Benchmark will not be used in any determination of Base Rate.
(iii)Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement, the Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
(iv)Notices; Standards for Decisions and Determinations. The Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by the Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section.
(v)Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or LIBO Rate), then the Agent may remove any tenor of such Benchmark that is unavailable or non-representative for Benchmark (including Benchmark Replacement) settings and (ii) the Agent may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings.
(d)If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Revolving Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(e)On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Revolving Advances shall automatically Convert into Base Rate Advances.
(f)Upon the occurrence and during the continuance of any Event of Default,
(i)with respect to Eurodollar Rate Advances, each such Revolving Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Revolving Advance is then a Base Rate Advance, will continue as a Base Rate Advance); and
(ii)the obligation of the Lenders to make Eurodollar Rate Advances or to Convert Revolving Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
43

Section 2.09Optional Conversion of Revolving Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 12:00 noon on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Section 2.08 and Section 2.12, Convert all Revolving Advances of one Type comprising the same Borrowing into Revolving Advances of the other Type; provided, however, that (a) any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, (b) any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b), (c) no Conversion of any Revolving Advances shall result in more separate Borrowings than permitted under Section 2.02(b) and (d) no Swingline Advances may be converted. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Revolving Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Revolving Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower.
Section 2.10Prepayments of Advances.
(a)Optional. At any time and from time to time, the Borrower shall have the right to prepay any Advance, in whole or in part, without premium or penalty (except as provided in clause (y) below), upon notice at least two Business Days’ prior to the date of such prepayment, in the case of Eurodollar Rate Advances, and not later than 11:00 a.m. on the date of such prepayment in the case of Base Rate Advances and Swingline Advances, to the Agent (and, in the case of prepayment a Swingline Advance, the Swingline Lender) specifying the proposed date of such prepayment and the aggregate principal amount and Type of the Advance to be prepaid (and, in the case of Eurodollar Rate Advances, the Interest Period of the Borrowing pursuant to which made); provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and shall be accompanied by accrued interest to the date of prepayment on the principal amount prepaid, and (y) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(e).
(b)Mandatory.
(i)The Borrower shall prepay the aggregate principal amount of the Advances, together with accrued interest to the date of prepayment on the principal amount prepaid, without requirement of demand therefor, or shall pay or prepay any other Indebtedness then outstanding at any time, when and to the extent required to comply with applicable Laws of any Governmental Authority or applicable resolutions of the Board of Directors of the Borrower.
(ii)If for any reason the Total Outstandings at any time exceed the aggregate Revolving Credit Commitments then in effect, the Borrower shall, within one Business Day after notice thereof, prepay Advances and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.10(b) unless, after the prepayment in full of the Advances, the Total Outstandings exceed the aggregate Revolving Credit Commitments then in effect.
44

Section 2.11Increased Costs.
(a)Increased Costs Generally. If any Change in Law shall:
(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 2.11(e)) or any Issuing Bank;
(ii)impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Advances made by such Lender or any Letter of Credit or participation therein; or
(iii)subject the Agent or any Lender to any Taxes (other than (A) Indemnified Taxes, (B) Excluded Taxes and (C) Other Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to the Agent or such Lender of making, maintaining or Converting any Advance (or of maintaining its obligation to make any such Revolving Advance), or to increase the cost to the Agent, such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by the Agent, such Lender or such Issuing Bank hereunder (whether of principal, interest or any other amount) then, upon request of the Agent, such Lender or such Issuing Bank, the Borrower will pay to the Agent, such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate the Agent, such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b)Capital Requirements. If any Lender or any Issuing Bank determines that any Change in Law affecting such Lender or such Issuing Bank or any Applicable Lending Office of such Lender or such Lender’s or such Issuing Bank’s holding company, if any, regarding capital and liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy and liquidity), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.
(c)Certificates for Reimbursement. A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive and binding upon all parties absent manifest error. The Borrower shall pay
45

such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within 30 days after receipt thereof.
(d)Delay in Requests. Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than three months prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).
(e)Reserves on Eurodollar Rate Advances. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Advance equal to the actual costs of such reserves allocated to such Revolving Advance by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error), which shall be due and payable on each date on which interest is payable on such Eurodollar Rate Advance, provided the Borrower shall have received at least 30 days’ prior notice (with a copy to the Agent) of such additional interest from such Lender. If a Lender fails to give notice 30 days prior to the relevant interest payment date, such additional interest shall be due and payable 30 days from receipt of such notice.
Section 2.12Illegality. If any Lender shall have determined in good faith that the introduction of or any change in any applicable Law or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance with any guideline or request from any such Governmental Authority (whether or not having the force of law), makes it unlawful for any Lender or its Applicable Lending Office to make, maintain or fund Eurodollar Rate Advances, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, any obligation of such Lender to make or continue Eurodollar Rate Advances or to Convert Base Rate Advances to Eurodollar Rate Advances shall be suspended until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Agent), prepay or, if applicable, Convert all Eurodollar Rate Advances of such Lender to Base Rate Advances, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Advances to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Advances. Upon any such prepayment or Conversion, the Borrower shall also pay accrued interest on the amount so prepaid or Converted.
Section 2.13Payments and Computations.
(a)All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. The Borrower shall make each payment hereunder not later than 1:00 p.m. on the day when due in U.S. dollars to the Agent at the Agent’s Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment
46

of principal, interest, fees or commissions ratably (other than amounts payable pursuant to Section 2.05(b), Section 2.11, Section 2.12, Section 2.14, Section 2.20 or Section 8.04(e)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon any Assuming Lender becoming a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.18, and upon the Agent’s receipt of such Lender’s Assumption Agreement and recording of the information contained therein in the Register, from and after the applicable Increase Date, the Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assumed thereby to the Assuming Lender. Upon its acceptance of an Assignment and Assumption and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Assumption, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Assumption shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b)All computations of interest based on the Base Rate (when the Base Rate is based on the Prime Rate) shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all other computations of interest and fees hereunder (including computations of interest based on the Eurodollar Rate and the Federal Funds Rate and of fees and Letter of Credit commissions) shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Interest on Swingline Advances shall be calculated on the basis of a year of 360 days or such other basis agreed to by the Swingline Lender and the Borrower, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.
(c)Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest, fees or commissions, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(d)Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due to such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate.
47

Section 2.14Taxes.
(a)Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.
(i)Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall to the extent permitted by applicable Laws be made free and clear of and without reduction or withholding for any Taxes. If, however, applicable Laws require the Borrower or the Agent to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such Laws as determined by the Borrower or the Agent, as the case may be, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.
(ii)If the Borrower or the Agent shall be required by the Internal Revenue Code to withhold or deduct any Taxes, including both United States of America Federal backup withholding and withholding Taxes, from any payment, then (A) the Agent shall withhold or make such deductions as are determined by the Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Internal Revenue Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the Agent, Lender or Issuing Bank, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.
(b)Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Laws.
(c)Tax Indemnifications.
(i)Without limiting the provisions of subsection (a) or (b) above, the Borrower shall, and does hereby, indemnify the Agent, each Lender and each Issuing Bank, and shall make payment in respect thereof within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) withheld or deducted by the Borrower or the Agent or paid by the Agent, such Lender or such Issuing Bank, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The Borrower shall also, and does hereby, indemnify the Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or an Issuing Bank for any reason fails to pay indefeasibly to the Agent as required by clause (ii) of this subsection. A certificate as to the amount of any such payment or liability delivered to the Borrower by a Lender or an Issuing Bank (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.
(ii)Each Lender and each Issuing Bank shall, within 30 days after demand therefor, severally (A) indemnify the Agent for (x) any Indemnified Taxes and Other Taxes attributable to
48

such Lender or such Issuing Bank (but only to the extent that the Borrower has not already indemnified the Agent for such Indemnified Taxes and Other Taxes and without limiting the obligation of the Borrower to do so), (y) any Taxes attributable to such Lender’s or such Issuing Bank’s failure to comply with the provisions of Section 8.07(d) relating to the maintenance of a Participant Register and (z) for any Excluded Taxes attributable to such Lender or such Issuing Bank, in each case, that are payable or paid by the Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority, and (B) indemnify the Borrower and the Agent against any and all Taxes and any and all related losses, claims, liabilities, penalties, interest and expenses (including the fees, charges and disbursements of any counsel for the Borrower or the Agent) incurred by or asserted against the Borrower or the Agent by any Governmental Authority as a result of the failure by such Lender or such Issuing Bank, as the case may be, to deliver, or as a result of the inaccuracy, inadequacy or deficiency of, any documentation required to be delivered by such Lender or such Issuing Bank, as the case may be, to the Borrower or the Agent pursuant to subsection (e). A certificate as to the amount of such payment or liability delivered to any Lender or any Issuing Bank by the Agent shall be conclusive absent manifest error. Each Lender and each Issuing Bank hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender or such Issuing Bank, as the case may be, under this Agreement or any other Loan Document or otherwise payable by the Agent to the Lender or the Issuing Bank from any other source against any amount due to the Agent under this clause (ii). The agreements in this clause (ii) shall survive the resignation and/or replacement of the Agent, any assignment of rights by, or the replacement of, a Lender or an Issuing Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.
(d)Evidence of Payments. Upon request by the Borrower or the Agent, as the case may be, after any payment of Taxes by the Borrower or by the Agent to a Governmental Authority as provided in this Section 2.14, the Borrower shall deliver to the Agent or the Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Agent, as the case may be.
(e)Status of Lenders; Tax Documentation.
(i)Each Lender shall deliver to the Borrower and to the Agent, at the time or times prescribed by applicable Laws or when reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by applicable Laws or by the taxing authorities of any jurisdiction and such other reasonably requested information as will permit the Borrower or the Agent, as the case may be, to determine (A) whether or not payments made hereunder or under any other Loan Document are subject to Taxes, (B) if applicable, the required rate of withholding or deduction, and (C) such Lender’s entitlement to any available exemption from, or reduction of, applicable Taxes in respect of all payments to be made to such Lender by the Borrower pursuant to this Agreement or otherwise to establish such Lender’s status for withholding tax purposes in the applicable jurisdiction.
(ii)Without limiting the generality of the foregoing, if the Borrower is resident for tax purposes in the United States of America,
49

(A)any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code shall deliver to the Borrower and the Agent executed originals of Internal Revenue Service Form W-9 or such other documentation or information prescribed by applicable Laws or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent, as the case may be, to determine whether or not such Lender is subject to backup withholding or information reporting requirements; and
(B)each Foreign Lender that is entitled under the Internal Revenue Code or any applicable treaty to an exemption from or reduction of withholding tax with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:
(1)executed originals of Internal Revenue Service Form W8BEN or Form W8BEN-E claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,
(2)executed originals of Internal Revenue Service Form W8ECI,
(3)executed originals of Internal Revenue Service Form W8IMY and all required supporting documentation,
(4)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Internal Revenue Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Internal Revenue Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Internal Revenue Code and (y) executed originals of Internal Revenue Service Form W8BEN or Form W8BEN-E, or
(5)executed originals of any other form prescribed by applicable Laws as a basis for claiming exemption from or a reduction in United States of America Federal withholding tax together with such supplementary documentation as may be prescribed by applicable Laws to permit the Borrower or the Agent to determine the withholding or deduction required to be made.
(iii)Each Lender shall promptly (A) notify the Borrower and the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (B) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of
50

such Lender, and as may be reasonably necessary (including the re-designation of its Applicable Lending Office) to avoid any requirement of applicable Laws of any jurisdiction that the Borrower or the Agent make any withholding or deduction for taxes from amounts payable to such Lender.
(iv)If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall deliver to each of the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (iv), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(f)Treatment of Certain Refunds. Unless required by applicable Laws, at no time shall the Agent have any obligation to file for or otherwise pursue on behalf of a Lender or an Issuing Bank, or have any obligation to pay to any Lender or any Issuing Bank, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or such Issuing Bank, as the case may be. If the Agent, any Lender or any Issuing Bank determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses incurred by the Agent, such Lender or such Issuing Bank, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Agent, such Lender or such Issuing Bank, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent, such Lender or such Issuing Bank in the event the Agent, such Lender or such Issuing Bank is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Agent, any Lender or any Issuing Bank to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.
(g)Payments. Failure or delay on the part of the Agent, any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section 2.14 shall not constitute a waiver of the Agent’s, such Lender’s or such Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate the Agent, a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section 2.14 for any Indemnified Taxes or Other Taxes imposed or asserted by the relevant Governmental Authority more than three months prior to the date that the Agent, such Lender or such Issuing Bank, as the case may be, claims compensation with respect thereto (except that, if a Change in Law giving rise to such Indemnified Taxes or Other Taxes is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).
51

(h)Each of the Agent, any Issuing Bank or any Lender agrees to cooperate with any reasonable request made by the Borrower in respect of a claim of a refund in respect of Indemnified Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.14 if (i) the Borrower has agreed in writing to pay all of the Agent’s or such Issuing Bank’s or such Lender’s reasonable out-of-pocket costs and expenses relating to such claim, (ii) the Agent or such Issuing Bank or such Lender determines, in its good faith judgment, that it would not be disadvantaged, unduly burdened or prejudiced as a result of such claim and (iii) the Borrower furnishes, upon request of the Agent, or such Issuing Bank or such Lender, an opinion of tax counsel (such opinion, which can be reasoned, and such counsel to be reasonably acceptable to such Lender, or such Issuing Bank or the Agent) that the Borrower is likely to receive a refund or credit.
Section 2.16Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances or L/C Advances owing to it (other than pursuant to Section 2.05(b), Section 2.11, Section 2.12, Section 2.14, Section 2.20 or Section 8.04(e) or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in Letters of Credit to any assignee or participant, other than to the Borrower or any Subsidiary thereof if permitted hereby (as to which the provisions of this Section 2.15 shall apply) in excess of its Ratable Share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders (for cash at face value) such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s Ratable Share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by Law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
Section 2.16Evidence of Debt.
(a)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Advances. The Borrower agrees that upon notice by any Lender (including the Swingline Lender) to the Borrower (with a copy of such notice to the Agent) to the effect that a Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Note payable to the order of such Lender in a principal amount up to the Revolving Credit Commitment of such Lender.
(b)The Register maintained by the Agent pursuant to Section 8.07(c) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assumption Agreement and each Assignment and Assumption delivered to and accepted by it, (iii) the amount of any
52

principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender’s share thereof.
(c)Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement.
Section 2.17Use of Proceeds. The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds) solely to refinance Indebtedness of the Borrower from time to time and for other general corporate purposes of the Borrower.
Section 2.18Increase in the Aggregate Revolving Credit Commitments.
(a)The Borrower may, at any time prior to the Termination Date, by notice to the Agent, request that the aggregate amount of the Revolving Credit Commitments be increased by an amount of $10,000,000 or an integral multiple thereof (each a “Commitment Increase”) to be effective as of a date that is at least 90 days prior to the Termination Date (the “Increase Date”) as specified in the related notice to the Agent; provided, however that (i) in no event shall the aggregate amount of the Revolving Credit Commitments at any time exceed $300,000,000 or the aggregate amount of Commitment Increases exceed $100,000,000 and (ii) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in this Section 2.18 shall be satisfied.
(b)The Agent shall promptly notify the Lenders of a request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Lenders wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Revolving Credit Commitments (the “Commitment Date”). Each Lender that is willing to participate in such requested Commitment Increase (each an “Increasing Lender”) shall, in its sole discretion, give written notice to the Agent on or prior to the Commitment Date of the amount by which it is willing to increase its Revolving Credit Commitment. If the Lenders notify the Agent that they are willing to increase the amount of their respective Revolving Credit Commitments by an aggregate amount that exceeds the amount of the requested Commitment Increase, the requested Commitment Increase shall be allocated among the Lenders willing to participate therein in such amounts as are agreed between the Borrower and the Agent. Each Increasing Lender shall be subject to such applicable consents as may be required under Section 8.07(b)(iii) (including, but not limited to, the consent, not to be unreasonably withheld, of each Issuing Bank and the Swingline Lender).
(c)Promptly following each Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Lenders are willing to participate in the requested Commitment Increase. If the aggregate amount by which the Lenders are willing to participate in any requested Commitment Increase on any such Commitment Date is less than the requested Commitment Increase, then the Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Commitment Increase that has not been committed to by the Lenders as of the applicable
53

Commitment Date; provided, however, that the Revolving Credit Commitment of each such Eligible Assignee shall be in an amount of not less than $10,000,000.
(d)On each Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.18(c) (each such Eligible Assignee, an “Assuming Lender”) shall become a Lender party to this Agreement as of such Increase Date and the Revolving Credit Commitment of each Increasing Lender for such requested Commitment Increase shall be so increased by the amount by which the Increasing Lender agreed to increase its Revolving Credit Commitment (or by the amount allocated to such Lender pursuant to the next to last sentence of Section 2.18(b)) as of such Increase Date; provided, however, that the Agent shall have received on or before such Increase Date the following, each dated such date:
(i)(A) certified copies of resolutions of the Board of Directors of the Borrower approving the Commitment Increase and the corresponding modifications to this Agreement, (B) an opinion of counsel for the Borrower (which may be in-house counsel), in form and substance reasonably acceptable to the Required Lenders and (C) a certificate from a duly authorized officer of the Borrower, stating that the conditions set forth in Section 3.02(a) and Section 3.02(b) are satisfied;
(ii)an assumption agreement from each Assuming Lender, if any, in form and substance satisfactory to the Borrower and the Agent (each an “Assumption Agreement”), duly executed by such Assuming Lender, the Agent, the Borrower and each other Person required to consent thereto, as applicable under Section 8.07(b)(iii); and
(iii)confirmation from each Increasing Lender of the increase in the amount of its Revolving Credit Commitment in a writing satisfactory to the Borrower and the Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.18(d), the Agent shall notify the Lenders (including, without limitation, each Assuming Lender) and the Borrower, on or before 1:00 p.m., by telecopier, of the occurrence of the Commitment Increase to be effected on such Increase Date and shall record in the Register the relevant information with respect to each Increasing Lender and each Assuming Lender on such date. Each Increasing Lender and each Assuming Lender shall, before 2:00 p.m. on the Increase Date, make available for the account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds, in the case of such Assuming Lender, an amount equal to such Assuming Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase) and, in the case of such Increasing Lender, an amount equal to the excess of (i) such Increasing Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase) over (ii) such Increasing Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment (without giving effect to the relevant Commitment Increase) as a percentage of the aggregate Revolving Credit Commitments (without giving effect to the relevant Commitment Increase). After the Agent’s receipt of such funds from each such Increasing Lender and each such Assuming Lender, the Agent will promptly thereafter cause to be distributed like funds to the other Lenders for the account of their respective Applicable Lending Offices in an amount to each other Lender such that the aggregate amount of the outstanding Advances owing to each Lender after giving effect to such distribution equals such Lender’s Ratable Share of the Borrowings
54

then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase).
Section 2.19Affected Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes an Affected Lender, then the following provisions shall apply for so long as such Lender is an Affected Lender:
(a)fees shall cease to accrue on the Unused Commitment of such Affected Lender pursuant to Section 2.04(a);
(b)the Revolving Credit Commitment and Advances of such Affected Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 8.01), other than any waiver, amendment or modification requiring the consent of all Lenders or of each Lender affected;
(c)if (x) there shall be any Available Amount under any outstanding Letter of Credit or (y) any Swingline Exposure shall exist during any time a Lender is an Affected Lender, then:
(i)so long as no Default or Event of Default has occurred and is continuing, all or any part of the Available Amount of all such Letters of Credit and Swingline Exposure shall be reallocated among the non-Affected Lenders in accordance with their respective Ratable Shares (disregarding any Affected Lender’s Revolving Credit Commitment) but only to the extent that with respect to each non-Affected Lender the sum of (A) the aggregate principal amount of all Revolving Advances made by such non-Affected Lender (in its capacity as a Lender) and outstanding at such time plus (B) such non-Affected Lender’s Ratable Share (after giving effect to the reallocation contemplated in this Section 2.19(c)(i)) of the outstanding L/C Obligations plus (C) such non-Affected Lender’s Ratable Share (after giving effect to the reallocation contemplated in this Section 2.19(c)(i)) of the outstanding Swingline Exposure, does not exceed such non-Affected Lender’s Revolving Credit Commitment;
(ii)if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business Day following notice by the Agent (x) first, prepay such unallocable Swingline Exposure and (y) second, Cash Collateralize for the benefit of the applicable Issuing Bank only the Borrower’s obligations corresponding to such Affected Lender’s Ratable Share of the Available Amount of outstanding Letters of Credit (after giving effect to any partial reallocation pursuant to clause (i) above) (the “Affected Lender Share”) in accordance with the procedures set forth in Section 2.03(h) for so long as such there shall be any Available Amount of outstanding Letters of Credit;
(iii)if the Ratable Share of the Available Amount of outstanding Letters of Credit and the Swingline Exposure of the non-Affected Lenders is reallocated pursuant to this Section 2.19(c), then the fees payable to the Lenders pursuant to Section 2.04(a) and Section 2.04(b) shall be adjusted in accordance with such non-Affected Lenders’ Ratable Shares;
(iv)if any Affected Lender Share is not reallocated pursuant to clause (i) above and if the Borrower fails to Cash Collateralize any portion of such Affected Lender Share pursuant to clause (ii) above, then, without prejudice to any rights or remedies of any Issuing Bank or any Lender hereunder, the fee payable under Section 2.04(b) with respect to such Affected Lender Share shall be payable to the Issuing Bank until such Affected Lender Share is reallocated; and
55

(v)if the Borrower Cash Collateralizes any portion of any Affected Lender Share pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Affected Lender pursuant to Section 2.04(b)(i) or the applicable Issuing Bank pursuant to Section 2.04(b)(ii) (solely with respect to any fronting fee) with respect to such Affected Lender’s Affected Lender Share during the period such Affected Lender’s Affected Lender Share is Cash Collateralized;
(d)to the extent the Agent receives any payments or other amounts for the account of an Affected Lender under this Agreement, such Affected Lender shall be deemed to have requested that the Agent use such payment or other amount to fulfill such Affected Lender’s previously unsatisfied obligations to fund a Revolving Advance under Section 2.03(c) or Section 2.03A(c) or L/C Advance or any other unfunded payment obligation of such Affected Lender under this Agreement; and
(e)subject to Section 8.18, for the avoidance of doubt, the Borrower, each Issuing Bank, the Swingline Lender, the Agent and each other Lender shall retain and reserve its other rights and remedies respecting each Affected Lender.
In the event that the Agent, the Borrower, the Swingline Lender and the Issuing Banks each agrees that an Affected Lender has adequately remedied all matters that caused such Lender to be an Affected Lender, then the Ratable Shares of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Revolving Credit Commitment and on such date such Lender shall purchase at par such of the Revolving Advances of the other Lenders as the Agent shall determine may be necessary in order for such Lender to hold such Revolving Advances in accordance with its Ratable Share. In addition, at such time as the Affected Lender is replaced by another Lender pursuant to Section 2.20, the Ratable Shares of the Lenders will be readjusted to reflect the inclusion of the replacing Lender’s Commitment in accordance with Section 2.20. In either such case, this Section 2.19 will no longer apply.
Section 2.20Replacement of Lenders. If any Lender requests compensation under Section 2.11, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, or if any Lender is an Affected Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 8.07), all of its interests, rights and obligations under this Agreement and the related Loan Documents to one or more assignees that shall assume such obligations (which any such assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a)the Borrower shall have paid to the Agent the assignment fee specified in Section 8.07(b);
(b)such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Advances and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 8.04(e)) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(c)in the case of any such assignment resulting from a claim for compensation under Section 2.11 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments thereafter; and
(d)such assignment does not conflict with applicable Laws.
56

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Section 2.21Extension of Termination Date
(a)The Borrower may at any time from time to time not more than ninety (90) days and not less than thirty (30) days prior to any anniversary of the Effective Date, by notice to the Agent (who shall promptly notify the Lenders) not later than 10 Business Days prior to the date on which the Lenders are requested to respond thereto (each such date, a “Lender Notice Date”), request that each Lender extend (each such date on which such extension occurs, an “Extension Date”) such Lender’s Termination Date to the date that is one year after the Termination Date then in effect for such Lender (the “Existing Termination Date”).
(b)Each Lender, acting in its sole and individual discretion, shall, by notice to the Agent given not later than the applicable Lender Notice Date, advise the Agent whether or not such Lender agrees to such extension (each Lender that determines to so extend its Termination Date, an “Extending Lender”). Each Lender that determines not to so extend its Termination Date (a “Non-Extending Lender”) shall notify the Agent of such fact promptly after such determination (but in any event no later than the Lender Notice Date), and any Lender that does not so advise the Agent on or before the Lender Notice Date shall be deemed to be a Non-Extending Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree, and it is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by the Borrower for extension of the Termination Date.
(c)The Agent shall promptly notify the Borrower of each Lender’s determination under this Section.
(d)The Borrower shall have the right, but shall not be obligated, on or before the applicable Termination Date for any Non-Extending Lender to replace such Non-Extending Lender with, and add as “Lenders” under this Agreement in place thereof, one or more financial institutions that are Eligible Assignees (each, an “Additional Commitment Lender”) approved by the Agent, each Issuing Bank and the Swingline Lender in accordance with the procedures provided in Section 8.07, each of which Additional Commitment Lenders shall have entered into an Assignment and Assumption (in accordance with and subject to the restrictions contained in Section 8.07, with the Borrower obligated to pay any applicable processing or recordation fee) with such Non-Extending Lender, pursuant to which such Additional Commitment Lenders shall, effective on or before the Termination Date for such Non-Extending Lender, assume a Revolving Credit Commitment (and, if any such Additional Commitment Lender is already a Lender, its Revolving Credit Commitment shall be in addition to such Lender’s Revolving Credit Commitment hereunder on such date). The Agent may effect such amendments to this Agreement as are reasonably necessary to provide for any such extensions with the consent of the Borrower but without the consent of any other Lenders.
(e)If (and only if) the total of the Revolving Credit Commitments of the Lenders that have agreed to extend their Termination Date and the additional Revolving Credit Commitments of the Additional Commitment Lenders is more than 50% of the aggregate amount of the Revolving Credit Commitments in effect immediately prior to the applicable Extension Date, then, effective as of the applicable Extension Date, the Termination Date of each Extending Lender and of each Additional Commitment Lender shall be extended to the date that is one year after the Existing Termination Date
57

(except that, if such date is not a Business Day, such Termination Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall thereupon become a “Lender” for all purposes of this Agreement and shall be bound by the provisions of this Agreement as a Lender hereunder and shall have the obligations of a Lender hereunder.
(f)Notwithstanding the foregoing, (x) no more than two (2) extensions of the Termination Date shall be permitted hereunder and (y) any extension of any Termination Date pursuant to this Section 2.21 shall not be effective with respect to any Extending Lender unless as of the applicable Extension Date and immediately after giving effect thereto:
(i)there shall exist no Default;
(ii)the representations and warranties made by the Borrower contained herein shall be true and correct; and
(iii)the Agent shall have received a certificate from the Borrower signed by an Authorized Officer of the Borrower (A) certifying the accuracy of the foregoing clauses (i) and (ii) and (B) certifying and attaching the resolutions adopted by the Borrower approving or consenting to such extension.
(g)On the Termination Date of each Non-Extending Lender, (i) the Revolving Credit Commitment of each Non-Extending Lender shall automatically terminate and (ii) the Borrower shall repay such Non-Extending Lender in accordance with Section 2.06 (and shall pay to such Non-Extending Lender all of the other obligations owing to it under this Agreement) and after giving effect thereto shall prepay any Revolving Advances outstanding on such date (and pay any additional amounts required pursuant to Section 2.02) to the extent necessary to keep outstanding Revolving Advances ratable with any revised Ratable Share of the respective Lenders effective as of such date, and the Agent shall administer any necessary reallocation of the outstanding Advances (without regard to any minimum borrowing, pro rata borrowing and/or pro rata payment requirements contained elsewhere in this Agreement).
(h)This Section shall supersede any provisions in Section 2.02 or Section 8.01 to the contrary.
ARTICLE III

CONDITIONS PRECEDENT
Section 3.01Conditions Precedent to Effectiveness. This Agreement shall become effective on and as of the first date (the “Effective Date”) on which the following conditions precedent have been satisfied:
(a)The Lenders shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have requested.
(b)The Borrower shall have paid all accrued fees and agreed expenses of the Agent, the Arrangers and the Lenders and the reasonable accrued fees and expenses of one law firm acting as counsel to the Agent that have been invoiced at least one Business Day prior to the Effective Date.
58

(c)On the Effective Date, the following statements shall be true and the Agent shall have received a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that:
(i)The representations and warranties contained in Section 4.01 are true and correct on and as of the Effective Date, and
(ii)No event has occurred and is continuing that constitutes a Default.
(d)The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent and the Lenders:
(i)Receipt by the Agent of executed counterparts of this Agreement properly executed by a duly authorized officer of the Borrower and by each Lender.
(ii)The Notes, payable to the order of the Lenders to the extent requested by any Lender pursuant to Section 2.16.
(iii)The articles of incorporation of the Borrower certified to be true and complete as of a recent date by the appropriate governmental authority of the state or other jurisdiction of its incorporation and certified by a secretary, assistant secretary or associate secretary of the Borrower to be true and correct as of the Effective Date.
(iv)The bylaws of the Borrower certified by a secretary, assistant secretary or associate secretary of the Borrower to be true and correct as of the Effective Date.
(v)Certified copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes.
(vi)A certificate of the secretary, assistant secretary or associate secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder.
(vii)A certificate as of a recent date from the Borrower’s state of incorporation evidencing that the Borrower is in good standing in such state.
(viii)A favorable opinion of counsel for the Borrower, in form and substance reasonably acceptable to the Lenders.
(ix)A favorable opinion of Sidley Austin LLP, counsel for the Agent, in form and substance reasonably acceptable to the Lenders.
(e)[Reserved].
(f)The Agent shall have received evidence satisfactory to it that that certain $500,000,000 Five-Year Credit Agreement dated as of June 29, 2017 by and among APS, as borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, shall have been terminated and cancelled and all indebtedness and other amounts due and unpaid thereunder shall have been (or shall
59

concurrently with the effectiveness of this Agreement be) fully repaid on terms and conditions reasonably acceptable to the Agent.
(g)The Agent shall have received reasonably satisfactory evidence that each of (i) that certain $500,000,000 Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021, by and among APS, as borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, and (ii) that certain $500,000,000 Five-Year Credit Agreement, dated as of May 28, 2021, by and among APS, as borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, shall be effective prior to or substantially concurrently with the effectiveness of this Agreement.
(h)PATRIOT Act. At least five days prior to the Effective Date, the Borrower shall have provided to the Agent and the Lenders the documentation and other information reasonably requested by the Agent, and reasonably available to the Borrower, in order to comply with requirements of the PATRIOT Act.
(i)In the event that the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, the Borrower shall deliver, at least five days prior to the Effective Date, a Beneficial Ownership Certification in relation to the Borrower.
Section 3.02Conditions Precedent to Each Credit Extension and Commitment Increase. The obligation of each Lender to make an Advance (other than an L/C Advance or an Advance made pursuant to Section 2.03(c) or Section 2.03A(c)) on the occasion of each Borrowing, the obligation of each Issuing Bank to issue a Letter of Credit, and each Commitment Increase shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Borrowing or such issuance (as the case may be), or the applicable Increase Date, the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or request for issuance and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or date of such issuance such statements are true):
(a)the representations and warranties contained in Section 4.01 (other than Section 4.01(k)), and in the case of a Borrowing or issuance of a Letter of Credit, Section 4.01(e)(ii) and Section 4.01(f)(ii)) are correct on and as of such date, before and after giving effect to such Borrowing or issuance of a Letter of Credit, or such Commitment Increase and to the application of the proceeds therefrom, as though made on and as of such date; and
(b)no event has occurred and is continuing, or would result from such Borrowing or issuance of a Letter of Credit, or such Commitment Increase or from the application of the proceeds therefrom, that constitutes a Default.
Each request for Credit Extension (which shall not include a Conversion or a continuation of Eurodollar Rate Advances) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 3.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.
Section 3.03Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01 and the satisfaction of each Lender with respect to letters delivered to it from the Borrower as set forth in Section 4.01(a), Section 4.01(e) and Section 4.01(f), each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or
60

acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower designates as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify the Lenders and the Borrower of the occurrence of the Effective Date.
ARTICLE IV

REPRESENTATIONS AND WARRANTIES
Section 4.01Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:
(a)Each of the Borrower and each Material Subsidiary: (i) is a corporation or other entity duly organized and validly existing under the Laws of the jurisdiction of its incorporation or organization; (ii) has all requisite corporate or if the Material Subsidiary is not a corporation, other comparable power necessary to own its assets and carry on its business as presently conducted; (iii) has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as presently conducted, if the failure to have any such license, authorization, consent or approval is reasonably likely to have a Material Adverse Effect and except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion) and except that (A) APS from time to time may make minor extensions of its lines, plants, services or systems prior to the time a related franchise, certificate of convenience and necessity, license or permit is procured, (B) from time to time communities served by APS may become incorporated and considerable time may elapse before such a franchise is procured, (C) certain such franchises may have expired prior to the renegotiation thereof, (D) certain minor defects and exceptions may exist which, individually and in the aggregate, are not material and (E) certain franchises, certificates, licenses and permits may not be specific as to their geographical scope); and (iv) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify is reasonably likely to have a Material Adverse Effect.
(b)The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not or did not (i) contravene the Borrower’s articles of incorporation or by-laws, (ii) contravene any Law, decree, writ, injunction or determination of any Governmental Authority, in each case applicable to or binding upon the Borrower or any of its properties, (iii) contravene any contractual restriction binding on or affecting the Borrower or (iv) cause the creation or imposition of any Lien upon the assets of the Borrower or any Material Subsidiary, except for Liens created under this Agreement and except where such contravention or creation or imposition of such Lien is not reasonably likely to have a Material Adverse Effect.
(c)No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes to be delivered by it.
(d)This Agreement has been, and each of the other Loan Documents upon execution and delivery will have been, duly executed and delivered by the Borrower. This Agreement is, and each of
61

the other Loan Documents upon execution and delivery will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms, subject, however, to the application by a court of general principles of equity and to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally.
(e)(i) The Consolidated balance sheet of the Borrower as of December 31, 2020, and the related Consolidated statements of income and cash flows of the Borrower for the fiscal year then ended, accompanied by an opinion thereon of Deloitte & Touche LLP, independent registered public accountants and the condensed Consolidated balance sheets of the Borrower as of March 31, 2021, and the related condensed Consolidated statements of income and cash flows of the Borrower for the three months then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to the Agent, fairly present in all material respects, subject, in the case of said balance sheet at March 31, 2021, and said statements of income and cash flows for the three months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower as at such dates and the Consolidated results of the operations of the Borrower for the periods ended on such dates, all in accordance with GAAP (except as disclosed therein), and (ii) except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion), since December 31, 2020, there has been no Material Adverse Effect.
(f)There is no pending or, to the knowledge of an Authorized Officer of the Borrower, threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the consummation of the transactions contemplated hereby or (ii) would be reasonably likely to have a Material Adverse Effect (except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion)) and there has been no adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of such disclosed litigation that would be reasonably likely to have a Material Adverse Effect.
(g)No proceeds of any Advance will be used to acquire any equity security not issued by the Borrower of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934.
(h)The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, in any case in violation of Regulation U. After application of the proceeds of any Advance, not more than 25% of the value of the assets subject to any restriction under this Agreement on the right to sell, pledge, transfer, or otherwise dispose of such assets is represented by margin stock.
(i)The Borrower and its Subsidiaries have filed all United States of America Federal income Tax returns and all other material Tax returns which are required to be filed by them and have paid all Taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except to the extent that (i) such Taxes are being contested in good faith and by appropriate proceedings and that appropriate reserves for the payment thereof have been maintained by the Borrower
62

and its Subsidiaries in accordance with GAAP or (ii) the failure to make such filings or such payments is not reasonably likely to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries as set forth in the most recent financial statements of the Borrower delivered to the Agent pursuant to Section 4.01(e) or Section 5.01(h)(i) or Section 5.01(h)(ii) hereof in respect of Taxes and other governmental charges are, in the opinion of the Borrower, adequate.
(j)Set forth on Schedule 4.01(j) hereto (as such schedule may be modified from time to time by the Borrower by written notice to the Agent) is a complete and accurate list of all the Material Subsidiaries of the Borrower.
(k)Set forth on Schedule 4.01(k) hereto is a complete and accurate list identifying any Indebtedness of the Borrower outstanding in a principal amount equal to or exceeding $5,000,000 and which is not described in the financial statements referred to in Section 4.01(e).
(l)The Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.
(m)No report, certificate or other written information furnished by the Borrower or any of its Subsidiaries to the Agent, any Arranger or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) at the time so furnished, when taken together as a whole with all such written information so furnished, contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except as would not reasonably be expected to result in a Material Adverse Effect; provided that with respect to any projected financial information, forecasts, estimates or forward-looking information, the Borrower represents only that such information and materials have been prepared in good faith on the basis of assumptions believed to be reasonable at the time of preparation of such forecasts, and no representation or warranty is made as to the actual attainability of any such projections, forecasts, estimates or forward-looking information.
(n)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower, any of their respective Affiliates over which any of the foregoing exercises management control (each, a “Controlled Affiliate”) or any director or officer of the Borrower, any of its Subsidiaries or any of their respective Controlled Affiliates (each, a “Manager”) is a Prohibited Person, and the Borrower, its Subsidiaries and, to the knowledge of the Borrower, such Controlled Affiliates are in compliance with all applicable orders, rules and regulations of OFAC.
(o)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower, any of their respective Controlled Affiliates or Managers: (i) is the target of Sanctions; (ii) is owned or controlled by, or acts on behalf of, any Person that is targeted by United States or multilateral economic or trade sanctions currently in force; (iii) is, or is owned or controlled by, a Person who is located, organized or resident in a country, region or territory that is, or whose government is, the subject of Sanctions, including, without limitation, Crimea, Cuba, Iran, North Korea and Syria, or (iv) is named, identified or described on any list of Persons with whom United States Persons may not conduct business, including any such blocked persons list, designated nationals list, denied persons list, entity list, debarred party list, unverified list, sanctions list or other such lists published or maintained by the United States, including OFAC, the United States Department of Commerce or the United States Department of State, or any other applicable Governmental Authority.
63

(p)None of the Borrower’s or its Subsidiaries’ assets constitute property of, or are beneficially owned, directly or indirectly, by any Person that is the target of Sanctions, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. (the “Trading With the Enemy Act”), any of the foreign assets control regulations of the Treasury (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or regulations promulgated thereunder or executive order relating thereto (which includes, without limitation, (i) Executive Order No. 13224, effective as of September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (ii) the PATRIOT Act), if the result of such ownership would be that any Credit Extension made by any Lender would be in violation of law (“Embargoed Person”); (a) no Embargoed Person has any interest of any nature whatsoever in the Borrower if the result of such interest would be that any Credit Extension would be in violation of law; (b) the Borrower has not engaged in business with Embargoed Persons if the result of such business would be that any Credit Extension made by any Lender would be in violation of law; (c) the Borrower will not, directly or indirectly, use the proceeds of the Credit Extension, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions or Anti-Corruption Laws by any Person (including any Person participating in the Credit Extensions, whether as a Lender or otherwise), and (d) neither the Borrower nor any Controlled Affiliate (i) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (ii) to the knowledge of the Borrower, engages in any dealings or transactions, or be otherwise associated, with any such “blocked person”. For purposes of determining whether or not a representation is true under this Section 4.01(p) with respect to the securities of the Borrower, the Borrower shall not be required to make any investigation into (x) the ownership of publicly traded stock or other publicly traded securities or (y) the beneficial ownership of any collective investment fund.
(q)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower and its Subsidiaries, any of their respective Managers, has failed to comply with the U.S. Foreign Corrupt Practices Act, as amended from time to time (the “FCPA”), or any other applicable Anti-Corruption Laws, and it and they have not made, offered, promised or authorized, and will not make, offer, promise or authorize, whether directly or indirectly, any payment, of anything of value to a Government Official while knowing or having a reasonable belief that all or some portion will be used for the purpose of: (a) influencing any act, decision or failure to act by a Government Official in his or her official capacity, (b) inducing a Government Official to use his or her influence with a government or instrumentality to affect any act or decision of such  government or entity or (c) securing an improper advantage, in each case in order to obtain, retain or direct business.
(r)If Borrower is required to deliver a Beneficial Ownership Certification, as of the Effective Date, the information included in the Beneficial Ownership Certification, as updated from time to time in accordance with this Agreement, is accurate, complete and correct in all respects as of the Effective Date and as of the date any such update is delivered. The Borrower acknowledges and agrees that the Beneficial Ownership Certification is one of the Loan Documents.
(s)The Borrower is not an Affected Financial Institution.
(t)None of the Borrower or any of its Subsidiaries is an entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery nor
64

performance of this Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, including the making of any Advance and the issuing of any Letter of Credit, will give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
ARTICLE V

COVENANTS OF THE BORROWER
Section 5.01Affirmative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower shall:
(a)Compliance with Laws, Etc. (i) Comply, and cause each of its Material Subsidiaries to comply, in all material respects, with all applicable Laws of Governmental Authorities, such compliance to include, without limitation, compliance with ERISA and Environmental Laws, unless the failure to so comply is not reasonably likely to have a Material Adverse Effect and (ii) comply at all times with all Laws, orders, decrees, writs, injunctions or determinations of any Governmental Authority relating to the incurrence or maintenance of Indebtedness by the Borrower, such compliance to include, without limitation, compliance with the PATRIOT Act, all applicable orders, rules and regulations of OFAC, the FCPA, the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970 and other Anti-Corruption Laws, except (other than in the case of the PATRIOT Act, the applicable orders, rules and regulations of OFAC, or the FCPA, or any similar applicable laws) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b)Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, all Taxes imposed upon it or upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such Tax (i) that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained in accordance with GAAP or (ii) if the failure to pay such Tax is not reasonably likely to have a Material Adverse Effect.
(c)Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates; provided, however, that the Borrower and its Subsidiaries may self-insure to the same extent as other companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and to the extent consistent with prudent business practice.
(d)Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises (other than “franchises” as described in Arizona Revised Statutes, Section 40-283 or any successor provision) reasonably necessary in the normal conduct of its business, if the failure to maintain such rights or privileges is reasonably likely to have a Material Adverse Effect, and, in the case of APS, will cause APS to use its commercially reasonable efforts to preserve and maintain such franchises reasonably necessary in the normal conduct of its business, except that (i) APS from time to time may make minor extensions of its lines, plants, services or systems prior to the time a related franchise, certificate of convenience and necessity, license or permit is procured, (ii) from time to time communities
65

served by APS may become incorporated and considerable time may elapse before such a franchise is procured, (iii) certain such franchises may have expired prior to the renegotiation thereof, (iv) certain minor defects and exceptions may exist which, individually and in the aggregate, are not material and (v) certain franchises, certificates, licenses and permits may not be specific as to their geographical scope; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(b).
(e)Visitation Rights. At any reasonable time and from time to time, permit and cause each of its Subsidiaries to permit the Agent or any of the Lenders or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors; provided, however, that the Borrower and its Subsidiaries reserve the right to restrict access to any of its properties in accordance with reasonably adopted procedures relating to safety and security; and provided further that the costs and expenses incurred by such Lender or its agents or representatives in connection with any such examinations, copies, abstracts, visits or discussions shall be, upon the occurrence and during the continuation of a Default, for the account of the Borrower and, in all other circumstances, for the account of such Lender.
(f)Keeping of Books. Keep, and cause each of its Material Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in a manner that permits the preparation of financial statements in accordance with GAAP.
(g)Maintenance of Properties, Etc. Keep, and cause each Material Subsidiary to keep, all property useful and necessary in its business in good working order and condition (ordinary wear and tear excepted), if the failure to do so is reasonably likely to have a Material Adverse Effect, it being understood that this covenant relates only to the working order and condition of such properties and shall not be construed as a covenant not to dispose of properties.
(h)Reporting Requirements. Furnish to the Agent:
(i)as soon as available and in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, commencing with the fiscal quarter ending June 30, 2021, (A) for each such fiscal quarter of the Borrower, Consolidated statements of income and cash flows of the Borrower for such fiscal quarter and the related Consolidated balance sheet of the Borrower as of the end of such fiscal quarter, setting forth in each case in comparative form the corresponding figures for the corresponding fiscal quarter in (or, in the case of the balance sheet, as of the end of) the preceding fiscal year and (B) for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, Consolidated statements of income and cash flows of the Borrower for such period setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year; provided that so long as the Borrower remains subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Borrower may provide, in satisfaction of the requirements of this first sentence of this Section 5.01(h)(i), its report on Form 10-Q for such fiscal quarter.  Each set of financial statements provided under this Section 5.01(h)(i) shall be accompanied by a certificate of an Authorized Officer, which certificate shall state that said Consolidated financial statements fairly present in all material respects the Consolidated financial condition and results of operations and cash flows of the Borrower in
66

accordance with GAAP (except as disclosed therein), as at the end of, and for, such period (subject to normal year-end audit adjustments) and shall set forth reasonably detailed calculations demonstrating compliance with Section 5.03;
(ii)as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2021, audited Consolidated statements of income and cash flows of the Borrower for such year and the related Consolidated balance sheet of the Borrower as at the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year; provided that, so long as the Borrower remains subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Borrower may provide, in satisfaction of the requirements of this first sentence of this Section 5.01(h)(ii), its report on Form 10-K for such fiscal year. Each set of financial statements provided pursuant to this Section 5.01(h)(ii) shall be accompanied by (A) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said Consolidated financial statements fairly present in all material respects the Consolidated financial condition and results of operations of the Borrower as at the end of, and for, such fiscal year, in accordance with GAAP (except as disclosed therein) and (B) a certificate of an Authorized Officer, which certificate shall set forth reasonably detailed calculations demonstrating compliance with Section 5.03;
(iii)as soon as possible and in any event within five days after any Authorized Officer of the Borrower knows of the occurrence of each Default continuing on the date of such statement, a statement of an Authorized Officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto;
(iv)promptly after the sending or filing thereof, copies of all reports and registration statements (other than exhibits thereto and registration statements on Form S-8 or its equivalent) that the Borrower or any Subsidiary files with the Securities and Exchange Commission;
(v)promptly after an Authorized Officer becomes aware of the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f), except, with respect to any matter referred to in Section 4.01(f)(ii), to the extent disclosed in a report on Form 8-K, Form 10-Q or Form 10-K of the Borrower;
(vi)promptly after an Authorized Officer becomes aware of the occurrence thereof, notice of any change by Moody’s or S&P of its respective Public Debt Rating or of the cessation (or subsequent commencement) by Moody’s or S&P of publication of their respective Public Debt Rating;
(vii)promptly after the occurrence thereof, notice of the occurrence of any ERISA Event, together with (x) a written statement of an Authorized Officer of the Borrower specifying the details of such ERISA Event and the action that the Borrower has taken and proposes to take with respect thereto, (y) a copy of any notice with respect to such ERISA Event that may be required to be filed with the PBGC and (z) a copy of any notice delivered by the PBGC to the Borrower or an ERISA Affiliate with respect to such ERISA Event;
(viii)as soon as possible and in any event within five days after any Authorized Officer of the Borrower knows of the occurrence thereof, notice of any change in the information
67

provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in parts (c) or (d) of such certification; and
(ix)promptly following request therefor, (a) such information and documentation reasonably requested by the Agent or any Lender for purposes of compliance with applicable “know your customer” requirements under the PATRIOT Act or other applicable anti-money laundering laws; (b) confirmation of the accuracy of the information set forth in the most recent Beneficial Ownership Certification provided to the Agent and Lenders; or (c) such other information respecting the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request.
Information required to be delivered pursuant to Section 5.01(h)(i), Section 5.01(h)(ii) and Section 5.01(h)(iv) above shall be deemed to have been delivered on the date on which the Borrower provides notice to the Agent that such information has been posted on the Borrower’s website on the Internet at www.pinnaclewest.com, at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Lenders without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01(h)(i) or Section 5.01(h)(ii) and (ii) the Borrower shall deliver paper copies of the information referred to in Section 5.01(h)(i), Section 5.01(h)(ii), and Section 5.01(h)(iv) to any Lender which requests such delivery.
(i)Change in Nature of Business. Conduct directly or through its Subsidiaries the same general type of business conducted by the Borrower and its Material Subsidiaries on the date hereof.
Section 5.02Negative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower shall not:
(a)Liens, Etc. Directly or indirectly create, incur, assume or permit to exist any Lien securing Indebtedness for borrowed money on or with respect to any property or asset (including, without limitation, the capital stock of APS) of the Borrower, whether now owned or held or hereafter acquired (unless it makes, or causes to be made, effective provision whereby the Obligations will be equally and ratably secured with any and all other obligations thereby secured so long as such other Indebtedness shall be so secured, such security to be pursuant to an agreement reasonably satisfactory to the Required Lenders); provided, however, that this Section 5.02(a) shall not apply to Liens securing Indebtedness for borrowed money (other than Indebtedness for borrowed money secured by the capital stock of APS) which do not in the aggregate exceed at any time outstanding the principal amount of $50,000,000.
(b)Mergers, Etc. Merge or consolidate with or into any Person, or permit any of its Material Subsidiaries to do so, except that (i) any Material Subsidiary of the Borrower may merge or consolidate with or into any other Material Subsidiary of the Borrower, (ii) any Subsidiary of the Borrower may merge into the Borrower or any Material Subsidiary of the Borrower and (iii) the Borrower or any Material Subsidiary may merge with any other Person so long as the Borrower or such Material Subsidiary is the surviving corporation, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom.
(c)Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Material Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets to any Person other than the Borrower or any Subsidiary of the Borrower, except (i) dispositions in the ordinary course of business, including, without
68

limitation, sales or other dispositions of electricity and related and ancillary services, other commodities, emissions credits and similar mechanisms for reducing pollution, and damaged, obsolete, worn out or surplus property no longer required or useful in the business or operations of the Borrower or any of its Subsidiaries, (ii) sale or other disposition of patents, copyrights, trademarks or other intellectual property that are, in the Borrower’s reasonable judgment, no longer economically practicable to maintain or necessary in the conduct of the business of the Borrower or its Subsidiaries and any license or sublicense of intellectual property that does not interfere with the business of the Borrower or any Material Subsidiary, (iii) in a transaction authorized by subsection (b) of this Section, (iv) individual dispositions occurring in the ordinary course of business which involve assets with a book value not exceeding $5,000,000, (v) sales, leases, transfers or dispositions of assets during the term of this Agreement having an aggregate book value not to exceed 30% of the total of all assets properly appearing on the most recent balance sheet of the Borrower provided pursuant to Section 4.01(e)(i) or Section 5.01(h)(ii) hereof, (vi) at any time following the consummation of the Four Corners Acquisition, which occurred on December 30, 2013, and the closure by APS of Units 1, 2 and 3 of the Four Corners Power Plant near Farmington, New Mexico, as described in the SEC Reports, (A) disposition of all or any portion of APS’ interests in such Units 1, 2 and 3, or (B) disposition of all or any portion of any Subsidiary’s (other than APS) interests in Units 4 and 5 of the Four Corners Power Plant near Farmington, New Mexico, and (vii) any Lien permitted under Section 5.02(a).
(d)Ownership of APS. Except to the extent permitted under Section 5.02(b), the Borrower will at all times continue to own directly or indirectly at least 80% of the outstanding capital stock of APS.
Section 5.03Financial Covenant. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower will maintain a ratio of (a) Consolidated Indebtedness to (b) the sum of Consolidated Indebtedness plus Consolidated Net Worth of not greater than 0.65 to 1.0.
ARTICLE VI

EVENTS OF DEFAULT
Section 6.01Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:
(a)The Borrower shall fail to pay when due (i) any principal of any Advance, (ii) any drawing under any Letter of Credit, or (iii) any interest on any Advance or any other fees or other amounts payable under this Agreement or any other Loan Documents, and (in the case of this clause (iii) only), such failure shall continue for a period of three Business Days; or
(b)Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in any certificate or other document delivered in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made or furnished (other than, for the avoidance of doubt, any Pricing Certificate Inaccuracy; provided that the Borrower complies with Section 1.06(d) with respect to such Pricing Certificate Inaccuracy); or
(c)(i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.17, Section 5.01(d) (as to the corporate existence of the Borrower), Section 5.01(h)(iii), Section 5.01(h)(vi), Section 5.02 or Section 5.03, or (ii) the Borrower shall fail to perform or
69

observe any other term, covenant or agreement contained in Section 5.01(e) if such failure shall remain unremedied for 15 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender or (iii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or any other Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender; or
(d)(i) The Borrower or any of its Material Subsidiaries shall fail to pay (A) any principal of or premium or interest on any Indebtedness that is outstanding in a principal amount of at least $35,000,000 in the aggregate (but excluding Indebtedness outstanding hereunder), or (B) an amount, or post collateral as contractually required in an amount, of at least $35,000,000 in respect of any Hedge Agreement, of the Borrower or such Material Subsidiary (as the case may be), in each case, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness or Hedge Agreement; or (ii) any event of default shall exist under any agreement or instrument relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or
(e)The Borrower or any of its Material Subsidiaries shall fail to pay any principal of or premium or interest in respect of any operating lease in respect of which the payment obligations of the Borrower have a present value of at least $35,000,000, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in such operating lease, if the effect of such failure is to terminate, or to permit the termination of, such operating lease; or
(f)The Borrower or any of its Material Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Material Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Material Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or
(g)Judgments or orders for the payment of money that exceeds any applicable insurance coverage (the insurer of which shall be rated at least “A” by A.M. Best Company) by more than $35,000,000 in the aggregate shall be rendered against the Borrower or any Material Subsidiary and such judgments or orders shall continue unsatisfied or unstayed for a period of 45 days; or
(h)(i) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
70

under the Securities Exchange Act of 1934), directly or indirectly, of 30% or more of the equity securities of the Borrower entitled to vote for members of the board of directors of the Borrower; or (ii) during any period of 24 consecutive months, a majority of the members of the board of directors of the Borrower cease (other than due to death or disability) to be composed of individuals (A) who were members of that board on the first day of such period, (B) whose election or nomination to that board was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or (C) whose election or nomination to that board was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board; or
(i)(i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $35,000,000, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $35,000,000;
then, and in any such event, the Agent shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances (other than L/C Advances) and of the Issuing Banks to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States of America, (A) the obligation of each Lender to make Advances (other than L/C Advances) and of the Issuing Banks to issue Letters of Credit shall automatically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower and (iii) exercise all rights and remedies available to it under this Agreement, the other Loan Documents and applicable Law.
Section 6.02Actions in Respect of Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Agent may with the consent, or shall at the request, of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, (a) make demand upon the Borrower to, and forthwith upon such demand the Borrower will Cash Collateralize the aggregate Available Amount of all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder) or (b) make such other arrangements in respect of the outstanding Letters of Credit as shall be acceptable to the Required Lenders, provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States of America, the Borrower will Cash Collateralize the aggregate Available Amount of all Letters of Credit then outstanding, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. If at any time the Agent determines that any funds held in the L/C Cash Deposit Account are subject to any right or interest of any Person other than the Agent, the Issuing Banks and the Lenders or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the L/C Cash Deposit Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C
71

Cash Deposit Account that are free and clear of any such right and interest. Upon the drawing of any Letter of Credit, to the extent funds are on deposit in the L/C Cash Deposit Account, such funds shall be applied to reimburse the Issuing Banks to the extent permitted by applicable Law, or each Lender to the extent such Lender has funded a Revolving Advance in respect of such Letter of Credit. The Borrower hereby grants to the Agent, for the benefit of the Issuing Banks and the Lenders, a Lien upon and security interest in the L/C Cash Deposit Account and all amounts held therein from time to time as security for the L/C Obligations, and for application to the Borrower’s reimbursement obligations as and when the same shall arise. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. After all such Letters of Credit shall have expired or been fully drawn upon and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such L/C Cash Deposit Account shall be promptly returned to the Borrower.
ARTICLE VII

THE AGENT
Section 7.02Appointment and Authority. Each of the Lenders (for purposes of this Article, references to the Lenders shall also mean the Issuing Banks) hereby irrevocably appoints Barclays to act on its behalf as the Agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as set forth in Section 7.06, the provisions of this Article are solely for the benefit of the Agent and the Lenders, and neither the Borrower nor any of its Affiliates shall have rights as a third party beneficiary of any of such provisions.
Section 7.02Rights as a Lender. The Person serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Agent hereunder and without any duty to account therefor to the Lenders.
Section 7.03Exculpatory Provisions. The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agent:
(a)    shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b)    shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein), provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable Law; and
72

(c)    shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.
The Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 6.01 and Section 8.01) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final, non-appealable judgment by a court of competent jurisdiction. The Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Agent by the Borrower or a Lender.
The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.
Section 7.04Reliance by Agent. The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of any Advance, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Agent may presume that such condition is satisfactory to such Lender or such Issuing Bank unless the Agent shall have received notice to the contrary from such Lender or such Issuing Bank prior to the making of such Advance or the issuance of such Letter of Credit. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in good faith in accordance with the advice of any such counsel, accountants or experts.
Section 7.05Delegation of Duties. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.
Section 7.06Resignation of Agent. The Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower so long as no Event of Default has occurred and is
73

continuing, to appoint a successor, which shall be a bank with an office in the United States of America, or an Affiliate of any such bank with an office in the United States of America. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 45 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent meeting the qualifications set forth above; provided that if the Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Agent shall be as agreed between the Borrower and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 8.04 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent.
Section 7.07Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section 7.08No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Arrangers, Syndication Agent, Co-Sustainability Structuring Agents, Co-Documentation Agents or other agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Agent or a Lender hereunder.
Section 7.09Issuing Banks. Each Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each Issuing Bank shall have all of the benefits and immunities provided in this Article VII (other than Section 7.02) to the same extent as such provisions apply to the Agent.
Section 7.10Certain ERISA Matters.
(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Agent, the Arrangers and their
74

respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower, that at least one of the following is and will be true:
(i)such Lender is not using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Advances, the Letters of Credit or the Commitments,
(ii)the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement,
(iii)(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Advances, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement, or
(iv)such other representation, warranty and covenant as may be agreed in writing between the Agent, in its sole discretion, and such Lender.
(b)In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower, that none of the Agent or the Arrangers, or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Agent under this Agreement, any Loan Document or any documents related to hereto or thereto).
(c)The Agent and each Arranger hereby inform the Lenders that each such Person is not undertaking to provide investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Advances, the Letters of Credit, the Commitments and this Agreement, (ii) may
75

recognize a gain if it extended the Advances, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Advances, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
Section 7.11Erroneous Payments.
(a)Each Lender hereby agrees that (x) if the Agent notifies such Lender that the Agent has determined in its sole discretion that any funds received by such Lender from the Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such Lender (whether or not known to such Lender), and demands the return of such Payment (or a portion thereof), such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender shall not assert, and hereby waives, as to the Agent, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Payments received, including without limitation any defense based on “discharge for value” or any similar doctrine. A notice of the Agent to any Lender under this Section 7.11 shall be conclusive, absent manifest error.
(b)Each Lender hereby further agrees that if it receives a Payment from the Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on notice, in each such case, that an error has been made with respect to such Payment. Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender shall promptly notify the Agent of such occurrence and, upon demand from the Agent, it shall promptly, but in no event later than one Business Day thereafter, return to the Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(c)The Borrower hereby agrees that (x) in the event an erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Payment (or portion thereof) for any reason, the Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower, except, in each case of this clause (y), to the extent such erroneous Payment is, and solely with respect to the amount of such erroneous Payment that is, comprised of funds received by the Agent from the Borrower for the purpose of making such erroneous Payment.
76

(d)Each party’s obligations under this Section 7.11 shall survive the resignation or replacement of the Agent or any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations under any Loan Document.
(e)For purposes of this Section 7.11, the term “Lender” includes any Issuing Bank.
ARTICLE VIII

MISCELLANEOUS
Section 8.01Amendments, Etc. Except as provided in Section 2.08(c) with respect to alternate rates of interest and Section 2.21 with respect to the extension of the then-existing Termination Date, no amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall
(a)unless agreed to by each Lender directly affected thereby, (i) reduce or forgive the principal amount of any Advance or the Borrower’s obligations to reimburse any drawing on a Letter of Credit, reduce the rate of or forgive any interest thereon (provided that only the consent of the Required Lenders shall be required to waive the applicability of any post-default increase in interest rates), or reduce or forgive any fees hereunder (other than fees payable to the Agent, the Arrangers, any Issuing Bank or the Swingline Lender, if any, for their own respective accounts), (ii) extend the final scheduled maturity date or any other scheduled date for the payment of any principal of or interest on any Advance, extend the time of payment of any obligation of the Borrower to reimburse any drawing on any Letter of Credit or any interest thereon, extend the expiry date of any Letter of Credit beyond the Letter of Credit Expiration Date, or extend the time of payment of any fees hereunder (other than fees payable to the Agent, the Arrangers, any Issuing Bank or the Swingline Lender, if any, for their own respective accounts), or (iii) reinstate or increase any Revolving Credit Commitment of any such Lender over the amount thereof in effect or extend the maturity thereof (it being understood that a waiver of any condition precedent set forth in Section 3.02 or of any Default, if agreed to by the Required Lenders or all Lenders (as may be required hereunder with respect to such waiver), shall not constitute such an increase);
(b)unless agreed to by all of the Lenders, (i) reduce the percentage of the aggregate Revolving Credit Commitments or of the aggregate unpaid principal amount of the Advances, or the number or percentage of Lenders, that shall be required for the Lenders or any of them to take or approve, or direct the Agent to take, any action hereunder or under any other Loan Document (including as set forth in the definition of “Required Lenders”), (ii) change any other provision of this Agreement or any of the other Loan Documents requiring, by its terms, the consent or approval of all the Lenders for such amendment, modification, waiver, discharge or termination thereof or any consent to any departure by the Borrower therefrom, or (iii) change or waive any provision of Section 2.15, any other provision of this Agreement or any other Loan Document requiring pro rata treatment of any Lenders, or this Section 8.01 or Section 2.19(b); and
(c)unless agreed to by the Issuing Banks, the Swingline Lender, if any, or the Agent in addition to the Lenders required as provided hereinabove to take such action, affect the respective rights
77

or obligations of the Issuing Banks, the Swingline Lender, if any, or the Agent, as applicable, hereunder or under any of the other Loan Documents.
(d)Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) pursuant to an increase in the Revolving Credit Commitment pursuant to Section 2.18 with only the consents prescribed by such Section.
(e)If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower, each Issuing Bank and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 8.07, and (ii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Section 2.11 and Section 2.14, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 8.04(e) had the Advances of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.
Section 8.02Notices, Etc.
(a)All notices and other communications provided for hereunder shall be either (x) in writing (including facsimile communication) and mailed, faxed or delivered or (y) as and to the extent set forth in Sections 8.02(b) and (c) and in the proviso to this Section 8.02(a), if to the Borrower, at the address specified on Schedule 8.02; if to any Lender, at its Domestic Lending Office; if to the Agent, at the address specified on Schedule 8.02; if to the Swingline Lender, at the address specified by the Swingline Lender to the Borrower and the Agent, and if to any Issuing Bank, at the address specified on Schedule 8.02 or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed or faxed, be effective when deposited in the mails or faxed, respectively, except that notices and communications to the Agent pursuant to Article II, Article III or Article VIII shall not be effective until received by the Agent. Delivery by facsimile of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b). Upon request of the Borrower, the Agent will provide to the Borrower (i) copies of each Administrative Questionnaire or (ii) the address of each Lender.
(b)Notices and other communications to the Lenders, the Agent and the Issuing Banks hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Agent and agreed to by the Borrower, provided
78

that the foregoing shall not apply to notices to any Lender or the Issuing Banks pursuant to Article II if such Lender or the Issuing Banks, as applicable, has notified the Agent and the Borrower that it is incapable of receiving notices under such Article by electronic communication. The Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Agent and the Borrower otherwise agree, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(c)The Borrower agrees that the Agent may make materials delivered to the Agent pursuant to Section 5.01(h)(i), Section 5.01(h)(ii) and Section 5.01(h)(iv), as well as any other written information, documents, instruments and other material relating to the Borrower or any of its Subsidiaries and relating to this Agreement, the Notes or the transactions contemplated hereby, or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby (collectively, the “Communications”) available to the Lenders by posting such notices on Intralinks or a substantially similar electronic system (the “Platform”). The Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Agent or any of its Affiliates in connection with the Platform.
(d)Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender for purposes of this Agreement; provided that if requested by any Lender the Agent shall deliver a copy of the Communications to such Lender by e-mail, facsimile or mail. Each Lender agrees (i) to notify the Agent in writing of such Lender’s e-mail address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Agent has on record an effective e-mail address for such Lender) and (ii) that any Notice may be sent to such e-mail address.
(e)The Borrower hereby acknowledges that certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that (w) all Communications that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Communications “PUBLIC,” the Borrower shall be deemed to have authorized the Agent, the Arrangers and the Lenders to treat such Communications as not containing any material
79

non-public information with respect to the Borrower or its securities for purposes of United States of America federal and state securities laws; (y) all Communications marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor;” and (z) the Agent and the Arrangers shall be entitled to treat any Communications that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public Investor.” Notwithstanding the foregoing, the Borrower shall be under no obligation to mark any Communications “PUBLIC.” Notwithstanding anything to the contrary herein, the Borrower and the Agent need not provide to any Public Lender any information, notice, or other document hereunder that is not public information, including without limitation, the Notice of Borrowing and any notice of Default.
Section 8.03No Waiver; Cumulative Remedies; Enforcement. No failure by any Lender, any Issuing Bank or the Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Borrower shall be vested exclusively in, and all actions and proceedings at Law in connection with such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with Article VI for the benefit of all the Lenders and the Issuing Banks; provided, however, that the foregoing shall not prohibit (a) the Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents, (b) any Issuing Bank from exercising the rights and remedies that inure to its benefit (solely in its capacity as an Issuing Bank) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 8.05 (subject to the terms of Section 2.15), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agent pursuant to Article VI and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.15, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
Section 8.04Costs and Expenses; Indemnity; Damage Waiver.
(a)The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the administration, modification and amendment of this Agreement, the Notes and the other Loan Documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of one law firm acting as counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other Loan Documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender in connection with the enforcement of rights under this Section 8.04(a).
80

(b)The Borrower agrees to indemnify and hold harmless the Agent (and any sub-agent thereof), each Lender, each Arranger, the Syndication Agent, the Co-Sustainability Structuring Agents, the Co-Documentation Agents and each Related Party of any of the foregoing (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith, whether based on contract, tort or any other theory), (i) the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of any Advance or Letter of Credit (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), in each case, whether or not the transactions contemplated herein or therein are consummated, or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, provided that such indemnity shall not, as to any Indemnified Party, be available to the extent (a) such fees and expenses are expressly stated in this Agreement to be payable by the Indemnified Party, included expenses payable under Section 2.14, Section 5.01(e) and Section 8.07(b) or (b) such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence, willful misconduct or material breach of its obligations under this Agreement, in which case any fees and expenses previously paid or advanced by the Borrower to such Indemnified Party in respect of such indemnified obligation will be returned by such Indemnified Party. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, equityholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto, and whether or not the transactions contemplated hereby are consummated, provided that if the Borrower and such Indemnified Party are adverse parties in any such litigation or proceeding, and the Borrower prevails in a final, non-appealable judgment by a court of competent jurisdiction, any amounts under this Section 8.04(b) previously paid or advanced by the Borrower to such Indemnified Party pursuant to this Section 8.04(b) will be returned by such Indemnified Party.
(c)To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Agent (or any sub-agent thereof), any Issuing Bank or any Related Party of any of the foregoing (and without limiting its obligation to do so), each Lender severally agrees to pay to the Agent (or any such sub-agent), such Issuing Bank or such Related Party, as the case may be, such Lender’s Ratable Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub-agent) or such Issuing Bank in its capacity as such, or against any Related Party of any of the foregoing acting for the Agent (or any such sub-agent) or such Issuing Bank in connection with such capacity.
(d)Without limiting the rights of indemnification of the Indemnified Parties set forth in this Agreement with respect to liabilities asserted by third parties, each party hereto also agrees not to assert any claim for special, indirect, consequential or punitive damages against the other parties hereto, or any Related Party of any party hereto, on any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any other Loan Document, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or the Letters of Credit. No Indemnified Party
81

shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems (including Intralinks, SyndTrak or similar systems) in connection with this Agreement or the other Loan Documents, provided that such indemnity shall not, as to any Indemnified Party, be available to the extent such damages are found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct.
(e)If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Revolving Advance, as a result of a payment or Conversion pursuant to Section 2.08(e) or (f), Section 2.10 or Section 2.12, acceleration of the maturity of the Revolving Advances pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Revolving Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by the Borrower pursuant to Section 2.19, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Revolving Advance.
(f)Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Section 2.02(c), Section 2.11, Section 2.14 and Section 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes.
Section 8.05Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Advances due and payable pursuant to the provisions of Section 6.01, each Lender, each Issuing Bank and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender, such Issuing Bank or any such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or Issuing Bank, whether or not such Lender or Issuing Bank shall have made any demand under this Agreement or such Note and although such obligations may be contingent or unmatured or are owed to a branch or office of such Lender or such Issuing Bank different from the branch or office holding such deposit or obligated on such indebtedness. Each Lender and each Issuing Bank agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and each Issuing Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have.
Section 8.06Effectiveness; Binding Effect. Except as provided in Section 3.01, this Agreement shall become effective when it shall have been executed by the Borrower and the Agent and when the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior
82

written consent of the Lenders (and any purported assignment without such consent shall be null and void).
Section 8.07Successors and Assigns.
(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Agent and each Lender (and any purported assignment or transfer without such consent shall be null and void) and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)Any Lender may at any time assign to one or more assignees (other than to an Ineligible Institution) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, Swingline Exposure and the Revolving Advances (including for purposes of this subsection (b), participations in L/C Obligations) at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i)Minimum Amounts.
(A)in the case of an assignment of the entire remaining amount of the assigning Lender’s Revolving Credit Commitment and the Revolving Advances at the time owing to it or in the case of an assignment to a Lender, no minimum amount need be assigned; and
(B)in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Revolving Credit Commitment (which for this purpose includes Revolving Advances outstanding thereunder) or, if the Revolving Credit Commitment is not then in effect, the principal outstanding balance of the Revolving Advances of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to which such assignment is delivered to the Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
83

(ii)Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Revolving Advances, L/C Obligations, Swingline Exposure or the Revolving Credit Commitment assigned, and each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement;
(iii)Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
(A)the consent of the Borrower (such consent not to be unreasonably withheld or delayed; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Agent within ten (10) Business Days after having received written notice thereof) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;
(B)the consent of the Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender;
(C)the consent of each Issuing Bank (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender; and
(D)the consent of the Swingline Lender, if any, (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under Swingline Advances (whether or not then outstanding).
(iv)Assignment and Assumption. The parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that no such fee shall be payable in the case of an assignment made at the request of the Borrower to an existing Lender. The assignee, if it is not a Lender, shall deliver to the Agent an Administrative Questionnaire.
(v)No Assignment to Ineligible Institutions. No such assignment shall be made to any Ineligible Institution.
Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section and notice thereof to the Borrower, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an
84

Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 2.11, Section 2.14 and Section 8.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.
(c)Register. The Agent shall maintain at the Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Credit Commitments of, and principal amounts of the Advances and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d)Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Agent, sell participations to any Person (other than an Ineligible Institution) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, Swingline Exposure and/or the Revolving Advances (including such Lender’s participations in L/C Obligations) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Agent, the Lenders and the Issuing Banks shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, any Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, any Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification addressing the matters set forth in clause (iv) above to the extent subject to such participation. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.11, Section 2.14 and Section 8.04(e) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 8.05 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Advances or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have
85

any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Advances or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Advance or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.
(e)Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 2.11 or Section 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as though it were a Lender.
(f)Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central banking authority; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(g)Resignation as an Issuing Bank after Assignment. Notwithstanding anything to the contrary contained herein, if at any time any Issuing Bank assigns all of its Revolving Credit Commitment and Revolving Advances pursuant to subsection (b) above, such Issuing Bank may, upon 30 days’ notice to the Borrower and the Lenders, resign as an Issuing Bank. If any Issuing Bank resigns, it shall retain all the rights, powers, privileges and duties of an Issuing Bank hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an Issuing Bank and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Advances or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).
(h)The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent.
Section 8.08Confidentiality. Neither the Agent nor any Lender may disclose to any Person any confidential, proprietary or non-public information of the Borrower furnished to the Agent or the Lenders by the Borrower (such information being referred to collectively herein as the “Borrower Information”), except that each of the Agent and each of the Lenders may disclose Borrower Information (i) to its and its Affiliates’ employees, officers, directors, agents and advisors having a need to know in connection with this Agreement (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Borrower Information and instructed to keep such
86

Borrower Information confidential on substantially the same terms as provided herein), (ii) to the extent requested by any regulatory authority or self-regulatory body, (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section 8.08, (A) to any assignee or participant or prospective assignee or participant, (B) to any direct, indirect, actual or prospective counterparty (and its advisor) to any swap, derivative or securitization transaction related to the obligations under this Agreement and (C) to any credit insurance provider relating to the Borrower and its Obligations, (vii) to the extent such Borrower Information (A) is or becomes generally available to the public on a non-confidential basis other than as a result of a breach of this Section 8.08 by the Agent or such Lender or their Related Parties, or (B) is or becomes available to the Agent or such Lender on a nonconfidential basis from a source other than the Borrower (provided that the source of such information was not known by the recipient after inquiry to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Borrower or any other Person with respect to such information) and (viii) with the consent of the Borrower. The obligations under this Section 8.08 shall survive for two calendar years after the date of the termination of this Agreement.
Section 8.09Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the Laws of the State of New York.
Section 8.10Counterparts; Integration. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” and words of like import in this Agreement or in any Loan Documents shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
Section 8.11Jurisdiction, Etc.
(a)Each of the parties hereto hereby submits to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in the Borough of Manhattan in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by Law, in such federal court.
(b)Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue
87

of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State court or federal court of the United States of America sitting in the Borough of Manhattan in New York City, and any appellate court from any thereof. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Section 8.12Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Agent, any Issuing Bank or any Lender, or the Agent, any Issuing Bank or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent, such Issuing Bank or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and each Issuing Bank severally agrees to pay to the Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the Issuing Banks under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
Section 8.13Patriot Act and Beneficial Ownership Regulation. The Agent and each Lender hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act and the Beneficial Ownership Regulation, it is required to obtain, verify and record information that identifies each borrower (including the Borrower), guarantor or grantor (the “Loan Parties”), which information includes the name and address of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the PATRIOT Act and the Beneficial Ownership Regulation. The Borrower shall provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Agent or any Lender in order to assist the Agent and such Lender in maintaining compliance with the PATRIOT Act and the Beneficial Ownership Regulation.
Section 8.14Waiver of Jury Trial. EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR THE ACTIONS OF THE BORROWER, THE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section 8.15No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower, on the one hand, and the Agent, each of the Lenders and each of the Arrangers, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each of the Agent, the Lenders and the Arrangers is and has been acting solely as a principal and is not the financial
88

advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Agent nor any Lender or Arranger has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Agent or any Lender or Arranger has advised or is currently advising the Borrower or any of its Affiliates on other matters) and neither the Agent nor any Lender or Arranger has any obligation to the Borrower with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Agent, each of the Lenders and the Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Agent nor any Lender or Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Agent and each Lender and Arranger have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by Law, any claims that it may have against the Agent and each Lender and Arranger with respect to any breach or alleged breach of agency or fiduciary duty in connection with the Loan Documents.
Section 8.16Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Agent and each Lender, regardless of any investigation made by the Agent or any Lender or on their behalf, and shall continue in full force and effect as long as any Advance or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
Section 8.17Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 8.18Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b)the effects of any Bail-In Action on any such liability, including, if applicable:
89

(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
Section 8.19Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to an Affected Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
(b)As used in this Section 8.19, the following terms have the following meanings:
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following:
(i)a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b)
90

(ii)a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii)a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
Section 8.20Amendment and Restatement; Departing Lenders.
(a)The parties to this Agreement agree that, upon (a) the execution and delivery by each of the parties hereto of this Agreement and (b) satisfaction of the conditions set forth in Section 3.01, the terms and provisions of the Existing Credit Agreement shall be and hereby are amended, superseded and restated in their entirety by the terms and provisions of this Agreement. This Agreement is not intended to and shall not constitute a novation. All Advances made and obligations incurred under the Existing Credit Agreement which are outstanding on the Effective Date shall continue as Advances and obligations under (and shall be governed by the terms of) this Agreement and the other Loan Documents. Without limiting the foregoing, upon the Effective Date: (i) all references in the “Loan Documents” (as defined in the Existing Credit Agreement) to the “Agent”, the “Credit Agreement” and the “Loan Documents” shall be deemed to refer to the Agent, this Agreement and the Loan Documents, respectively, (ii) the Existing Letters of Credit which remain outstanding on the Effective Date shall continue as Letters of Credit under (and shall be governed by the terms of) this Agreement, (iii) all obligations with any Lender or any Affiliate of any Lender under the Existing Credit Agreement or the “Loan Documents” (as defined in the Existing Credit Agreement) which are outstanding on the Effective Date shall continue as obligations under this Agreement and the other Loan Documents (subject to clause (b) below), and (iv) the Agent shall make such reallocations, sales, assignments or other relevant actions in respect of outstanding Advances under the Existing Credit Agreement as are necessary to keep outstanding Revolving Advances ratable with the revised Ratable Share of the Lenders on the Effective Date.
(b)Each Departing Lender desires and hereby agrees to assign all of its rights and obligations as a Lender under the Existing Credit Agreement to the other Lenders in accordance with this clause (b). Each of the Agent, the Lenders and the Borrower hereby consents to (i) the reallocation of the Commitments held by each Departing Lender under the Existing Credit Agreement to the other Lenders, and (ii) each Departing Lender’s assignment of its rights, interests, liabilities and obligations under the Existing Credit Agreement to the other Lenders, in each case, as described below. On the Effective Date and after giving effect to such reallocation and assignment, the Commitment of each Departing Lender under the Existing Credit Agreement shall terminate and the Commitment of each Lender hereunder shall be as set forth on Schedule 1.01(a) attached hereto, and each Lender hereby consents to the Commitments set forth on Schedule 1.01(a) attached hereto. The reallocation of the aggregate Commitments hereunder among the Lenders, including the assignment by each Departing Lender of all of its respective rights, interests, liabilities and obligations under the Existing Credit Agreement to the other Lenders, shall be deemed to have been consummated pursuant to the terms of the Assignment and Assumption attached as Exhibit C to the Existing Credit Agreement as if the Lenders and each Departing Lender had executed an Assignment and Assumption with respect to such reallocation; provided that in connection with such reallocation, each Departing Lender shall receive on the Effective Date payment of an amount equal to the
91

outstanding principal of its Advances, accrued interest thereon, accrued fees and all other amounts payable to it under the Existing Credit Agreement and the other “Loan Documents” (as defined in the Existing Credit Agreement) (other than obligations to pay fees and expenses with respect to which the Borrower has not received an invoice, contingent indemnity obligations and other contingent obligations owing to it under the “Loan Documents” (as defined in the Existing Credit Agreement)). The Departing Lenders shall not be Lenders hereunder, and for the avoidance of doubt, each Departing Lender is only a party to this Agreement with respect to this Section 8.20 and has no other rights or obligations under this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

92

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
PINNACLE WEST CAPITAL CORPORATION
By    /s/ Andrew Cooper____________________
Name:    Andrew Cooper
Title:    Vice President and Treasurer

93

ADMINISTRATIVE AGENT:    BARCLAYS BANK PLC, as Agent, Co-Sustainability     Structuring Agent, Issuing Bank and Lender

By    /s/ Sam Yoo                
Name:     Sam Yoo            
Title:    Managing Director        

94

MIZUHO BANK, LTD., as Syndication Agent, Co-    Sustainability Structuring Agent, Issuing Bank and Lender

By    /s/ Edward Sacks            
Name:    /s/ Edward Sacks        
Title:    Executive Director        

95

LENDERS:    Bank of America, as a Lender and as an Issuing Bank

By    /s/ Michael Moulton            
Name:    Michael Moulton            
Title:    Vice President            

96

LENDERS:    BNP Paribas, as a Lender and as an Issuing Bank

By    /s/ Nicole Rodriquez            
Name:    Nicole Rodriguez            
Title:    Director            

By    /s/ Christopher Sked            
Name:    Christopher Sked            
Title:    Managing Director        

97

LENDERS:    JPMorgan Chase Bank, N.A as a Lender and as an
Issuing Bank

By    /s/ Nancy R. Barwig            
Name:    Nancy R. Barwig            
Title:    Executive Director        

98

LENDERS:    MUFG Bank, Ltd., as a Lender and as an Issuing Bank

By    /s/ Ricky Vargas            
Name:    Ricky Vargas            
Title:    Vice President            

99

LENDERS:    Truist Bank, as a Lender

By    /s/ Andrew Johnson            
Name:    Andrew Johnson            
Title:    Managing Director        
100

LENDERS:    Wells Fargo Bank, National Association, as a Lender
and as an Issuing Bank

By    /s/ Gregory R. Gredvig            
Name:    Gregory R. Gredvig            
Title:    Director            

101

LENDERS:    Bank of Montreal, Chicago Branch, as a Lender

By    /s/ Darren Thomas            
Name:    Darren Thomas                
Title:    Director            

102

LENDERS:    The Bank of New York Mellon, as a Lender

By    /s/ Molly H. Ross            
Name:    Molly H. Ross                
Title:    Vice President            

103

LENDERS:    The Bank of Nova Scotia, as a Lender

By    /s/ David Dewar            
Name:    David Dewar                
Title:    Director            
104

LENDERS:    CITIBANK, N.A., as a Lender

By    /s/ Hans Lin                
Name:    Hans Lin                
Title:    Director            

105

LENDERS:    KEYBANK NATIONAL ASSOCIATION, as a
Lender

By    /s/ Keven D. Smith            
Name:    Keven D. Smith                
Title:    Senior Vice President        

106

LENDERS:    PNC Bank, National Association, as a Lender

By    /s/ Richard G. Tutich            
Name:    Richard G. Tutich            
Title:    Vice President            

107

LENDERS:    Royal Bank of Canada, as a Lender

By    /s/ Martina Wellik            
Name:    Martina Wellik                
Title:    Authorized Signatory        

108

LENDERS:    TD Bank, N.A. as a Lender

By    /s/ Steve Levi                
Name:    Steve Levi                
Title:    Senior Vice President        

109

LENDERS:    U.S. Bank National Bank, as a Lender

By    /s/ Ryan Hutchins            
Name:    Ryan Hutchins                
Title:    Senior Vice President        

110

Each of the undersigned Departing Lenders hereby acknowledges and agrees that, from and after the Effective Date, it is no longer a party to the Existing Credit Agreement or any of the Loan Documents executed in connection therewith and is a party to this Agreement solely with respect to Section 8.20 of this Agreement.

    ZIONS BANCORPORATION, N.A. DBA
NATIONAL BANK OF A, as a Departing Lender

By    /s/ Sabrina Aaronson            
Name:    Sabrina Aaronson            
Title:    Vice President            

SCHEDULE 1.01(a)
COMMITMENTS AND RATABLE SHARES

									
Bank	Revolving Credit
Commitment	Ratable Share	
Barclays Bank PLC	$13,999,999.98	7.00%	
Mizuho Bank, Ltd.	$14,000,000.00	7.00%	
Bank of America, N.A.	$14,000,000.00	7.00%	
BNP Paribas	$14,000,000.00	7.00%	
JPMorgan Chase Bank, N.A.	$14,000,000.00	7.00%	
MUFG Bank, Ltd.	$14,000,000.00	7.00%	
Truist Bank	$14,000,000.00	7.00%	
Wells Fargo Bank, National Association	$14,000,000.00	7.00%	
Bank of Montreal, Chicago Branch	$9,777,777.78	4.89%	
The Bank of New York Mellon	$9,777,777.78	4.89%	
The Bank of Nova Scotia	$9,777,777.78	4.89%	
Citibank, N.A.	$9,777,777.78	4.89%	
KeyBank National Association	$9,777,777.78	4.89%	
PNC Bank, National Association	$9,777,777.78	4.89%	
Royal Bank of Canada	$9,777,777.78	4.89%	
TD Bank, N.A.	$9,777,777.78	4.89%	
U.S. Bank National Association	$9,777,777.78	4.89%	
TOTAL	$200,000,000.00	100.000000000%	

SCHEDULE 1.01(b)
SUSTAINABILITY TABLE

																					
KPI Metric	Annual Sustainability Targets:
Carbon Intensity Targets and OSHA Incident Targets	
Reference Year	2021	2022	2023	2024	2025		
Carbon Intensity Target (Minimum)	599	592	578	540	491		
Carbon Intensity Target (Maximum)	732	723	706	660	600		
OSHA Incident Target (Minimum)	31	31	31	31	31		
OSHA Incident Target (Maximum)	37	37	37	37	37		

The OSHA Incident Amount for the fiscal year ending December 31, 2019 is 41.
The OSHA Incident Amount for the fiscal year ending December 31, 2020 is 25, excluding COVID-19.

SCHEDULE 4.01(j)
SUBSIDIARIES

Arizona Public Service Company

SCHEDULE 4.01(k)
EXISTING INDEBTEDNESS

None.

SCHEDULE 8.02
CERTAIN ADDRESSES FOR NOTICES

BORROWER:
Pinnacle West Capital Corporation
400 North 5th Street
Mail Station 9040
Phoenix, AZ 85004
Attention: Treasurer
Telephone: (602) 250-3300
Telecopier: (602) 250-3920
Electronic: Andrew.Cooper@pinnaclewest.com    

AGENT:
Agent’s Office
(for payments and Requests for Credit Extensions):
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attention: Philip Naber
Telephone: (212) 526-7375
Email: Philip.Naber@barclays.com

with copies to:

Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019
Attention: Bank Debt Management
Telephone: (212) 526-9531
Email: LTMNY@barclays.com

Agent’s Account/Barclays Bank Agency Service Wiring Information
Barclays Bank PLC
New York, New York
ABA: 026002574               
Account Number: 050-019104  
Account Name: Clad Control Account
Ref: Pinnacle West Capital Corporation

Other Notices as Agent:
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attention: Philip Naber
Telephone: (212) 526-7375
Email: Philip.Naber@barclays.com

with copies to:

Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019
Attention: Bank Debt Management
Telephone: (212) 526-9531
Email: LTMNY@barclays.com

ISSUING BANKS:
Barclays Bank PLC
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attn. US Letter of Credit Team
Email xraletterofcredit@barclays.com

Mizuho Bank, Ltd.

Mizuho Bank, Ltd.
1800 Plaza Ten
Harborside Financial Ctr.
Jersey City, NJ 07311
Attention: Hyunsook (Sophia) Hwang
Telephone: 201-626-9416
Facsimile: 201-626-9941
Email: LAU_USCORP3@MIZUHOCBUS.COM

Bank of America, N.A.

Bank of America, N.A.
100 N. Tryon Street
Charlotte, NC 28255-0001
Attention: William A. Merritt, III
Telephone: (980) 386-9762
Facsimile: (980) 683-6339
E-mail: william.merritt@baml.com

BNP Paribas

BNP Paribas
c/o BNP Paribas RCC, Inc.
Newport Tower – Suite 188
525 Washington Boulevard
Jersey City, New Jersey 07310
Attn: Letters of Credit
E-mail: nyls.agency.support@us.bnpparibas.com
With a cc to: NYTFStandby@us.bnpparibas.com

JPMorgan Chase Bank, N.A.

JPMorgan Chase Bank, N.A.
8181 Communications Pkwy
Plano, TX 75024
Attention: Nancy R. Barwig
Telephone: (972) 324-1721
Facsimile: (312) 732-1762
E-mail: nancy.r.barwig@jpmorgan.com
With a cc to: cb.lc.service.team@chase.com

MUFG Bank, Ltd.

MUFG Bank, Ltd.
1221 Avenue of the Americas
New York, NY 10020-1104
Facsimile: 201-521-2304; 201-521-2305        
E-Mail: 2015212304@njhr2163.btmna.com; irisuscb@us.mufg.jp

Truist Bank

Truist Securities, Inc.
Truist Bank
3333 Peachtree Road
Atlanta, GA 30326
Attention: Andrew Johnson
Telephone: (404) 439-7451
Facsimile: (404) 439-7470
E-mail: Andrew.johnson@truist.com

Wells Fargo Bank, National Association

Wells Fargo Bank, N.A.
Wholesale Loan Services
7711 Plantation Road
MAC R4058-010
Roanoke, VA  24019
Attention: Tammy Pentecost
Telephone: 540-759-3118 
Facsimile: 866-270-7214
E-mail: tammy.pentecost@wellsfargo.com
With a cc to: sheila.shaffer@wellsfargo.com

EXHIBIT A — FORM OF
PROMISSORY NOTE

______________, 20__

FOR VALUE RECEIVED, the undersigned, PINNACLE WEST CAPITAL CORPORATION, an Arizona corporation (the “Borrower”), hereby promises to pay to the order of _______ or its registered assigns (the “Lender”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of each Advance from time to time made by the Lender to the Borrower pursuant to the Amended and Restated Five-Year Credit Agreement dated as of May 28, 2021 among the Borrower, the Lender and certain other lenders parties thereto, Barclays Bank PLC, as Agent for the Lender and such other lenders, and the issuing banks and other agents party thereto (as amended or modified from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined) outstanding on such date.
The Borrower promises to pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United States of America to the Agent for the account of the Lender in same day funds at the address and account specified on Schedule 8.02. Each Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time the Lender’s Unused Commitment, the indebtedness of the Borrower resulting from each such Advance being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
PINNACLE WEST CAPITAL CORPORATION

By    _________________            
 Name:    _________________        
 Title:    _________________        
A-1

ADVANCES AND PAYMENTS OF PRINCIPAL

															
Date	Amount of Advance	Amount of Principal Paid or Prepaid	Unpaid Principal Balance	Notation
Made By	

A-2

EXHIBIT B — FORM OF NOTICE OF
BORROWING

Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below

Attention: Loan Operations

[Date]

Ladies and Gentlemen:

The undersigned, Pinnacle West Capital Corporation, refers to the Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021 (as amended or modified from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto, Barclays Bank PLC, as Agent for said Lenders and the Issuing Banks and other agents party thereto, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 2.02(a) of the Credit Agreement:
(i)    The Business Day of the Proposed Borrowing is ____________, 20___.
(ii)    The Type of Revolving Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii)    The aggregate amount of the Proposed Borrowing is $_____________.
[(iv)    The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is ___month[s].
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A)    the representations and warranties contained in Section 4.01 (other than Sections 4.01(k), 4.01(e)(ii) and 4.01(f)(ii)) of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;
(B)    no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default; and
(C)    before and after giving effect to the Proposed Borrowing and to the application of
B-1

the proceeds therefrom, as though made on and as of such date, the Indebtedness of the Borrower does not exceed that permitted by (i) applicable resolutions of the Board of Directors of the Borrower or (ii) applicable Laws of any Governmental Authority.
Very truly yours,
PINNACLE WEST CAPITAL CORPORATION

By    _________________            
 Name:    _________________        
 Title:    _________________        
B-2

EXHIBIT C — FORM OF
ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. Annex 1 attached hereto (the “Standard Terms and Conditions”) is hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date referred to below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including without limitation any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable Law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at Law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the “Assigned Interest”). Each such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor. Assignee shall deliver (if it is not already a Lender) to the Agent an Administrative Questionnaire.
1.Assignor: ________________________________
2.Assignee: ________________________________
[and is an Affiliate of [identify Bank]1]
3.Borrower: Pinnacle West Capital Corporation
4.Agent: Barclays Bank PLC, as the administrative agent under the Credit Agreement
5.Credit Agreement: The Amended and Restated Five-Year Credit Agreement dated as of May 28, 2021, by and among the Borrower, the Lenders party thereto, the Agent and the Issuing Banks and other agents party thereto.
6.Assigned Interest:

1 Select as applicable.
C-1

												
Aggregate Amount
of Commitment for
all Lenders	Amount of Commitment Assigned	Percentage Assigned of Commitment2	CUSIP Number	
				
$____________	$____________	___________%		

[7. Trade Date: ]3
Effective Date: ___, 20___[TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]

By    _________________            
 Name:    _________________        
 Title:    _________________        
ASSIGNEE
[NAME OF ASSIGNEE]

By    _________________            
 Name:    _________________        
 Title:    _________________    
[Consented to and]4 Accepted:
BARCLAYS BANK PLC, as Agent

By ___________________________
Name:
Title:

[Consented to:]5
[BARCLAYS BANK PLC, as Issuing Bank]

By ___________________________
Name:
Title:

2 Set forth, to at least 9 decimals, as a percentage of the Commitment of all Banks thereunder.
3 To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.
4 To be added only if the consent of the Agent is required by the terms of the Credit Agreement.
5 To be added only if the consent of the Borrower and/or other parties (e.g. Issuing Bank) is required by the terms of the Credit Agreement.
C-2

[MIZUHO BANK, LTD., as Issuing Bank]

By ___________________________
Name:
Title:

[BANK OF AMERICA, N.A., as Issuing Bank]

By ___________________________
Name:
Title:

[BNP PARIBAS, as Issuing Bank]

By ___________________________
Name:
Title:

[JPMORGAN CHASE BANK, N.A., as Issuing Bank]

By ___________________________
Name:
Title:

[MUFG BANK, LTD., as Issuing Bank]

By ___________________________
Name:
Title:

[TRUIST BANK, as Issuing Bank]

By ___________________________
Name:
Title:

[WELLS FARGO BANK, NATIONAL ASSOCIATION, as Issuing Bank]

By ___________________________
Name:
Title:

PINNACLE WEST CAPITAL CORPORATION

By ___________________________
Name:
Title:

C-3

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1.    Representations and Warranties.
1.1    Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower of any of its obligations under any Loan Document.
1.2    Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Eligible Assignee under Section 8.07 of the Credit Agreement (subject to such consents, if any, as may be required under Section 8.07 of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements referred to in Section 4.01(e) or delivered pursuant to Section 5.01(h), as applicable, thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, (vi) it has, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, and (vii) if it is a foreign lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2.    Payments. From and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other
C-4

amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
3.    General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the Law of the State of New York.

C-5

EXHIBIT D — FORM OF PRICING CERTIFICATE

Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below

Attention: Loan Operations

[Date]

Ladies and Gentlemen:

Please refer to the Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021 (as amended or modified from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among Pinnacle West Capital Corporation, as Borrower, certain Lenders party thereto, Barclays Bank PLC, as Agent for said Lenders and the Issuing Banks and other agents party thereto. This Pricing Certificate (this “Certificate”) is being delivered pursuant to Section 1.06 of the Credit Agreement.
The undersigned hereby certifies solely in [his/her] capacity as [insert title of officer] of the Borrower and not in an individual capacity (and without personal liability) that:
1.    I am the duly elected [insert title of officer] of the Borrower, and I am authorized to deliver this Certificate on behalf of the Borrower;
2.    The calculation of Carbon Intensity (including the Energy Efficiency and Distributed Generation Amounts), the OSHA Incident Amount and the Sustainability Margin Adjustment, in each case, for the 20[__] Reference Year, and attached hereto as Annex A, are true and correct as of the date hereof and evidences the Borrower’s qualification for a Sustainability Margin Adjustment (x) with respect to Eurodollar Rate Advances and Base Rate Advances, equal to [____]% per annum and (y) with respect to the Commitment Fee, equal to  [____]% per annum.
3.    The public reporting of the information set forth on Annex A for such Reference Year can be found at the following website: [____________________].
Very truly yours,
PINNACLE WEST CAPITAL CORPORATION

By    _________________            
 Name:    _________________        
 Title:    _________________        
D-1

ANNEX A

Carbon Intensity, OSHA Incident Amount and the Sustainability Margin Adjustment
D-2

U.S. $500,000,000
AMENDED AND RESTATED FIVE-YEAR CREDIT AGREEMENT
Dated as of May 28, 2021
among
ARIZONA PUBLIC SERVICE COMPANY,
as Borrower,

THE LENDERS PARTY HERETO,

BARCLAYS BANK PLC,
as Agent and Issuing Bank,

MIZUHO BANK, LTD.,
as Syndication Agent,

BARCLAYS BANK PLC,
MIZUHO BANK, LTD.,
as Co-Sustainability Structuring Agents,

MIZUHO BANK, LTD.,
BANK OF AMERICA, N.A.,
BNP PARIBAS,
JPMORGAN CHASE BANK, N.A.,
MUFG BANK, LTD.,
TRUIST BANK
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Issuing Banks,

BANK OF AMERICA, N.A.,
BNP PARIBAS,
JPMORGAN CHASE BANK, N.A.,
MUFG BANK, LTD.,
TRUIST BANK
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Co-Documentation Agents,

BARCLAYS BANK PLC,
MIZUHO BANK, LTD.,
BNP PARIBAS SECURITIES CORP.,
BOFA SECURITIES, INC.,
JPMORGAN CHASE BANK, N.A.,
MUFG BANK, LTD.,
TRUIST SECURITIES, INC.
and
WELLS FARGO SECURITIES, LLC,
as Joint Lead Arrangers and Joint Book Runners

TABLE OF CONTENTS

						
Article I DEFINITIONS AND ACCOUNTING TERMS	1	
Section 1.01    Certain Defined Terms	1	
Section 1.02    Other Interpretive Provisions	26	
Section 1.03    Accounting Terms	27	
Section 1.04    Rounding	28	
Section 1.05    Times of Day	28	
Section 1.06    Sustainability Adjustments	28	
Article II AMOUNTS AND TERMS OF THE ADVANCES and LETTERS OF CREDIT	30	
Section 2.01    The Revolving Advances and Letters of Credit	30	
Section 2.02    Making the Revolving Advances	30	
Section 2.03    Letters of Credit	31	
Section 2.03A    Swingline Advances	38	
Section 2.04    Fees    	40	
Section 2.05    Optional Termination or Reduction of the Commitments	40	
Section 2.06    Repayment of Advances	41	
Section 2.07    Interest on Advances	41	
Section 2.08    Interest Rate Determination	42	
Section 2.09    Optional Conversion of Revolving Advances	44	
Section 2.10    Prepayments of Advances	45	
Section 2.11    Increased Costs	45	
Section 2.12    Illegality	47	
Section 2.13    Payments and Computations	47	
Section 2.14    Taxes	48	
Section 2.15    Sharing of Payments, Etc	52	
Section 2.16    Evidence of Debt	52	
Section 2.17    Use of Proceeds	53	
Section 2.18    Increase in the Aggregate Revolving Credit Commitments	53	
Section 2.19    Affected Lenders	55	
Section 2.20    Replacement of Lenders	57	
Section 2.21    Extension of Termination Date	57	
Article III CONDITIONS PRECEDENT	58	
Section 3.01    Conditions Precedent to Effectiveness	58	
Section 3.02    Conditions Precedent to Each Credit Extension and Commitment Increase	60	
Section 3.03    Determinations Under Section 3.01	60	
Article IV REPRESENTATIONS AND WARRANTIES	61	
Section 4.01    Representations and Warranties of the Borrower	61	
Article V COVENANTS OF THE BORROWER	65	
Section 5.01    Affirmative Covenants	65	
Section 5.02    Negative Covenants	68	
i

						
Section 5.03    Financial Covenant	69	
Article VI EVENTS OF DEFAULT	70	
Section 6.01    Events of Default	70	
Section 6.02    Actions in Respect of Letters of Credit upon Default	72	
Article VII THE AGENT	72	
Section 7.01    Appointment and Authority	72	
Section 7.02    Rights as a Lender	72	
Section 7.03    Exculpatory Provisions	73	
Section 7.04    Reliance by Agent	73	
Section 7.05    Delegation of Duties	74	
Section 7.06    Resignation of Agent	74	
Section 7.07    Non-Reliance on Agent and Other Lenders	74	
Section 7.08    No Other Duties, Etc	74	
Section 7.09    Issuing Banks	74	
Section 7.10    Certain ERISA Matters	75	
Section 7.11    Erroneous Payments	76	
Article VIII MISCELLANEOUS	77	
Section 8.01    Amendments, Etc	77	
Section 8.02    Notices, Etc	78	
Section 8.03    No Waiver; Cumulative Remedies; Enforcement	80	
Section 8.04    Costs and Expenses; Indemnity; Damage Waiver	80	
Section 8.05    Right of Set-off	82	
Section 8.06    Effectiveness; Binding Effect	82	
Section 8.07    Successors and Assigns	82	
Section 8.08    Confidentiality	86	
Section 8.09    Governing Law	86	
Section 8.10    Counterparts; Integration	86	
Section 8.11    Jurisdiction, Etc	87	
Section 8.12    Payments Set Aside	87	
Section 8.13    Patriot Act and Beneficial Ownership Regulation	87	
Section 8.14    Waiver of Jury Trial	87	
Section 8.15    No Advisory or Fiduciary Responsibility	88	
Section 8.16    Survival of Representations and Warranties	88	
Section 8.17    Severability	88	
Section 8.18    Acknowledgement and Consent to Bail-In of Affected Financial Institutions	89	
Section 8.19    Acknowledgement Regarding Any Supported QFCs	89	
Section 8.20    Amendment and Restatement; Departing Lenders	90	

Schedules

ii

Schedule 1.01(a) Commitments and Ratable Shares
Schedule 1.01(b) Sustainability Table
Schedule 4.01(j) Subsidiaries
Schedule 4.01(k) Existing Indebtedness
Schedule 8.02 Certain Address for Notices

Exhibits

Exhibit A Form of Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Assignment and Assumption
Exhibit D Form of Pricing Certificate

iii

AMENDED AND RESTATED FIVE-YEAR CREDIT AGREEMENT

Dated as of May 28, 2021

ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation (the “Borrower”), the banks, financial institutions and other institutional lenders (the “Initial Lenders”) and initial issuing banks (the “Initial Issuing Banks”) listed on the signature pages hereof, the other Lenders (as hereinafter defined), BARCLAYS BANK PLC, as Agent for the Lenders (as hereinafter defined), MIZUHO BANK, LTD., as Syndication Agent, BARCLAYS BANK PLC and MIZUHO BANK, LTD., as Co-Sustainability Structuring Agents and BANK OF AMERICA, N.A., BNP PARIBAS, JPMORGAN CHASE BANK, N.A., MUFG BANK, LTD., TRUIST BANK and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Documentation Agents, agree as follows:
The Borrower, the banks, financial institutions party thereto and other institutional lenders party thereto (collectively, the “Existing Lenders”), the issuing banks party thereto (collectively, the “Existing Issuing Banks”), Barclays Bank PLC, as Agent for the Existing Lenders, Mizuho Bank, Ltd., as Syndication Agent and the other agents party thereto, are parties to that certain Five-Year Credit Agreement, dated as of July 12, 2018 (as amended, restated, amended and restated, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”), whereby the Existing Lenders made certain advances (collectively, the “Existing Advances”) to, and the Existing Issuing Banks issued letters of credit for the benefit of (collectively, the “Existing Letters of Credit”), the Borrower.
The Borrower has requested that the Lenders (as hereinafter defined), the Swingline Lender (as hereinafter defined) and the Issuing Lenders (as hereinafter defined) make advances and extend credit to it in an aggregate principal amount at any one time outstanding not exceeding the aggregate amount of the Lenders’ Commitments (as hereinafter defined), which can be increased hereunder in accordance with Section 2.18 and subject to the terms and conditions set forth herein, and that the Existing Advances and the Existing Letters of Credit outstanding on the date hereof be continued as Advances and Letters of Credit hereunder, respectively.
The Lenders, the Swingline Lender and the Issuing Lenders are willing to continue the Existing Advances made to, and the Existing Letters of Credit issued for the account of, the Borrower under the Existing Credit Agreement as Advances to and Letters of Credit for the account of the Borrower hereunder, and to make further extensions of credit as provided herein.
It is the intent of the parties hereto that this Agreement shall not constitute a novation of the obligations and liabilities existing under the Existing Credit Agreement or constitute a repayment of any such obligations and liabilities, and that this Agreement shall amend and restate the Existing Credit Agreement in its entirety.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
Article I

DEFINITIONS AND ACCOUNTING TERMS
Section1.01Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings:

“2020 Order” means Decision No. 77853, dated December 17, 2020, of the Arizona Corporation Commission.
“Additional Commitment Lender” has the meaning specified in Section 2.21(d).
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Agent.
“Advance” means a Revolving Advance or a Swingline Advance.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affected Lender” means any Lender, as reasonably determined by the Agent or if the Agent is the Affected Lender, by the Required Lenders, that (a) has failed to (i) fund all or any portion of any Revolving Advance within three (3) Business Days of the date such Revolving Advances were required to be funded hereunder unless such Lender notifies the Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in writing) has not been satisfied, or (ii) pay to the Agent, any Issuing Bank, the Swingline Lender, if any, or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit and funding obligations in respect of Swingline Advances) within three (3) Business Days of the date when due, (b) has notified the Borrower, the Agent, any Issuing Bank or any Lender in writing of its intention not to fund any Revolving Advance or any of its other funding obligations under this Agreement, (c) has failed, within three Business Days after written request by the Agent, or if the Agent is the Affected Lender, by the Required Lenders, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Revolving Advances and other funding obligations under this Agreement, (d) shall (or whose parent company shall) generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or shall have had any proceeding instituted by or against such Lender (or its parent company) seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian for, it or for any substantial part of its property) shall occur, or shall take (or whose parent company shall take) any corporate action to authorize any of the actions set forth above in this subsection (d) or (e) has become the subject of a Bail-In Action, provided that a Lender shall not be deemed to be an Affected Lender solely by virtue of the ownership or acquisition of any equity interest in any Lender or any Person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For
2

purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.
“Agent” means Barclays in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
“Agent’s Account” means the account of the Agent designated on Schedule 8.02 under the heading “Agent’s Account” or such other account as the Agent may designate to the Lenders and the Borrower from time to time.
“Agent’s Office” means the Agent’s address and, as appropriate, the Agent’s Account, or such other address or account as the Agent may from time to time notify the Borrower and the Lenders.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery, corruption or money laundering.
“Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Base Rate Advance and such Lender’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
“Applicable Rate” means, from time to time, the following percentages per annum determined by reference to the Public Debt Rating as set forth below:

Public Debt Rating S&P/Moody’s	Eurodollar Rate Advances	Base Rate Advances	Commitment Fee	
Level 1
AA-/Aa3 or above	0.750%	0.000%	0.060%	
Level 2
A+/A1	0.875%	0.000%	0.075%	
Level 3
A/A2	1.000%	0.000%	0.100%	
Level 4
A-/A3	1.125%	0.125%	0.125%	
Level 5
BBB+/Baa1 or below	1.250%	0.250%	0.175%	

It is hereby understood and agreed that the Applicable Rate shall be adjusted from time to time based upon the Sustainability Margin Adjustment (to be calculated and applied as set forth in Section 1.06); provided that in no event shall the Applicable Rate be less than zero.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of any entity that administers or manages a Lender.
“Arrangers” means, collectively, Barclays, Mizuho Bank, Ltd., BNP Paribas Securities Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A. (together with any affiliates it deems appropriate to
3

provide the services contemplated herein), MUFG Bank, Ltd., Truist Securities, Inc. and Wells Fargo Securities, LLC.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto.
“Assuming Lender” has the meaning specified in Section 2.18(d).
“Assumption Agreement” has the meaning specified in Section 2.18(d)(ii).
“Authorized Officer” means the chairman of the board, chief executive officer, chief operating officer, chief financial officer, chief accounting officer, president, any vice president, treasurer, controller or any assistant treasurer of the Borrower.
“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Barclays” means Barclays Bank PLC.
“Base Rate” means for any day a fluctuating rate per annum equal to the highest of:
(a)    the rate of interest in effect for such day as publicly announced from time to time by the Agent as its “prime rate”;
(b)    the Federal Funds Rate plus 0.50%; and
(c)    an amount equal to (i) the Eurodollar Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus (ii) 1%; provided that clause (c) shall not be applicable during any period in which the Eurodollar Rate is unavailable or unascertainable; provided further that, if the Base Rate shall be less than 1%, such rate shall be deemed to be 1% for purposes of this Agreement.
4

“Base Rate Advance” means a Revolving Advance that bears interest as provided in Section 2.07(a)(i).
“Benchmark” means, initially, LIBO Rate; provided that if a replacement of the Benchmark has occurred pursuant to Section 2.08(c), then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor:
(1)    For purposes of Section 2.08(c)(i), the first alternative set forth below that can be determined by the Agent:
(a)    the sum of: (i) Term SOFR and (ii) 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available Tenor of three-months’ duration, and 0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration, or
(b)    the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of LIBO Rate with a SOFR-based rate having approximately the same length as the interest payment period specified in Section 2.08(c)(i); and
(2)    For purposes of Section 2.08(c)(ii), the sum of (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time;
provided that, if the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Transition Event” means, with respect to any then-current Benchmark other than LIBO Rate, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New
5

York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation in form and substance acceptable to the Agent in its discretion.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Internal Revenue Code to which Section 4975 of the Internal Revenue Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Internal Revenue Code) the assets of any such “employee benefit plan” or “plan”.
“Borrower” has the meaning given to such term in the introductory paragraph hereof.
“Borrower Information” has the meaning specified in Section 8.08.
“Borrowing” means (a) a borrowing consisting of simultaneous Revolving Advances of the same Type made by each of the Lenders pursuant to Section 2.01(a) or (b) Swingline Advances.
“Business Day” means a day of the year on which banks are not required or authorized by Law to close in New York City or Phoenix, Arizona and, if the applicable Business Day relates to any Advance in which interest is calculated by reference to the Eurodollar Rate, on which dealings are carried on in the London interbank market.
“Capital Lease Obligations” means, subject to Section 1.03, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease or a finance lease on the balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
“Carbon Intensity” shall mean, for any Reference Year, the measurement of total carbon emissions, measured in pounds, per megawatt hour of energy delivered by the Borrower to its customers, and determined on a basis consistent with the determination of the Carbon Intensity Target (Minimum) and Carbon Intensity Target (Maximum) as of the Effective Date, as reported on the applicable Pricing Certificate pursuant to Section 1.06(f) and reflected in PWCC’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage) for such Reference Year. For the avoidance of doubt, energy delivered by the Borrower to customers also includes energy efficiency (consisting of total kilowatt hour sales lost due to programs designed to help customers avoid using electricity) and distributed generation (consisting of total kilowatt hour sales lost to customer-installed
6

electricity generation and storage technologies) as determined on a basis consistent with the determination of the Carbon Intensity Target (Minimum) and Carbon Intensity Target (Maximum) as of the Effective Date (the “Energy Efficiency and Distributed Generation Amounts”).
“Carbon Intensity Applicable Rate Adjustment Amount” means, with respect to any period between Sustainability Pricing Adjustment Dates:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances:
(i)negative 0.025%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the Carbon Intensity Target (Minimum) for such Reference Year;
(ii) 0.00%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the Carbon Intensity Target (Minimum) for such Reference Year but less than the Carbon Intensity Target (Maximum) for such Reference Year; and
(iii)positive 0.025%, if (A) the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the Carbon Intensity Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report the Carbon Intensity on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f);
(b)with respect to the Commitment Fee:
(i)negative 0.005%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the Carbon Intensity Target (Minimum) for such Reference Year;
(ii)0.000%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the Carbon Intensity Target (Minimum) for such Reference Year but less than the Carbon Intensity Target (Maximum) for such Reference Year; and
(iii)positive 0.005%, if (A) the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the Carbon Intensity Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report the Carbon Intensity on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
“Carbon Intensity Target (Maximum)” means, with respect to any Reference Year, the Carbon Intensity Target (Maximum) for such Reference Year as set forth in the Sustainability Table.
“Carbon Intensity Target (Minimum)” means, with respect to any Reference Year, the Carbon Intensity Target (Minimum) for such Reference Year as set forth in the Sustainability Table.
7

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption of any Law, (b) any change in any Law or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided, however, that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed a “Change in Law” regardless of the date enacted, adopted, issued or implemented.

“Commitment” means a Revolving Credit Commitment or a Letter of Credit Commitment.
“Commitment Date” has the meaning specified in Section 2.18(b).
“Commitment Fee” has the meaning specified in Section 2.04(a).
“Commitment Increase” has the meaning specified in Section 2.18(a).
“Consolidated” refers to the consolidation of accounts in accordance with GAAP.
“Consolidated Indebtedness” means, at any date, the Indebtedness of the Borrower and its Consolidated Subsidiaries determined on a Consolidated basis as of such date; provided, however, that so long as the creditors of the VIE Lessor Trusts have no recourse to the assets of the Borrower, “Consolidated Indebtedness” shall not include any Indebtedness or other obligations of the VIE Lessor Trusts.
“Consolidated Net Worth” means, at any date, the sum as of such date of (a) the par value (or value stated on the books of the Borrower) of all classes of capital stock of the Borrower and its Subsidiaries, excluding the Borrower’s capital stock owned by the Borrower and/or its Subsidiaries, plus (or minus in the case of a surplus deficit) (b) the amount of the Consolidated surplus, whether capital or earned, of the Borrower, determined in accordance with GAAP as of the end of the most recent calendar month (excluding the effect on the Borrower’s accumulated other comprehensive income/loss of the ongoing application of Accounting Standards Codification Topic 815).
“Consolidated Subsidiary” means, at any date, any Subsidiary or other entity the accounts of which would be Consolidated with those of the Borrower on its Consolidated financial statements if such financial statements were prepared as of such date; provided that in no event will Consolidated Subsidiaries include the VIE Lessor Trusts.
“Controlled Affiliate” has the meaning specified in Section 4.01(n).
“Convert”, “Conversion”, “Converted” and “Converting” each refers to a conversion of Revolving Advances of one Type into Revolving Advances of the other Type pursuant to Section 2.08, Section 2.09 or Section 2.12.
“Credit Extension” means each of the following: (a) a Borrowing and (b) the issuance of a Letter of Credit.
8

“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Agent in accordance with the conventions for this rate recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Agent decides that any such convention is not administratively feasible for the Agent, then the Agent may establish another convention in its reasonable discretion.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“Departing Lender” means each Lender under the Existing Credit Agreement that executes and delivers to the Agent a Departing Lender Signature Page.
“Departing Lender Signature Page” means each signature page to this Agreement on which it is indicated that such person is signing as a “Departing Lender”.
“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
“Dollars” or “$” means dollars of the United States of America.
“Domestic Lending Office” means, with respect to any Lender, the office of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Agent.
“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Agent has not received, by 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.
“Early Opt-in Election” means the occurrence of:
(1)    a notification by the Agent to (or the request by the Borrower to the Agent to notify) each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
(2)    the joint election by the Agent and the Borrower to trigger a fallback from LIBO Rate and the provision by the Agent of written notice of such election to the Lenders.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
9

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” has the meaning specified in Section 3.01.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 8.07(b)(iii) and Section 8.07(b)(v) (subject to such consents, if any, as may be required under Section 8.07(b)(iii)).
“Energy Efficiency and Distributed Generation Amounts” has the meaning set forth in the definition of Carbon Intensity.
“Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment and relating to any Environmental Law, including, without limitation, (a) by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any Governmental Authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.
“Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, natural resources or, to the extent relating to exposure to Hazardous Materials, human health or safety, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating to Section 412 of the Internal Revenue Code).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a
10

trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Agent.
“Eurodollar Rate” means, subject to the implementation of a Benchmark Replacement in accordance with Section 2.08(c), for any Interest Period as to any Eurodollar Rate Advance, (i) the rate per annum determined by the Agent to be the offered rate which appears on the page of the Reuters Screen which displays the London interbank offered rate administered by ICE Benchmark Administration Limited (such page currently being the LIBOR01 page) (the “LIBO Rate”) for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time), two Business Days prior to the commencement of such Interest Period, or (ii) in the event the rate referenced in the preceding clause (i) does not appear on such page or service or if such page or service shall cease to be available, the rate determined by the Agent to be the offered rate on such other page or other service which displays the LIBO Rate for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period; provided that if LIBO Rates are quoted under either of the preceding clauses (i) or (ii), but there is no such quotation for the Interest Period elected, the LIBO Rate shall be equal to the Interpolated Rate; and provided, further, that if any such rate determined pursuant to this definition is below zero, the Eurodollar Rate will be deemed to be zero.
“Eurodollar Rate Advance” means a Revolving Advance that bears interest at a rate based on the Eurodollar Rate (other than a Base Rate Advance bearing interest at a rate based on the Eurodollar Rate).
“Events of Default” has the meaning specified in Section 6.01.
“Excluded Taxes” means, with respect to the Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) Taxes imposed on or measured by its overall net income (however denominated), and franchise Taxes imposed on it (in lieu of net income Taxes), by the United States of America or the jurisdiction (or any political subdivision thereof) under the Laws of which such recipient is organized or does business or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which the Borrower is located, (c) any backup withholding Tax that is required by the Internal Revenue Code to be withheld from amounts payable to a Lender that has failed to comply with clause (A) of Section 2.14(e)(ii), (d) in the case of a Foreign Lender (other than as agreed to between any assignee and the Borrower pursuant to a request by the Borrower under Section 2.20), any United States of America withholding Tax that (i) is required to be imposed on amounts payable to such Foreign Lender pursuant to the Laws in force at the time such Foreign Lender becomes a party hereto (or designates a new Applicable Lending Office) or (ii) is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with clause (B) of Section 2.14(e)(ii), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of
11

designation of a new Applicable Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.14(a)(i) or (ii) and (v) any United States withholding Tax imposed by FATCA.
“Executive Order” has the meaning specified in Section 4.01(p).
“Existing Advances” has the meaning given to such term in the preamble.
“Existing Credit Agreement” has the meaning given to such term in the preamble.
“Existing Issuing Banks” has the meaning given to such term in the preamble.
“Existing Lenders” has the meaning given to such term in the preamble.
“Existing Letters of Credit” has the meaning given to such term in the preamble.
“Existing Termination Date” has the meaning specified in Section 2.21(a).
“Extending Lender” has the meaning specified in Section 2.21(b).
“Extension Date” has the meaning specified in Section 2.21(a).
“FATCA” means Section 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Internal Revenue Code.

“FCA” has the meaning specified in Section 2.08(c)(i).

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Agent on such day on such transactions as determined by the Agent, and (c) solely for purposes for determining the Money Market Rate, any such other publication or means of determining the rate for federal funds as agreed to between the Borrower and Swingline Lender; provided further, that if the Federal Funds Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Fee Letters” means (a) each of the following letters to the Borrower dated May 10, 2021: (i) the letter from Barclays and Mizuho Bank, Ltd., (ii) the letter from Bank of America, N.A., BNP Paribas, BNP Paribas Securities Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A., MUFG Bank, Ltd., MUFG Union Bank, N.A., Truist Securities, Inc., Wells Fargo Bank, National Association and Wells Fargo Securities, LLC and (iii) the agent fee letter from Barclays, as Agent, each relating to certain fees
12

payable by the Borrower to such parties in respect of the transactions contemplated by this Agreement and (b) any letter between the Borrower and any Issuing Bank other than an Initial Issuing Bank relating to certain fees payable to such Issuing Bank in its capacity as such, each as amended, modified, restated or supplemented from time to time.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to LIBO Rate.
“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes (including such a Lender when acting in the capacity of an Issuing Bank or a Swingline Lender). For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
“Four Corners Acquisition” means the acquisition by the Borrower from Southern California Edison Company (“SCE”) of SCE’s interests in Units 4 and 5 of the Four Corners Power Plant near Farmington, New Mexico, pursuant to the Purchase and Sale Agreement, dated as of November 8, 2010, by and between SCE and the Borrower.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
“GAAP” has the meaning specified in Section 1.03.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

“Government Official” shall mean (a) an executive, official, employee or agent of a governmental department, agency or instrumentality, (b) a director, officer, employee or agent of a wholly or partially government-owned or -controlled company or business, (c) a political party or official thereof, or candidate for political office or (d) an executive, official, employee or agent of a public international organization (e.g., the International Monetary Fund or the World Bank).

“Guarantee” means as to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, agreements to keep well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise), provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
13

“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.
“Hedge Agreement” means any interest rate swap, cap or collar agreement, interest rate future or option contract, currency swap agreement, currency future or option contract, commodity future or option contract, commodity forward contract or other similar agreement.
“IBA” has the meaning specified in Section 2.08(c)(i).
“Increase Date” has the meaning specified in Section 2.18(a).
“Increasing Lender” has the meaning specified in Section 2.18(b).
“Indebtedness” means as to any Person at any date (without duplication): (a) indebtedness created, issued, incurred or assumed by such Person for borrowed money or evidenced by bonds, debentures, notes or similar instruments; (b) all obligations of such Person to pay the deferred purchase price of property or services, excluding, however, trade accounts payable (other than for borrowed money) arising in, and accrued expenses incurred in, the ordinary course of business of such Person so long as such trade accounts payable are paid within 180 days (unless subject to a good faith dispute) of the date incurred; (c) all Indebtedness secured by a Lien on any asset of such Person, to the extent such Indebtedness has been assumed by, or is a recourse obligation of, such Person; (d) all Guarantees by such Person; (e) all Capital Lease Obligations of such Person; and (f) the amount of all reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers’ acceptances, surety or other bonds and similar instruments in support of Indebtedness; provided that Indebtedness, in accordance with Section 1.03, shall exclude any obligation or liability arising from the application or interpretation of ASC Topic 840 or 842 or any related, similar or successor pronouncement, guideline, publication or rule, or which is otherwise excluded in accordance with Section 1.03.
“Indemnified Taxes” means Taxes other than Excluded Taxes.
“Ineligible Institution” means (a) a natural person, (b) any Affected Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute an Affected Lender or a Subsidiary thereof, (c) the Borrower, any of its Subsidiaries or any of its Affiliates, or (d) a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof.
“Initial Issuing Banks” has the meaning given to such term in the introductory paragraph hereof.
“Initial Lenders” has the meaning given to such term in the introductory paragraph hereof.
“Interest Period” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on (i) the date such Eurodollar Rate Advance is disbursed, (ii) the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance or (iii) the effective date of the most recent continuation of such Eurodollar Rate Advance, as the case may be, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, as the Borrower may, upon notice received by
14

the Agent not later than 12:00 noon on the third Business Day prior to the first day of such Interest Period, select; provided, however, that:
(a)    the Borrower may not select any Interest Period that ends after the Termination Date;
(b)    Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration;
(c)    whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and
(d)    whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“Interpolated Rate” means, in relation to the LIBO Rate, the rate which results from interpolating on a linear basis between:
(a)    the applicable LIBO Rate for the longest period (for which that LIBO Rate is available) which is less than the Interest Period of that Advance; and
(b)    the applicable LIBO Rate for the shortest period (for which that LIBO Rate is available) which exceeds the Interest Period of that Advance,
each as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period of that Advance.
“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).
“Issuing Bank” means the Initial Issuing Banks or any other Lender approved by the Borrower that may agree to issue Letters of Credit pursuant to an Assignment and Assumption or other agreement in form satisfactory to the Borrower and the Agent, so long as such Lender expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Agent of its Applicable Lending Office (which information shall be recorded by the Agent in the Register), for so long as such Initial Issuing Bank or Lender, as the case may be, shall have a Letter of Credit Commitment.
“KPI Metric Target” means each of the Carbon Intensity Target (Maximum), the Carbon Intensity Target (Minimum), the OSHA Incident Target (Maximum) and the OSHA Incident Target (Minimum).
15

“L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Ratable Share.
“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made nor refinanced as a Base Rate Advance.
“L/C Cash Deposit Account” means an interest bearing cash deposit account to be established and maintained by the Agent, over which the Agent shall have sole dominion and control, upon terms as may be satisfactory to the Agent.
“L/C Obligations” means, as at any date of determination, the aggregate Available Amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“L/C Related Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by any Issuing Bank and the Borrower or in favor of any Issuing Bank and relating to such Letter of Credit.
“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, licenses, authorizations and permits of, and agreements with, any Governmental Authority.
“Lender Notice Date” has the meaning specified in Section 2.21(a).
“Lenders” means the Initial Lenders, each Issuing Bank, the Swingline Lender, if any, each Assuming Lender that shall become a party hereto pursuant to Section 2.18 and each Person that shall become a party hereto pursuant to Section 8.07. For the avoidance of doubt, the term “Lenders” excludes the Departing Lenders.
“Letter of Credit” has the meaning specified in Section 2.01(b).
“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by any Issuing Bank.
“Letter of Credit Commitment” means, with respect to each Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower from time to time in an aggregate amount equal to (a) for each of the Initial Issuing Banks, $31,250,000 and (b) for any other Issuing Bank, as separately agreed to by such Issuing Bank and the Borrower. The Letter of Credit Commitment is part of, and not in addition to, the Revolving Credit Commitments.
“Letter of Credit Expiration Date” means the day that is five Business Days prior to the Termination Date.
“LIBO Rate” has the meaning specified in the definition of “Eurodollar Rate.”
16

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge or other security interest or preferential arrangement that has the practical effect of creating a security interest, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property, and any capital lease having substantially the same economic effect as any of the foregoing.
“Loan Documents” mean this Agreement, each Note, each L/C Related Document and the Fee Letters.
“Material Adverse Effect” means a material adverse effect on (a) the financial condition, operations, business or property of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender under this Agreement or any Note or (c) the ability of the Borrower to perform its obligations under this Agreement or any Note.
“Material Subsidiary” means, at any time, a Subsidiary of the Borrower which as of such time meets the definition of a “significant subsidiary” included as of the date hereof in Regulation S-X of the Securities and Exchange Commission or whose assets at such time exceed 10% of the assets of the Borrower and the Subsidiaries (on a consolidated basis).
“Money Market Rate” means (a) the Federal Funds Rate plus (b) the Applicable Rate for Eurodollar Rate Advances.
“Money Market Rate Advance” means a Swingline Advance that bears interest at a rate based on the Money Market Rate.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
“Non-Extending Lender” has the meaning specified in Section 2.21(b).
“Note” means a promissory note of the Borrower payable to the order of any Lender, delivered pursuant to a request made under Section 2.16 in substantially the form of Exhibit A hereto.
“Notice of Borrowing” has the meaning specified in Section 2.02(a).
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under any Loan Document or otherwise with respect to any Revolving Advance, Swingline Advance or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue under any Loan Document after the commencement by or against the Borrower of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
“OFAC” means Office of Foreign Assets Control of the United States Department of the Treasury.
17

“OSHA Incident Amount” shall mean, for any Reference Year, the total number of injuries or illnesses, excluding COVID-19, that meet the general recording criteria, and are therefore “recordable” for such Reference Year in accordance with the recordkeeping and reporting rules of the United States Department of Labor – Occupational Safety and Health Administration Severe Injury Reports (or any replacement(s) thereof) pursuant to 29 C.F.R. §1904, as reported on the applicable Pricing Certificate pursuant to Section 1.06(f) and reflected in PWCC’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage); it being understood and agreed that on the date hereof PWCC applies the US-OSHA Recordkeeping rules (www.osha.gov/recordkeeping (as in effect on the date of this Agreement) to determine recordable injuries for PWCC and its Subsidiaries in the aggregate, and reported numbers include the performance of PWCC’s and its Subsidiaries’ employees and supervised contractors (e.g., agency temp workers and other workers under the direct supervision of PWCC or any of its Subsidiaries); provided that in the event that (i) the methodologies or other basis upon which such reporting shall change from the methodologies and basis for the determination of the OSHA Incident Target (Maximum) and OSHA Incident Target (Minimum) or (ii) OSHA shall cease to require the recording of the total number of injuries or illnesses, excluding COVID-19, that are “recordable” by PWCC, the OSHA Incident Amount shall be deemed to be equal to an amount that will result in no adjustment to the Applicable Rate for the applicable Reference Year; provided, further, that in the event that the combined number of employees and supervised contractors (e.g., agency temp workers and other workers under the direct supervision of PWCC or any of its Subsidiaries) of PWCC and its subsidiaries for any Reference Year increases or decreases by ten percent (10%) or more over the combined number of employees and supervised contractors of PWCC and its subsidiaries for the immediately preceding Reference Year, the OSHA Incident Amount shall be deemed to be equal to an amount that will result in no adjustment to the Applicable Rate for the applicable Reference Year and each Reference Year thereafter unless otherwise agreed in writing by the Borrower, the Agent and the Required Lenders.
“OSHA Incident Amount (Three-Year Average)” shall mean, for any Reference Year, an amount equal to (a) the sum of (i) the OSHA Incident Amount for the immediately preceding two (2) fiscal years prior to such Reference Year plus (ii) the OSHA Incident Amount for such Reference Year divided by (b) three (3). For purposes of calculating the OSHA Incident Amount (Three-Year Average) for the Reference Years ending on December 31, 2021 and December 31, 2022, the OSHA Incident Amount for the fiscal years ending December 31, 2019 and December 31, 2020 shall be as set forth in the Sustainability Table.
“OSHA Incident Applicable Rate Adjustment Amount” means, with respect to any period between Sustainability Pricing Adjustment Dates:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances:
(i)negative 0.025%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the OSHA Incident Target (Minimum) for such Reference Year;
(ii)0.00%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the OSHA Incident Target (Minimum) for such Reference Year but less than the OSHA Incident Target (Maximum) for such Reference Year; and
(iii)positive 0.025%, if (A) the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year
18

is greater than or equal to the OSHA Incident Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report an OSHA Incident Amount (Three-Year Average) on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
(b)with respect to the Commitment Fee:
(i)negative 0.005%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the OSHA Incident Target (Minimum) for such Reference Year;
(ii)0.000%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the OSHA Incident Target (Minimum) for such Reference Year but less than the OSHA Incident Target (Maximum) for such Reference Year; and
(iii)positive 0.005%, if (A) the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the OSHA Incident Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report an OSHA Incident Amount (Three-Year Average) on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
“OSHA Incident Target (Maximum)” means, with respect to any Reference Year, the OSHA Incident Target (Maximum) for such Reference Year as set forth in the Sustainability Table.
“OSHA Incident Target (Minimum)” means, with respect to any Reference Year, the OSHA Incident Target (Minimum) for such Reference Year as set forth in the Sustainability Table.
“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
“Participant” has the meaning specified in Section 8.07(d).
“Participant Register” has the meaning specified in Section 8.07(d).
“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended.
“Payment” has the meaning specified in Section 7.11(a).
“Payment Notice” has the meaning specified in Section 7.11(b).
“PBGC” means the Pension Benefit Guaranty Corporation.
19

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
“Permitted Lien” of the Borrower or any Material Subsidiary means any of the following:
(i)Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been made;
(ii)Liens imposed by or arising by operation of law, such as Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business, including, without limitation, landlord’s liens arising under Arizona Law under leases entered into by the Borrower in the 1986 sale and leaseback transactions with respect to PVNGS Unit 2 and securing the payment of rent under such leases, in each case, for sums not overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been made;
(iii)Liens incurred in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits or other similar statutory obligations;
(iv)Liens to secure obligations on surety or appeal bonds;
(v)Liens on cash deposits in the nature of a right of setoff, banker’s lien, counterclaim or netting of cash amounts owed arising in the ordinary course of business on deposit accounts, commodity accounts or securities accounts;
(vi)easements, restrictions, reservations, licenses, covenants, and other defects of title that are not, in the aggregate, materially adverse to the use of such property for the purpose for which it is used;
(vii)Liens securing claims against or other obligations of any Person other than the Borrower or any Subsidiary of the Borrower neither assumed nor guaranteed by the Borrower or any Subsidiary of the Borrower nor on which the Borrower or any Subsidiary of the Borrower customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by the Borrower or any Subsidiary of the Borrower for use in the operation of the business of the Borrower or any Subsidiary of the Borrower, including, without limitation, for the generation, transmission or distribution of electric energy, transportation, telephonic, telegraphic, radio, wireless or other electronic communication or any other purpose;
(viii)rights reserved to or vested in and Liens on assets arising out of obligations or duties to any municipality or public authority with respect to any right, power, franchise, grant, license or permit, or by any provision of Law;
20

(ix)rights reserved to or vested in others to take or receive any part of the power pursuant to firm power commitment contracts, purchased power contracts, tolling agreements and similar agreements, coal, gas, oil or other minerals, timber or other products generated, developed, manufactured or produced by, or grown on, or acquired with, any property of the Borrower;
(x)rights reserved to or vested in any municipality or public authority to control or regulate any property of the Borrower, or to use such property in a manner that does not materially impair the use of such property for the purposes for which it is held by the Borrower;
(xi)security interests granted in favor of the lessors in the Borrower’s Decommissioning Trust Agreement (PVNGS Unit 2) dated as of January 31, 1992 (such agreement, as amended or otherwise modified from time to time, being the “Unit 2 Trust Agreement”) entered into in connection with the PVNGS Unit 2 sale leaseback transaction to secure the Borrower’s obligations in respect of the decommissioning of PVNGS Unit 2 or related facilities;
(xii)Liens that may exist with respect to the Unit 2 Trust Agreement (other than as described in paragraph (xi) above) or with respect to either of the Borrower’s Decommissioning Trust Agreement (PVNGS Unit 1) or Decommissioning Trust Agreement (PVNGS Unit 3), each dated as of July 1, 1991, as amended or otherwise modified from time to time, relating to the Borrower’s obligation to set aside funds for the decommissioning and retirement from service of such Units;
(xiii)pledges of pollution control bonds and related rights to secure the Borrower’s reimbursement obligations in respect of letters of credit, bond insurance, and other credit or liquidity enhancements supporting pollution control bond transactions, provided that such pollution control bonds are not secured by any other assets of the Borrower or any Material Subsidiary;
(xiv)rights and interests of Persons other than the Borrower or any Material Subsidiary (including, without limitation, acquisition rights), related obligations of the Borrower or any Material Subsidiary and restrictions on it or its property arising out of contracts, agreements and other instruments to which the Borrower or any Material Subsidiary is a party that relate to the common ownership or joint use of property or other use of property for the benefit of one or more third parties or that allow a third party to purchase property of the Borrower or any Material Subsidiary and all Liens on the interests of Persons other than the Borrower or any Material Subsidiary in such property;
(xv)transfers of operational or other control of facilities to a regional transmission organization or other similar body and Liens on such facilities to cover expenses, fees and other costs of such an organization or body;
(xvi)Liens established on specified bank accounts of the Borrower to secure the Borrower’s reimbursement obligations in respect of letters of credit supporting commercial paper issued by the Borrower and similar arrangements for collateral security with respect to refinancings or replacements of the same;
(xvii)rights of transmission users or any regional transmission organizations or similar entities in transmission facilities;
21

(xviii)Liens on property of the Borrower sold in a transaction permitted by Section 5.02(a) to another Person pursuant to a conditional sales agreement where the Borrower retains title;
(xix)Liens created under this Agreement;
(xx)Liens on cash or cash equivalents not to exceed $200,000,000 (A) deposited in margin accounts with or on behalf of futures contract brokers or paid over to other contract counterparties or (B) pledged or deposited as collateral to a contract counterparty to secure obligations with respect to (1) contracts (other than for Indebtedness) for commercial and trading activities in the ordinary course of business for the purchase, transmission, distribution, sale, storage, lease or hedge of any energy or energy related commodity or (2) Hedge Agreements;
(xxi)Liens granted on cash or cash equivalents to defease Indebtedness of the Borrower or any of its Subsidiaries;
(xxii)Liens granted on cash or cash equivalents constituting proceeds from any sale or disposition of assets that is not prohibited by Section 5.02(c) deposited in escrow accounts or otherwise withheld or set aside to secure obligations of the Borrower or any Subsidiary providing for indemnification, adjustment of purchase price or any similar obligations, in each case, in an amount not to exceed the amount of gross proceeds received by the Borrower or any Subsidiary in connection with such sale or disposition;
(xxiii)Liens, deposits and similar arrangements to secure the performance of bids, tenders or contracts (other than contracts for borrowed money), public or statutory obligations, performance bonds and other obligations of a like nature incurred in the ordinary course of business by the Borrower or any of its Subsidiaries;
(xxiv)rights of lessees arising under leases entered into by the Borrower or any of its Subsidiaries as lessor, in the ordinary course of business;
(xxv)any Liens on or reservations with respect to governmental and other licenses, permits, franchises, consents and allowances;
(xxvi)Liens on property which is the subject of a Capital Lease Obligation designating the Borrower or any of its Subsidiaries as lessee and all right, title and interest of the Borrower or any of its Subsidiaries in and to such property and in, to and under such lease agreement, whether or not such lease agreement is intended as a security;
(xxvii)licenses of intellectual property entered into in the ordinary course of business;
(xxviii) Liens solely on any cash earnest money deposits made by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(xxix) deposits or funds established for the removal from service of operating facilities and coal mines and related facilities or other similar facilities used in connection therewith; and
(xxx)Liens on cash deposits used to secure letters of credit under defaulting lender provisions in credit or reimbursement facilities;
22

provided, however, that no Lien in favor of the PBGC shall, in any event, be a Permitted Lien.
“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.
“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Internal Revenue Code or Title IV of ERISA, any ERISA Affiliate.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Pricing Certificate” means a certificate substantially in the form of Exhibit D executed by an officer of the Borrower setting forth in reasonable detail the calculation of Carbon Intensity (including the Energy Efficiency and Distributed Generation Amounts), the OSHA Incident Amount and the Sustainability Margin Adjustment, in each case, for the Reference Year covered thereby, and confirming the website for the concurrent public reporting of such information on PWCC’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage) for such Reference Year.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Agent) or any similar release by the Federal Reserve Board (as determined by the Agent).
“Prohibited Person” means any Person (a) listed in the Annex to the Executive Order or identified pursuant to Section 1 of the Executive Order; (b) that is owned or controlled by, or acting for or on behalf of, any Person listed in the Annex to the Executive Order or identified pursuant to the provisions of Section 1 of the Executive Order; (c) with whom a Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-laundering law, including the Executive Order; (d) who commits, threatens, conspires to commit, or support “terrorism” as defined in the Executive Order; (e) who is named as a “Specially designated national or blocked person” on the most current list published by the OFAC at its official website, at http://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf or any replacement website or other replacement official publication of such list; or (f) who is owned or controlled by a Person listed above in clause (c) or (e).
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public Debt Rating” means, as of any date, the rating that has been most recently announced by either S&P or Moody’s, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower or, if any such rating agency shall have issued more than one such rating, the lowest such rating issued by such rating agency. For purposes of the foregoing, (a) if only one of S&P and Moody’s shall have in effect a Public Debt Rating, the Applicable Rate shall be determined by reference to the available rating; (b) except as set forth in the proviso at the end of this definition, if neither S&P nor Moody’s shall have in effect a Public Debt Rating, the Applicable Rate will be set in accordance with Level 5 under the definition of “Applicable Rate”; (c) if the ratings established by S&P and Moody’s shall fall within different levels, the Applicable Rate shall be based upon the higher rating
23

unless such ratings differ by two or more levels, in which case the applicable level will be deemed to be one level below the higher of such levels; and (d) if any rating established by S&P or Moody’s shall be changed (other than as a result of a change in the basis on which ratings are established), such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; provided that if the Public Debt Rating system of S&P or Moody’s shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend the definition of “Applicable Rate” to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate will be set in accordance with the level most recently in effect under the definition of “Applicable Rate” prior to such change or cessation.
“PVNGS” means the Palo Verde Nuclear Generating Station.
“PWCC” means Pinnacle West Capital Corporation, an Arizona corporation.
“Ratable Share” of any amount means, with respect to any Lender at any time but subject to the provisions of Section 2.19, the product of such amount times a fraction the numerator of which is the amount of such Lender’s Revolving Credit Commitment at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or Section 6.01, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the aggregate amount of all Revolving Credit Commitments at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or Section 6.01, the aggregate amount of all Revolving Credit Commitments as in effect immediately prior to such termination).
“Reference Year” means, with respect to any Pricing Certificate, the fiscal year ending immediately prior to the date of such Pricing Certificate.
“Register” has the meaning specified in Section 8.07(c).
“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30-day notice period has been waived under the final regulations issued under Section 4043, as in effect as of the date of this Agreement (the “Section 4043 Regulations”). Any changes made to the Section 4043 Regulations that become effective after the Effective Date shall have no impact on the definition of Reportable Event as used herein unless otherwise amended by the Borrower and the Required Lenders.
“Required Lenders” means, at any time, but subject to Section 2.19, Lenders holding in the aggregate more than 50% of (a) the Revolving Credit Commitments or (b) if the Revolving Credit Commitments have been terminated, the Total Outstandings.
24

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Revolving Advance” means an advance by a Lender to the Borrower as part of a Borrowing, including a Base Rate Advance made pursuant to Section 2.03(c), but excluding any L/C Advance made as part of an L/C Borrowing and any Swingline Advance, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a Type of Revolving Advance).
“Revolving Credit Commitment” means, as to any Lender, its obligation to (a) make Revolving Advances to the Borrower pursuant to Section 2.01 and Section 2.03(c), (b) purchase participations in L/C Obligations and (c) make Revolving Advances pursuant to Section 2.03A(c) for the purpose of repaying Swingline Advances, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 1.01(a) under the column “Revolving Credit Commitment” or if such Lender has become a Lender hereunder pursuant to an Assumption Agreement or if such Lender has entered into any Assignment and Assumption, the amount set forth for such Lender in the Register, in each case as such amount may be reduced pursuant to Section 2.05 or increased pursuant to Section 2.18.
“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc.
“Sale Leaseback Obligation Bonds” means any bonds issued by or on behalf of the Borrower in connection with a sale/leaseback transaction and any refinancing or refunding of such obligations.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by OFAC and any similar economic or financial sanctions or trade embargoes of the type described in Sections 4.01(n) through (q) and imposed, administered or enforced from time to time by the U.S. government, including the U.S. Department of State, or any other applicable Governmental Authority.
“SEC Reports” means the Borrower’s (i) Form 10-K Report for the year ended December 31, 2020, (ii) Form 10-Q Report for the quarter ended March 31, 2021 and (iii) Form 8-K Reports filed on March 3, 2021, April 1, 2021, May 7, 2021 and May 21, 2021.
“SOFR” means a rate per annum equal to the secured overnight financing rate for such Business Day published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time).
“Subsequent Order” means any decision, order or ruling of the Arizona Corporation Commission issued after the Effective Date relating to the incurrence or maintenance of Indebtedness by the Borrower and that amends, supersedes or otherwise modifies the 2020 Order or any successor decision, order or ruling.
“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding Voting Stock, (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of
25

such Person’s other Subsidiaries; provided that in no event will Subsidiaries include the VIE Lessor Trusts.
“Sustainability Pricing Adjustment Date” has the meaning specified in Section 1.06(a).
“Sustainability Margin Adjustment” means with respect to any Pricing Certificate for any period between Sustainability Pricing Adjustment Dates, an amount (whether negative, zero or positive), expressed as a percentage, equal to:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances, the sum of (i) the Carbon Intensity Applicable Rate Adjustment Amount and (ii) the OSHA Incident Applicable Rate Adjustment Amount, in each case for Eurodollar Rate Advances and Base Rate Advances; and
(b)with respect to the Commitment Fee, the sum of (i) the Carbon Intensity Applicable Rate Adjustment Amount and (ii) the OSHA Incident Applicable Rate Adjustment Amount, in each case for the Commitment Fee.
“Sustainability Table” means the Sustainability Table set forth on Schedule 1.01(b).
“Swingline Advance” means an advance made by the Swingline Lender, if any, to the Borrower pursuant to Section 2.03A.
“Swingline Eurodollar Rate Advance” means a Swingline Advance that bears interest at a rate equivalent to (a) clause (ii) under the definition of Eurodollar Rate, plus (b) the Applicable Rate for Eurodollar Rate Advances.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Advances outstanding at such time. The Swingline Exposure of any Lender shall be its Ratable Share of the total Swingline Exposure at such time.
“Swingline Lender” means, upon notice to the Agent by such Lender and the Borrower, any Lender approved by the Borrower and the Agent from time to time that may agree to fund Swingline Advances.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Termination Date” means the earlier of (a) May 28, 2026, subject to extension (in the case of, and solely with respect to, each Lender consenting thereto) as provided in Section 2.21 in which case one or more different Termination Dates may exist which shall relate to individual Lender Commitments and (b) the date of termination in whole of the Commitments pursuant to Section 2.05 or Section 6.01.
“Term SOFR” means, for the applicable corresponding tenor, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Total Outstandings” means the sum of (a) the aggregate principal amount of all Revolving Advances plus (b) all L/C Obligations outstanding plus (c) the aggregate Swingline Exposure.
26

“Type” means a Base Rate Advance or a Eurodollar Rate Advance.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).
“Unissued Letter of Credit Commitment” means, with respect to any Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower in an amount equal to the excess of (a) the amount of its Letter of Credit Commitment over (b) the aggregate Available Amount of all Letters of Credit issued by such Issuing Bank.
“Unused Commitment” means, with respect to each Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Advances made by such Lender (in its capacity as a Lender) and outstanding at such time and (ii) such Lender’s Ratable Share of the aggregate L/C Obligations and, other than for the purposes of calculation of the Commitment Fees, such Lender’s Ratable Share of the aggregate Swingline Exposure outstanding at such time.
“VIE Lessor Trusts” means the three (3) separate variable-interest entity lessor trusts that purchased from, and leased back to, the Borrower certain interests in the PVNGS Unit 2 and related common facilities, as described in Note 6 of Combined Notes to Condensed Consolidated Financial Statements in the Borrower’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021.
“Voting Stock” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
Section1.02Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
27

(a)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s permitted successors and permitted assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
(b)In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”
(c)Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
Section1.03Accounting Terms. Unless otherwise specified herein, and subject to the provision below, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the most recent audited Consolidated financial statements of the Borrower delivered to the Agent (“GAAP”). If at any time any change in GAAP or in the interpretation thereof would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or in the interpretation thereof (subject to the approval of the Required Lenders); provided that, unless and until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein. Notwithstanding the foregoing, (a) for purposes of all financial or covenant calculations made under this Agreement and for purposes of defining and calculating Capital Lease Obligations, Indebtedness and Consolidated Indebtedness hereunder for such purposes, all leases or other agreements of any Person deemed to be a lease or other obligation under GAAP (as in effect from time to time) (whether such lease or other agreement is existing as of the date hereof or hereafter entered into) that would not be characterized as (i) a Capital Lease Obligation, (ii) Indebtedness or (iii) Consolidated Indebtedness, in each case, under this Agreement based on GAAP as in effect as of December 31, 2015, will not be deemed to be (i) a Capital Lease Obligation, (ii) Indebtedness or (iii) Consolidated Indebtedness, respectively, as a result of any change in GAAP, or the interpretation
28

or application thereof required or approved by such Person’s independent certified public accountants, occurring or coming into or taking effect after December 31, 2015, including ASC Topic 840 or 842 or any related, similar or successor pronouncement, guidance, publication or rule and (b) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Person at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.
Section1.04Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
Section1.05Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
Section1.06Sustainability Adjustments.
(a)Following the date on which Borrower provides a Pricing Certificate in respect of the most recently ended Reference Year, the Applicable Rate shall be adjusted, as applicable, pursuant to the Sustainability Margin Adjustment as set forth in such Pricing Certificate. For purposes of the foregoing, (i) the Sustainability Margin Adjustment shall be determined as of the fifth Business Day following receipt by the Agent of a Pricing Certificate delivered pursuant to Section 1.06(f) based upon the Carbon Intensity and OSHA Incident Amount (Three-Year Average) for the applicable Reference Year set forth in such Pricing Certificate and the calculations of the Sustainability Margin Adjustment, therein (such day, the “Sustainability Pricing Adjustment Date”) and (ii) each change in the Applicable Rate resulting from a Pricing Certificate (or the non-delivery or delivery of an incomplete Pricing Certificate) shall be effective during the period commencing on and including the applicable Sustainability Pricing Adjustment Date and ending on the date immediately preceding the next such Sustainability Pricing Adjustment Date (or, in the case of non-delivery of a Pricing Certificate, the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 1.06(f)).
(b)For the avoidance of doubt, only one Pricing Certificate may be delivered in respect of any Reference Year. It is further understood and agreed that the Applicable Rate (i) with respect to Eurodollar Rate Advances and Base Rate Advances will never be reduced or increased by more than 0.05% and (ii) with respect to the Commitment Fee will never be reduced or increased by more than 0.01%, in each case, pursuant to the Sustainability Margin Adjustment during any calendar year. For the avoidance of doubt, any adjustment to the Applicable Rate by reference to the KPI Metric Targets in any year shall not be cumulative year-over-year. Each applicable adjustment shall only apply until the date on which the next adjustment is due to take place.
(c)It is hereby understood and agreed that if no such Pricing Certificate is delivered, or any Pricing Certificate shall be incomplete and fail to include the Carbon Intensity or the OSHA Incident
29

Amount (Three-Year Average) for the applicable Reference Year, within the period set forth in Section 1.06(f), the Sustainability Margin Adjustment will be made to the Applicable Rate commencing on the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 1.06(f).
(d)If (i)(A) the Borrower or any Lender becomes aware of any material inaccuracy in the Sustainability Margin Adjustment, the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) as reported in a Pricing Certificate (any such material inaccuracy, a “Pricing Certificate Inaccuracy”) and, in the case of any Lender, such Lender delivers, not later than ten (10) Business Days after obtaining knowledge thereof, a written notice to the Agent describing such Pricing Certificate Inaccuracy in reasonable detail (which description shall be shared with each Lender and the Borrower), or (B) the Borrower and the Lenders agree that there was a Pricing Certificate Inaccuracy at the time of delivery of a Pricing Certificate, and (ii) a proper calculation of the Sustainability Margin Adjustment, the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) would have resulted in no adjustment or an increase to the Applicable Rate for any period, the Borrower shall be obligated to pay to the Agent for the account of the applicable Lenders or the applicable Issuing Banks, as the case may be, promptly on demand by the Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under any Debtor Relief Laws, automatically and without further action by the Agent, any Lender or any Issuing Bank), but in any event within ten (10) Business Days after the Borrower has received written notice of, or has agreed in writing that there was, a Pricing Certificate Inaccuracy, an amount equal to the excess of (1) the amount of interest and fees that should have been paid for such period over (2) the amount of interest and fees actually paid for such period.
It is understood and agreed that any Pricing Certificate Inaccuracy shall not constitute a Default or Event of Default or otherwise result in the failure of any condition precedent to any advance or the issuance of any Letter of Credit; provided, that, the Borrower complies with the terms of this Section 1.06(d) with respect to such Pricing Certificate Inaccuracy. Notwithstanding anything to the contrary herein, unless such amounts shall be due upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code (or any comparable event under non-U.S. Debtor Relief Laws), (a) any additional amounts required to be paid pursuant to the immediate preceding paragraph shall not be due and payable until a written demand is made for such payment by the Agent in accordance with such paragraph, (b) any nonpayment of such additional amounts prior to or concurrently with such demand for payment by the Agent shall not constitute a Default (whether retroactively or otherwise) and (c) none of such additional amounts shall be deemed overdue prior to such a demand or shall accrue interest at the default rate pursuant to Section 2.07(b) prior to such a demand.
(e)Each party hereto hereby agrees that neither the Agent nor any Co-Sustainability Structuring Agent shall have any responsibility for (or liability in respect of) reviewing, auditing or otherwise evaluating any calculation by the Borrower of any Sustainability Margin Adjustment (or any of the data or computations that are part of or related to any such calculation) set forth in any Pricing Certificate (and the Agent may rely conclusively on any such certificate, without further inquiry).
(f)As soon as available and in any event within 120 days following the end of each calendar year (commencing with the calendar year ending December 31, 2021), the Borrower may deliver a Pricing Certificate to the Agent (and the Agent shall promptly provide a copy to each Lender) for the most recently-ended Reference Year; provided, that, for any Reference Year the Borrower may elect not to deliver a Pricing Certificate, and such election shall not constitute a Default or Event of Default (but such failure to so deliver a Pricing Certificate by the end of such 120-day period shall result in the Sustainability Margin Adjustment being applied as set forth in Section 1.06(c)). In the event the Borrower’s fiscal year is changed to a non-calendar year fiscal year, the Borrower will be permitted to
30

adjust the timing of delivery of the Pricing Certificate at its election in a manner intended to maintain consistency with the foregoing.
Article II

AMOUNTS AND TERMS OF THE ADVANCES AND
LETTERS OF CREDIT
Section2.01The Revolving Advances and Letters of Credit.
(a)The Revolving Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Advances in Dollars to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an amount not to exceed such Lender’s Unused Commitment. Each Borrowing (other than a Swingline Advance) shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Advances of the same Type made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. Within the limits of each Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.10 and reborrow under this Section 2.01(a). Any Swingline Advance shall be made and repaid in accordance with the procedures set forth in Section 2.03A.
(b)Letters of Credit. Each Issuing Bank agrees, on the terms and conditions hereinafter set forth, in reliance upon the agreements of the other Lenders set forth in this Agreement, to issue standby letters of credit (each a “Letter of Credit”) for the account of the Borrower from time to time on any Business Day during the period from the Effective Date until 30 days before the Termination Date in an aggregate Available Amount for all Letters of Credit issued by each Issuing Bank not to exceed at any time such Issuing Bank’s Letter of Credit Commitment, provided that after giving effect to the issuance of any Letter of Credit, (i) the Total Outstandings shall not exceed the aggregate Revolving Credit Commitments and (ii) each Lender’s Ratable Share of the Total Outstandings shall not exceed such Lender’s Revolving Credit Commitment. No Letter of Credit shall have an expiration date (including all rights of the Borrower or the beneficiary to require renewal) later than the Letter of Credit Expiration Date. Within the limits referred to above, the Borrower may from time to time request the issuance of Letters of Credit under this Section 2.01(b). The terms “issue”, “issued”, “issuance” and all similar terms, when applied to a Letter of Credit, shall include any renewal, extension or amendment thereof.
Section2.02Making the Revolving Advances.
(a)Except as otherwise provided in Section 2.03(c), each Borrowing (other than a Swingline Advance) shall be made on notice, given not later than (x) 12:00 noon on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances or (y) 1:00 p.m. on the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by facsimile. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be in writing or by facsimile in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Revolving Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Revolving Advance. Each Lender shall, in the case of a Borrowing consisting of Base Rate Advances, before 2:00 p.m. on the date of such Borrowing, and in the case of a Borrowing consisting of Eurodollar Rate Advances, before 11:00 a.m. on the date of such Borrowing, make available for the
31

account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds, such Lender’s Ratable Share of such Borrowing. After the Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent’s address referred to in Section 8.02 or as requested by the Borrower in the applicable Notice of Borrowing.
(b)Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or Section 2.12 and (ii) at no time shall there be more than fifteen different Interest Periods outstanding for Eurodollar Rate Advances.
(c)Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense reasonably incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Revolving Advance to be made by such Lender as part of such Borrowing when such Revolving Advance, as a result of such failure, is not made on such date.
(d)Unless the Agent shall have received notice from a Lender prior to the time of the applicable Borrowing that such Lender will not make available to the Agent such Lender’s Ratable Share of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Share available to the Agent, such Lender and the Borrower severally agree to repay to the Agent within one Business Day after demand for such Lender and within three Business Days after demand for the Borrower such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Revolving Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If the Borrower and such Lender shall pay such interest to the Agent for the same or an overlapping period, the Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Revolving Advance as part of such Borrowing for purposes of this Agreement.
(e)The failure of any Lender to make the Revolving Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Advance to be made by such other Lender on the date of any Borrowing.
32

Section2.03Letters of Credit.
(a)General.
(i)No Issuing Bank shall issue any Letter of Credit, if the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.
(ii)No Issuing Bank shall be under any obligation to issue any Letter of Credit if:
(A)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any Law applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital and liquidity requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which, in each such case, such Issuing Bank in good faith deems material to it;
(B)except as otherwise agreed by the Borrower and such Issuing Bank, such Letter of Credit is in an initial stated amount less than $100,000;
(C)such Letter of Credit is to be denominated in a currency other than Dollars;
(D)such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder;
(E)subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension; or
(F)any Lender is at such time an Affected Lender hereunder, unless the applicable Issuing Bank is satisfied that the related exposure will be 100% covered by the Commitments of the non-Affected Lenders or, if not so covered, until such Issuing Bank has entered into arrangements satisfactory to it in its sole discretion with the Borrower or such Affected Lender to eliminate such Issuing Bank’s risk with respect to such Affected Lender, and participating interests in any such newly issued Letter of Credit shall be allocated among non-Affected Lenders in a manner consistent with Section 2.19(c)(i) (and Affected Lenders shall not participate therein).
(iii)No Issuing Bank shall amend any Letter of Credit if such Issuing Bank would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.
33

(iv)No Issuing Bank shall be under any obligation to amend any Letter of Credit if (A) such Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
(b)Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.
(i)Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the applicable Issuing Bank (with a copy to the Agent) in the form of a Letter of Credit Application appropriately completed and signed by an Authorized Officer of the Borrower, together with agreed-upon draft language for such Letter of Credit reasonably acceptable to the applicable Issuing Bank. Such Letter of Credit Application must be received by such Issuing Bank and the Agent not later than 11:00 a.m. at least three Business Days (or such later date and time as the Agent and such Issuing Bank may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the applicable Issuing Bank: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as such Issuing Bank may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the applicable Issuing Bank (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as such Issuing Bank may require. Additionally, the Borrower shall furnish to the applicable Issuing Bank and the Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any L/C Related Documents, as the applicable Issuing Bank or the Agent may require. In the event and to the extent that the provisions of any Letter of Credit Application or other L/C Related Document shall conflict with this Agreement, the provisions of this Agreement shall govern. Without limitation of the immediately preceding sentence, to the extent that any such Letter of Credit Application or other L/C Related Document shall impose any additional conditions on the maintenance of a Letter of Credit, any additional default provisions, collateral requirements or other obligations of the Borrower to any Issuing Bank, other than as stated in this Agreement, such additional conditions, provisions, requirements or other obligations shall not have effect so long as this Agreement shall be in effect, except to the extent as expressly agreed to by the Borrower and such Issuing Bank.
(ii)Promptly after receipt of any Letter of Credit Application, the applicable Issuing Bank will confirm with the Agent (in writing) that the Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such Issuing Bank will provide the Agent with a copy thereof. Unless the applicable Issuing Bank has received written notice from the Required Lenders, the Agent or the Borrower, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article III shall not then be satisfied, then, subject to the terms and conditions hereof and any applicable Letter of Credit Application, such Issuing Bank shall, on the requested date,
34

issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with such Issuing Bank’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from such Issuing Bank a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Ratable Share times the amount of such Letter of Credit.
(iii)If the Borrower so requests in any applicable Letter of Credit Application, the applicable Issuing Bank may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit such Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the applicable Issuing Bank, the Borrower shall not be required to make a specific request to the applicable Issuing Bank for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable Issuing Bank to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the applicable Issuing Bank shall not permit any such extension (or may issue a Notice of Non-Extension) if (A) such Issuing Bank has determined that it would not be permitted at such time to issue such Letter of Credit in its revised form (as extended) by reason of the provisions of clause (i) of Section 2.03(a) (or would have no obligation to issue such Letter of Credit by reason of the provisions of clause (ii) of Section 2.03(a)), or (B) it has received notice (which shall be in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Agent that the Required Lenders have elected not to permit such extension pursuant to Section 6.02 or (2) from the Agent, the Required Lenders or the Borrower that one or more of the applicable conditions specified in Section 3.02 is not then satisfied, and in each such case directing such Issuing Bank not to permit such extension.
(iv)Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable Issuing Bank will also deliver to the Borrower and the Agent a true and complete copy of such Letter of Credit or amendment.
(c)Drawings and Reimbursements; Funding of Participations.
(i)Subject to the provisions below, not later than 2:30 p.m. on the date (the “Honor Date”) that any Issuing Bank makes any payment on a drawing on any Letter of Credit, if the Borrower shall have received notice of such payment prior to 11:30 a.m. on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 2:30 p.m. on the next Business Day, the Borrower shall reimburse such Issuing Bank through the Agent in an amount equal to the amount of such drawing together with interest thereon. If the Borrower fails to so reimburse such Issuing Bank by such time, unless the Borrower shall have advised the Agent that it does not meet the conditions specified in either clause (B) or (C) below, the Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Ratable Share thereof. In such event, the Borrower shall be deemed to have requested a Base Rate Advance to be
35

disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.01(a) or the delivery of a Notice of Borrowing but subject to (A) the amount of the aggregate Unused Commitments, (B) no Event of Default having occurred and be continuing, or resulting therefrom, and (C) the conditions specified in Section 3.02(c) and Section 3.02(d) being satisfied on and as of the date of the applicable Base Rate Advance and, to the extent so financed, the Borrower's obligation to satisfy the reimbursement obligation created by such payment by the Issuing Bank on the Honor Date shall be discharged and replaced by the resulting Base Rate Advance. Any notice given by any Issuing Bank or the Agent pursuant to this Section 2.03(c)(i) shall be given in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii)Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Agent for the account of the applicable Issuing Bank at the Agent’s Office in an amount equal to its Ratable Share of the Unreimbursed Amount not later than 4:00 p.m. on the Business Day specified in such notice by the Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Advance to the Borrower in such amount. The Agent shall remit the funds so received to the applicable Issuing Bank.
(iii)With respect to any Unreimbursed Amount that is not fully refinanced by a Base Rate Advance because any of the conditions set forth in clauses (A), (B) or (C) of Section 2.03(c)(i) cannot be satisfied or for any other reason, then not later than 2:30 p.m. on the next Business Day after the day notice of the drawing is given to the Borrower, in the case of a failure to meet any such condition, or in any other case, after notice of the event resulting in the outstanding Unreimbursed Amount, the Borrower shall reimburse such Issuing Bank through the Agent in an amount equal to the amount of such outstanding Unreimbursed Amount with interest thereon. If the Borrower fails to so reimburse such Issuing Bank by such time, the Borrower shall be deemed to have incurred from the applicable Issuing Bank an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time plus 2% per annum. In such event, each Lender’s payment to the Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.
(iv)Until each Lender funds its Base Rate Advance or L/C Advance pursuant to this Section 2.03(c) to reimburse the applicable Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Ratable Share of such amount shall be solely for the account of the applicable Issuing Bank.
(v)Each Lender’s obligation to make Base Rate Advances or L/C Advances to reimburse the applicable Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against such Issuing Bank, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided,
36

however, that each Lender’s obligation to make Base Rate Advances pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 2.03(c)(i). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the applicable Issuing Bank for the amount of any payment made by such Issuing Bank under any Letter of Credit, together with interest as provided herein.
(vi)If any Lender fails to make available to the Agent for the account of the applicable Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such Issuing Bank shall be entitled to recover from such Lender (acting through the Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Issuing Bank at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by such Issuing Bank in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by such Issuing Bank in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Base Rate Advance included in the relevant Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the applicable Issuing Bank submitted to any Lender (through the Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.
(d)Repayment of Participations.
(i)At any time after the applicable Issuing Bank has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Agent receives for the account of such Issuing Bank any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral (as defined in Section 2.03(h)) applied thereto by the Agent), the Agent will distribute to such Lender its Ratable Share thereof in the same funds as those received by the Agent.
(ii)If any payment received by the Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 8.12 (including pursuant to any settlement entered into by such Issuing Bank in its discretion), each Lender shall pay to the Agent for the account of such Issuing Bank its Ratable Share thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e)Failure to Make Revolving Advances. The failure of any Lender to make the Revolving Advance to be made by it on the date specified in Section 2.03(c) or any L/C Advance shall not relieve any other Lender of its obligation hereunder to make its Revolving Advance or L/C Advance, as the case may be, to be made by such other Lender on such date.
(f)Obligations Absolute. The obligation of the Borrower to reimburse the applicable Issuing Bank for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
37

(i)any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
(ii)the existence of any claim, counterclaim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
(iii)any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
(iv)any payment by the applicable Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the applicable Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
(v)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.
provided, however, that nothing in this Section 2.03(f) shall limit the rights of the Borrower under Section 2.03(g).
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity that is known to the Borrower in connection with any draw under such Letter of Credit of which the Borrower has reasonable notice, the Borrower will immediately notify the applicable Issuing Bank. To the extent allowed by applicable Law, Borrower shall be conclusively deemed to have waived any such claim against the applicable Issuing Bank and its correspondents unless such notice is given as aforesaid. Nothing herein shall require the Borrower to make any determination as to whether the drawing is in accordance with the requirements of the Letter of Credit, provided that the Borrower may waive any discrepancies in the drawing on any such Letter of Credit.
(g)Role of Issuing Bank. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the applicable Issuing Bank shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the applicable Issuing Bank, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of such Issuing Bank shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct as determined by a final, non-appealable
38

judgment by a court of competent jurisdiction; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or L/C Related Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at Law or under any other agreement. None of the applicable Issuing Bank, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of such Issuing Bank shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(f); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the applicable Issuing Bank, and such Issuing Bank may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such Issuing Bank’s willful misconduct or gross negligence as determined by a final, non-appealable judgment by a court of competent jurisdiction or such Issuing Bank’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the applicable Issuing Bank may accept documents that appear on its face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and such Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
(h)Cash Collateral. Upon the request of the Agent or the applicable Issuing Bank, if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then outstanding L/C Obligations. Section 6.02 sets forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.10(b)(ii), Section 2.19(c)(ii), (iv) and (v) and Section 6.02, “Cash Collateralize” means to pledge and deposit with or deliver to the Agent, for the benefit of the Issuing Banks and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Agent and each Issuing Bank (which documents are hereby consented to by the Lenders) in an amount equal to 100% of the amount of the L/C Obligations as of such date plus any accrued and unpaid interest and fees thereon. Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Agent, for the benefit of the Issuing Banks and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts with the Agent.
(i)Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Agent on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all such Letters of Credit and (B) to the Agent on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank.
(j)Interim Interest. Except as provided in Section 2.03(c)(ii) with respect to Unreimbursed Amounts refinanced as Base Rate Advances and Section 2.03(c)(iii) with respect to L/C Borrowings, unless the Borrower shall reimburse each payment by an Issuing Bank pursuant to a Letter of Credit in full on the Honor Date, the Unreimbursed Amount thereof shall bear interest, for each day from and including the Honor Date to but excluding the date that the Borrower reimburses such Issuing Bank for
39

the Unreimbursed Amount in full, at the rate per annum equal to (i) the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time, to but excluding the next Business Day after the Honor Date and (ii) from and including the next Business Day after the Honor Date, the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time plus 2% per annum.
Section 2.03A    Swingline Advances.
(a)Amount of Swingline Advances. Subject to the terms and conditions set forth herein, the Swingline Lender will make Swingline Advances in Dollars to the Borrower from time to time during the period from the Effective Date until the Termination Date, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of all outstanding Swingline Advances exceeding $50,000,000 (or such lesser amount as agreed between the Borrower and the Swingline Lender) or (ii) the Total Outstandings exceeding the aggregate Revolving Credit Commitment. Each Swingline Advance shall be in an aggregate amount of $500,000 or an integral multiple of $100,000 in excess thereof or such greater amounts as agreed between the Borrower and the Swingline Lender. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Advances. The Swingline Lender shall be under no obligation to make a Swingline Advance if any Lender is at such time an Affected Lender hereunder, unless the Swingline Lender is satisfied that the related exposure will be 100% covered by the Commitments of the non-Affected Lenders or, if not so covered, until the Swingline Lender has entered into arrangements satisfactory to it in its sole discretion with the Borrower or such Affected Lender to eliminate the Swingline Lender’s risk with respect to such Affected Lender, and participating interests in any such newly made Swingline Advance shall be allocated among non-Affected Lenders in a manner consistent with Section 2.19(c)(i) (and Affected Lenders shall not participate therein).
(b)Borrowing Notice and Making of Swingline Advances. To request a Swingline Advance, the Borrower shall notify the Swingline Lender and the Agent of such request in writing, not later than 2:00 p.m. (or such later time as the Swingline Lender may determine in its sole discretion), on the day of such Swingline Advance. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Advance. The Swingline Lender shall promptly notify the Borrower and the Agent (and the Agent shall promptly notify each Lender) and the Swingline Lender shall make each Swingline Advance available to the Borrower by 2:30 p.m. (or such later time as may be agreed by the Swingline Lender and the Borrower) on the requested date of such Swingline Advance in a manner agreed upon by the Borrower and the Swingline Lender. Each Swingline Advance shall bear interest at the Base Rate, or, at the option of the Borrower and subject to prior agreement between the Borrower and the Swingline Lender, shall be a Swingline Eurodollar Rate Advance or a Money Market Rate Advance.
(c)Repayment of Swingline Advances. Each Swingline Advance shall be paid in full by the Borrower on the earlier of (x) on or before the fourteenth (14th) Business Day after the date such Swingline Advance was made by the Swingline Lender or (y) the Termination Date. A Swingline Advance may not be repaid with the proceeds from another Swingline Advance. In addition, the Swingline Lender (i) may at any time in its sole discretion with respect to any outstanding Swingline Advance, or (ii) shall, on the fourteenth (14th) Business Day after the date any Swingline Advance is made and which has not been otherwise repaid, require each Lender (including the Swingline Lender) to make a Revolving Advance in the amount of such Lender’s Ratable Share of such Swingline Advance (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swingline Advance. Not later than 2:00 p.m. on the date of any notice received pursuant to this
40

Section 2.03A(c), each Lender shall make available to the Agent its required Revolving Advance, in immediately available funds in the same manner as provided in Section 2.02(a) with respect to Revolving Advances made by such Lender. Revolving Advances made pursuant to this Section 2.03A(c) shall initially be Base Rate Advances and thereafter may be continued as Base Rate Advances or converted into Eurodollar Rate Advances in the manner provided in Section 2.09 and subject to the other conditions and limitations set forth in this Article II. Each Lender’s obligation to make Revolving Advances pursuant to this Section 2.03A(c) to repay Swingline Advances shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Swingline Lender or any other Person, (b) the occurrence or continuance of a Default or an Event of Default, (c) any adverse change in the condition (financial or otherwise) of the Borrower, or (d) any other circumstance, happening or event whatsoever. In the event that any Lender fails to make payment to the Agent of any amount due under this Section 2.03A(c), the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Agent of any amount due under this Section 2.03A(c), such Lender shall be deemed, at the option of the Agent, to have unconditionally and irrevocably purchased from the Swingline Lender without recourse or warranty, an undivided interest and participation in the applicable Swingline Advance in the amount of such Revolving Advance, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Rate for each day during the period commencing on the date of demand and ending on the date such amount is received.
(d)    Swingline Advances Reports. The Swingline Lender shall furnish to the Agent on each Business Day a written report summarizing outstanding Swingline Advances made by the Swingline Lender and the due date for the repayment of such Swingline Advances; provided that if no Swingline Advances are outstanding, no such report shall be required to be delivered.
(e)    Successor Swingline Lender. Subject to the appointment and acceptance of a successor Swingline Lender as provided in this paragraph, the Borrower may, upon not less than ten (10) Business Days prior notice to the Agent and the Lenders, replace the existing Swingline Lender with the consent of the Agent (which consent shall not unreasonably be withheld). Upon the acceptance of its appointment as Swingline Lender hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the replaced Swingline Lender, and the replaced Swingline Lender shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Swingline Lender shall be as agreed between the Borrower and such successor. After the Swingline Lender’s replacement hereunder, the provisions of this Article and Section 8.04 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Swingline Lender.
Section2.04Fees.
(a)Commitment Fee. The Borrower agrees to pay to the Agent for the account of each Lender a commitment fee (the “Commitment Fee”) on such Lender’s Unused Commitment (provided that, for the avoidance of doubt, and without duplication, such Lender’s Unused Commitment shall be calculated exclusive of such Lender’s Swingline Exposure and, if such Lender is the Swingline Lender, without giving effect to the Swingline Advances, and in no event shall the aggregate of such Commitment Fees exceed an amount calculated based on the product of (a) the aggregate Revolving Credit Commitments minus the aggregate principal amount of all Revolving Advances and aggregate L/C
41

Obligations and (b) the Applicable Rate for Commitment Fees) from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assumption Agreement or in the Assignment and Assumption pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Rate for Commitment Fees in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing June 30, 2021, and on the Termination Date, provided that no Commitment Fee shall accrue with respect to the Unused Commitment of an Affected Lender so long as such Lender shall be an Affected Lender.
(b)Letter of Credit Fees.
(i)The Borrower shall pay to the Agent for the account of each Lender a commission on such Lender’s Ratable Share of the average daily aggregate Available Amount of all Letters of Credit outstanding from time to time at a rate per annum equal to the Applicable Rate for Eurodollar Rate Advances in effect from time to time, during such calendar quarter, payable in arrears quarterly on the last day of each March, June, September and December, commencing with the quarter ended June 30, 2021, and on the Termination Date; provided that the Applicable Rate for Eurodollar Rate Advances shall be 2% above such Applicable Rate in effect upon the occurrence and during the continuation of an Event of Default if the Borrower is required to pay default interest pursuant to Section 2.07(b).
(ii)The Borrower shall pay to each Issuing Bank, for its own account, a fronting fee with respect to each Letter of Credit issued by such Issuing Bank, payable in the amounts and at the times specified in the applicable Fee Letter between the Borrower and such Issuing Bank, and such other commissions, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree promptly following receipt of an invoice therefor.
(c)Agent’s Fees. The Borrower shall pay to the Agent for its own account such fees as are agreed between the Borrower and the Agent pursuant to the Fee Letter between the Borrower and the Agent.
Section2.05Optional Termination or Reduction of the Commitments.
(a)The Borrower shall have the right, upon at least three Business Days’ notice to the Agent, to terminate in whole or permanently reduce ratably in part the Unused Commitments or the Unissued Letter of Credit Commitments, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b)So long as no Default or Event of Default shall be continuing, the Borrower shall have the right, at any time, upon at least ten Business Days’ notice to an Affected Lender (with a copy to the Agent), to terminate in whole such Lender’s Revolving Credit Commitment and, if applicable, its Letter of Credit Commitment, without affecting the Commitments of any other Lender. Such termination shall be effective, (x) with respect to such Lender’s Unused Commitment, on the date set forth in such notice, provided, however, that such date shall be no earlier than ten Business Days after receipt of such notice and (y) with respect to each Revolving Advance outstanding to such Lender, in the case of Base Rate Advances, on the date set forth in such notice and, in the case of Eurodollar Rate Advances, on the last day of the then current Interest Period relating to such Revolving Advance. Upon termination of a Lender’s Commitments under this Section 2.05(b), the Borrower will pay or cause to be paid all principal
42

of, and interest accrued to the date of such payment on, Revolving Advances (and if such Lender is the Swingline Lender, the Swingline Advances) owing to such Lender and, subject to Section 2.19, pay any accrued Commitment Fees or Letter of Credit fees payable to such Lender pursuant to the provisions of Section 2.04, and all other amounts payable to such Lender hereunder (including, but not limited to, any increased costs or other amounts owing under Section 2.11 and any indemnification for Taxes under Section 2.14); and, if such Lender is an Issuing Bank, shall pay to such Issuing Bank for deposit in an escrow account an amount equal to the Available Amount of all Letters of Credit issued by such Issuing Bank, whereupon all Letters of Credit issued by such Issuing Bank shall be deemed to have been issued outside of this Agreement on a bilateral basis and shall cease for all purposes to constitute a Letter of Credit issued under this Agreement, and upon such payments, except as otherwise provided below, the obligations of such Lender hereunder shall, by the provisions hereof, be released and discharged; provided, however, that (i) such Lender’s rights under Section 2.11, Section 2.14 and Section 8.04, and, in the case of an Issuing Bank, Section 8.04(c), and its obligations under Section 8.04 and 8.08, in each case in accordance with the terms thereof, shall survive such release and discharge as to matters occurring prior to such date and (ii) such escrow agreement shall be in a form reasonably agreed to by the Borrower and such Issuing Bank, but in no event shall either the Borrower or such Issuing Bank require any waivers, covenants, events of default or other provisions that are more restrictive than or inconsistent with the provisions of this Agreement. Subject to Section 2.18, the aggregate amount of the Commitments of the Lenders once reduced pursuant to this Section 2.05(b) may not be reinstated. The termination of the Commitments of an Affected Lender pursuant to this Section 2.05(b) will not be deemed to be a waiver of any right that the Borrower, the Agent, any Issuing Bank, the Swingline Lender or any other Lender may have against the Affected Lender that arose prior to the date of such termination. Upon any such termination, the Ratable Share of each remaining Lender will be revised.
Section2.06Repayment of Advances. The Borrower shall repay to the Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Advances made by such Lender and then outstanding. The Borrower shall repay Swingline Advances in accordance with Section 2.03A(c).
Section2.07Interest on Advances.
(a)Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender (including the Swingline Lender) from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
(i)Base Rate Advances. During such periods as such Revolving Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Rate for Base Rate Advances in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full.
(ii)Eurodollar Rate Advances. During such periods as such Revolving Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Revolving Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Revolving Advance plus (y) the Applicable Rate for Eurodollar Rate Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full.
43

(iii)Swingline Advances. During such period as such Swingline Advance remains outstanding, the Base Rate or, as agreed to by the Swingline Lender and the Borrower, the Money Market Rate or the Eurodollar Rate, payable on the date such Swingline Advance is required to be repaid.
(b)Default Interest. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a), the Agent may, and upon the request of the Required Lenders shall, require the Borrower to pay interest (“Default Interest”) on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and (ii) to the fullest extent permitted by Law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above, provided, however, that following acceleration of the Advances pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not previously required by the Agent.
(c)Interest Rate Limitation. Nothing contained in this Agreement or in any other Loan Document shall be deemed to establish or require the payment of interest to any Lender at a rate in excess of the maximum rate permitted by applicable Law. If the amount of interest payable for the account of any Lender on any interest payment date would exceed the maximum amount permitted by applicable Law to be charged by such Lender, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. In the event of any such reduction affecting any Lender, if from time to time thereafter the amount of interest payable for the account of such Lender on any interest payment date would be less than the maximum amount permitted by applicable Law to be charged by such Lender, then the amount of interest payable for its account on such subsequent interest payment date shall be automatically increased to such maximum permissible amount, provided that at no time shall the aggregate amount by which interest paid for the account of any Lender has been increased pursuant to this sentence exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to the previous sentence.
Section2.08Interest Rate Determination.
(a)The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a).
(b)Subject to Section 2.08(c), if the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Advance or a Conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Advance, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate (including, without limitation, because the LIBO Rate is not available or published on a current basis) for any requested Interest Period with respect to a proposed Eurodollar Rate Advance; provided that no Benchmark Transition Event shall have occurred at such time, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Advance does not adequately and fairly reflect the cost to such Lenders of funding such Revolving Advance, the Agent will promptly so notify the Borrower and each Lender, whereupon each Eurodollar Rate Advance will automatically on the last day of the then existing Interest Period therefor Convert into a Base Rate Advance. Thereafter, the obligation of the Lenders to make or maintain
44

Eurodollar Rate Advances shall be suspended until the Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, Conversion to or continuation of Eurodollar Rate Advances or, failing that, will be deemed to have Converted such request into a request for a Base Rate Advance in the amount specified therein.
(c)Benchmark Replacement Setting. Notwithstanding anything to the contrary herein or in any other Loan Document (and any Hedge Agreement shall be deemed not to be a “Loan Document” for purposes of this Section):
(i)Replacing LIBO Rate. On March 5, 2021 the Financial Conduct Authority (“FCA”), the regulatory supervisor of the LIBO Rate’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12-month LIBO Rate tenor settings. On the earlier of (i) the date that all Available Tenors of LIBO Rate have either permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (ii) the Early Opt-in Effective Date, if the then-current Benchmark is LIBO Rate, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a quarterly basis.
(ii)Replacing Future Benchmarks. Upon the occurrence of a Benchmark Transition Event, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Advances to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Advances. During the period referenced in the foregoing sentence, the component of Base Rate based upon the Benchmark will not be used in any determination of Base Rate.
(iii)Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement, the Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
45

(iv)Notices; Standards for Decisions and Determinations. The Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by the Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section.
(v)Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or LIBO Rate), then the Agent may remove any tenor of such Benchmark that is unavailable or non-representative for Benchmark (including Benchmark Replacement) settings and (ii) the Agent may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings
(d)If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Revolving Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(e)On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Revolving Advances shall automatically Convert into Base Rate Advances.
(f)Upon the occurrence and during the continuance of any Event of Default,
(i)with respect to Eurodollar Rate Advances, each such Revolving Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base Rate Advance (or if such Revolving Advance is then a Base Rate Advance, will continue as a Base Rate Advance); and
(ii)the obligation of the Lenders to make Eurodollar Rate Advances or to Convert Revolving Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
Section2.09Optional Conversion of Revolving Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 12:00 noon on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Section 2.08 and Section 2.12, Convert all Revolving Advances of one Type comprising the same Borrowing into Revolving Advances of the other Type; provided, however, that (a) any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, (b) any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b), (c) no Conversion of any Revolving Advances shall result in more separate Borrowings than permitted under Section 2.02(b) and (d) no Swingline Advances may be converted. Each such notice of a Conversion shall, within the
46

restrictions specified above, specify (i) the date of such Conversion, (ii) the Revolving Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Revolving Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower.
Section2.10Prepayments of Advances.
(a)Optional. At any time and from time to time, the Borrower shall have the right to prepay any Advance, in whole or in part, without premium or penalty (except as provided in clause (y) below), upon notice at least two Business Days’ prior to the date of such prepayment, in the case of Eurodollar Rate Advances, and not later than 11:00 a.m. on the date of such prepayment in the case of Base Rate Advances and Swingline Advances, to the Agent (and, in the case of prepayment a Swingline Advance, the Swingline Lender) specifying the proposed date of such prepayment and the aggregate principal amount and Type of the Advance to be prepaid (and, in the case of Eurodollar Rate Advances, the Interest Period of the Borrowing pursuant to which made); provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and shall be accompanied by accrued interest to the date of prepayment on the principal amount prepaid, and (y) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(e).
(b)Mandatory.
(i)The Borrower shall prepay the aggregate principal amount of the Advances, together with accrued interest to the date of prepayment on the principal amount prepaid, without requirement of demand therefor, or shall pay or prepay any other Indebtedness then outstanding at any time, when and to the extent required to comply with applicable Laws of any Governmental Authority, including the 2020 Order and/or any Subsequent Order, or applicable resolutions of the Board of Directors of the Borrower.
(ii)If for any reason the Total Outstandings at any time exceed the aggregate Revolving Credit Commitments then in effect, the Borrower shall, within one Business Day after notice thereof, prepay Advances and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.10(b) unless, after the prepayment in full of the Advances, the Total Outstandings exceed the aggregate Revolving Credit Commitments then in effect.
Section2.11Increased Costs.
(a)Increased Costs Generally. If any Change in Law shall:
(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 2.11(e)) or any Issuing Bank;
(ii)impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Advances made by such Lender or any Letter of Credit or participation therein; or
47

(iii)subject the Agent or any Lender to any Taxes (other than (A) Indemnified Taxes, (B) Excluded Taxes and (C) Other Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to the Agent or such Lender of making, maintaining or Converting any Advance (or of maintaining its obligation to make any such Revolving Advance), or to increase the cost to the Agent, such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by the Agent, such Lender or such Issuing Bank hereunder (whether of principal, interest or any other amount) then, upon request of the Agent, such Lender or such Issuing Bank, the Borrower will pay to the Agent, such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate the Agent, such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b)Capital Requirements. If any Lender or any Issuing Bank determines that any Change in Law affecting such Lender or such Issuing Bank or any Applicable Lending Office of such Lender or such Lender’s or such Issuing Bank’s holding company, if any, regarding capital and liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy and liquidity), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.
(c)Certificates for Reimbursement. A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive and binding upon all parties absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within 30 days after receipt thereof.
(d)Delay in Requests. Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than three months prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).
48

(e)Reserves on Eurodollar Rate Advances. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Advance equal to the actual costs of such reserves allocated to such Revolving Advance by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error), which shall be due and payable on each date on which interest is payable on such Eurodollar Rate Advance, provided the Borrower shall have received at least 30 days’ prior notice (with a copy to the Agent) of such additional interest from such Lender. If a Lender fails to give notice 30 days prior to the relevant interest payment date, such additional interest shall be due and payable 30 days from receipt of such notice.
Section2.12Illegality. If any Lender shall have determined in good faith that the introduction of or any change in any applicable Law or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance with any guideline or request from any such Governmental Authority (whether or not having the force of law), makes it unlawful for any Lender or its Applicable Lending Office to make, maintain or fund Eurodollar Rate Advances, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, any obligation of such Lender to make or continue Eurodollar Rate Advances or to Convert Base Rate Advances to Eurodollar Rate Advances shall be suspended until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Agent), prepay or, if applicable, Convert all Eurodollar Rate Advances of such Lender to Base Rate Advances, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Advances to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Advances. Upon any such prepayment or Conversion, the Borrower shall also pay accrued interest on the amount so prepaid or Converted.
Section2.13Payments and Computations.
(a)All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. The Borrower shall make each payment hereunder not later than 1:00 p.m. on the day when due in U.S. dollars to the Agent at the Agent’s Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal, interest, fees or commissions ratably (other than amounts payable pursuant to Section 2.05(b), Section 2.11, Section 2.12, Section 2.14, Section 2.20 or Section 8.04(e)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon any Assuming Lender becoming a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.18, and upon the Agent’s receipt of such Lender’s Assumption Agreement and recording of the information contained therein in the Register, from and after the applicable Increase Date, the Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assumed thereby to the Assuming Lender. Upon its acceptance of an Assignment and Assumption and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Assumption, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to
49

such Assignment and Assumption shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b)All computations of interest based on the Base Rate (when the Base Rate is based on the Prime Rate) shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all other computations of interest and fees hereunder (including computations of interest based on the Eurodollar Rate and the Federal Funds Rate and of fees and Letter of Credit commissions) shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Interest on Swingline Advances shall be calculated on the basis of a year of 360 days or such other basis agreed to by the Swingline Lender and the Borrower, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.
(c)Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest, fees or commissions, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(d)Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due to such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate.
Section2.14Taxes.
(a)Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.
(i)Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall to the extent permitted by applicable Laws be made free and clear of and without reduction or withholding for any Taxes. If, however, applicable Laws require the Borrower or the Agent to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such Laws as determined by the Borrower or the Agent, as the case may be, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.
(ii)If the Borrower or the Agent shall be required by the Internal Revenue Code to withhold or deduct any Taxes, including both United States of America Federal backup withholding and withholding Taxes, from any payment, then (A) the Agent shall withhold or make such deductions as are determined by the Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Agent shall timely
50

pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Internal Revenue Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the Agent, Lender or Issuing Bank, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.
(b)Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Laws.
(c)Tax Indemnifications.
(i)Without limiting the provisions of subsection (a) or (b) above, the Borrower shall, and does hereby, indemnify the Agent, each Lender and each Issuing Bank, and shall make payment in respect thereof within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) withheld or deducted by the Borrower or the Agent or paid by the Agent, such Lender or such Issuing Bank, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The Borrower shall also, and does hereby, indemnify the Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or an Issuing Bank for any reason fails to pay indefeasibly to the Agent as required by clause (ii) of this subsection. A certificate as to the amount of any such payment or liability delivered to the Borrower by a Lender or an Issuing Bank (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.
(ii) Each Lender and each Issuing Bank shall, within 30 days after demand therefor, severally (A) indemnify the Agent for (x) any Indemnified Taxes and Other Taxes attributable to such Lender or such Issuing Bank (but only to the extent that the Borrower has not already indemnified the Agent for such Indemnified Taxes and Other Taxes and without limiting the obligation of the Borrower to do so), (y) any Taxes attributable to such Lender’s or such Issuing Bank’s failure to comply with the provisions of Section 8.07(d) relating to the maintenance of a Participant Register and (z) for any Excluded Taxes attributable to such Lender or such Issuing Bank, in each case, that are payable or paid by the Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority, and (B) indemnify the Borrower and the Agent against any and all Taxes and any and all related losses, claims, liabilities, penalties, interest and expenses (including the fees, charges and disbursements of any counsel for the Borrower or the Agent) incurred by or asserted against the Borrower or the Agent by any Governmental Authority as a result of the failure by such Lender or such Issuing Bank, as the case may be, to deliver, or as a result of the inaccuracy, inadequacy or deficiency of, any documentation required to be delivered by such Lender or such Issuing Bank, as the case may be, to the Borrower or the Agent pursuant to subsection (e). A certificate as to the amount of such payment or liability delivered to any Lender or any Issuing Bank by the Agent shall be conclusive absent manifest error. Each Lender and each Issuing Bank hereby authorizes the
51

Agent to set off and apply any and all amounts at any time owing to such Lender or such Issuing Bank, as the case may be, under this Agreement or any other Loan Document or otherwise payable by the Agent to the Lender or the Issuing Bank from any other source against any amount due to the Agent under this clause (ii). The agreements in this clause (ii) shall survive the resignation and/or replacement of the Agent, any assignment of rights by, or the replacement of, a Lender or an Issuing Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.
(d)Evidence of Payments. Upon request by the Borrower or the Agent, as the case may be, after any payment of Taxes by the Borrower or by the Agent to a Governmental Authority as provided in this Section 2.14, the Borrower shall deliver to the Agent or the Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Agent, as the case may be.
(e)Status of Lenders; Tax Documentation.
(i)Each Lender shall deliver to the Borrower and to the Agent, at the time or times prescribed by applicable Laws or when reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by applicable Laws or by the taxing authorities of any jurisdiction and such other reasonably requested information as will permit the Borrower or the Agent, as the case may be, to determine (A) whether or not payments made hereunder or under any other Loan Document are subject to Taxes, (B) if applicable, the required rate of withholding or deduction, and (C) such Lender’s entitlement to any available exemption from, or reduction of, applicable Taxes in respect of all payments to be made to such Lender by the Borrower pursuant to this Agreement or otherwise to establish such Lender’s status for withholding tax purposes in the applicable jurisdiction.
(ii)Without limiting the generality of the foregoing, if the Borrower is resident for tax purposes in the United States of America,
(A)any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code shall deliver to the Borrower and the Agent executed originals of Internal Revenue Service Form W-9 or such other documentation or information prescribed by applicable Laws or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent, as the case may be, to determine whether or not such Lender is subject to backup withholding or information reporting requirements; and
(B)each Foreign Lender that is entitled under the Internal Revenue Code or any applicable treaty to an exemption from or reduction of withholding tax with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:
52

(1)executed originals of Internal Revenue Service Form W8BEN or Form W-8BEN-E claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,
(2)executed originals of Internal Revenue Service Form W8ECI,
(3)executed originals of Internal Revenue Service Form W8IMY and all required supporting documentation,
(4)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Internal Revenue Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Internal Revenue Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Internal Revenue Code and (y) executed originals of Internal Revenue Service Form W8BEN or Form W-8BEN-E, or
(5)executed originals of any other form prescribed by applicable Laws as a basis for claiming exemption from or a reduction in United States of America Federal withholding tax together with such supplementary documentation as may be prescribed by applicable Laws to permit the Borrower or the Agent to determine the withholding or deduction required to be made.
(iii)Each Lender shall promptly (A) notify the Borrower and the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (B) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Applicable Lending Office) to avoid any requirement of applicable Laws of any jurisdiction that the Borrower or the Agent make any withholding or deduction for taxes from amounts payable to such Lender.
(iv)If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall deliver to each of the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (iv), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(f)Treatment of Certain Refunds. Unless required by applicable Laws, at no time shall the Agent have any obligation to file for or otherwise pursue on behalf of a Lender or an Issuing Bank, or
53

have any obligation to pay to any Lender or any Issuing Bank, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or such Issuing Bank, as the case may be. If the Agent, any Lender or any Issuing Bank determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses incurred by the Agent, such Lender or such Issuing Bank, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Agent, such Lender or such Issuing Bank, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent, such Lender or such Issuing Bank in the event the Agent, such Lender or such Issuing Bank is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Agent, any Lender or any Issuing Bank to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.
(g)Payments. Failure or delay on the part of the Agent, any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section 2.14 shall not constitute a waiver of the Agent’s, such Lender’s or such Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate the Agent, a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section 2.14 for any Indemnified Taxes or Other Taxes imposed or asserted by the relevant Governmental Authority more than three months prior to the date that the Agent, such Lender or such Issuing Bank, as the case may be, claims compensation with respect thereto (except that, if a Change in Law giving rise to such Indemnified Taxes or Other Taxes is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).
(h)Each of the Agent, any Issuing Bank or any Lender agrees to cooperate with any reasonable request made by the Borrower in respect of a claim of a refund in respect of Indemnified Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.14 if (i) the Borrower has agreed in writing to pay all of the Agent’s or such Issuing Bank’s or such Lender’s reasonable out-of-pocket costs and expenses relating to such claim, (ii) the Agent or such Issuing Bank or such Lender determines, in its good faith judgment, that it would not be disadvantaged, unduly burdened or prejudiced as a result of such claim and (iii) the Borrower furnishes, upon request of the Agent, or such Issuing Bank or such Lender, an opinion of tax counsel (such opinion, which can be reasoned, and such counsel to be reasonably acceptable to such Lender, or such Issuing Bank or the Agent) that the Borrower is likely to receive a refund or credit.
Section 2.15Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances or L/C Advances owing to it (other than pursuant to Section 2.05(b), Section 2.11, Section 2.12, Section 2.14, Section 2.20 or Section 8.04(e) or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in Letters of Credit to any assignee or participant, other than to the Borrower or any Subsidiary thereof if permitted hereby (as to which the provisions of this Section 2.15 shall apply) in excess of its Ratable Share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders (for cash at face value) such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each
54

of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s Ratable Share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by Law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
Section 2.16Evidence of Debt.
(a)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Advances. The Borrower agrees that upon notice by any Lender (including the Swingline Lender) to the Borrower (with a copy of such notice to the Agent) to the effect that a Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Note payable to the order of such Lender in a principal amount up to the Revolving Credit Commitment of such Lender.
(b)The Register maintained by the Agent pursuant to Section 8.07(c) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assumption Agreement and each Assignment and Assumption delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender’s share thereof.
(c)Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement.
Section 2.17Use of Proceeds. The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds) solely to refinance Indebtedness of the Borrower from time to time and for other general corporate purposes of the Borrower, subject to such restrictions that are imposed in the 2020 Order and/or any Subsequent Order.
Section 2.18Increase in the Aggregate Revolving Credit Commitments.
(a)The Borrower may, at any time prior to the Termination Date, by notice to the Agent, request that the aggregate amount of the Revolving Credit Commitments be increased by an amount of
55

$10,000,000 or an integral multiple thereof (each a “Commitment Increase”) to be effective as of a date that is at least 90 days prior to the Termination Date (the “Increase Date”) as specified in the related notice to the Agent; provided, however that (i) in no event shall the aggregate amount of the Revolving Credit Commitments at any time exceed $700,000,000 or the aggregate amount of Commitment Increases exceed $200,000,000 and (ii) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in this Section 2.18 shall be satisfied.
(b)The Agent shall promptly notify the Lenders of a request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Lenders wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Revolving Credit Commitments (the “Commitment Date”). Each Lender that is willing to participate in such requested Commitment Increase (each an “Increasing Lender”) shall, in its sole discretion, give written notice to the Agent on or prior to the Commitment Date of the amount by which it is willing to increase its Revolving Credit Commitment. If the Lenders notify the Agent that they are willing to increase the amount of their respective Revolving Credit Commitments by an aggregate amount that exceeds the amount of the requested Commitment Increase, the requested Commitment Increase shall be allocated among the Lenders willing to participate therein in such amounts as are agreed between the Borrower and the Agent. Each Increasing Lender shall be subject to such applicable consents as may be required under Section 8.07(b)(iii) (including, but not limited to, the consent, not to be unreasonably withheld, of each Issuing Bank and the Swingline Lender).
(c)Promptly following each Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Lenders are willing to participate in the requested Commitment Increase. If the aggregate amount by which the Lenders are willing to participate in any requested Commitment Increase on any such Commitment Date is less than the requested Commitment Increase, then the Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Commitment Increase that has not been committed to by the Lenders as of the applicable Commitment Date; provided, however, that the Revolving Credit Commitment of each such Eligible Assignee shall be in an amount of not less than $10,000,000.
(d)On each Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.18(c) (each such Eligible Assignee, an “Assuming Lender”) shall become a Lender party to this Agreement as of such Increase Date and the Revolving Credit Commitment of each Increasing Lender for such requested Commitment Increase shall be so increased by the amount by which the Increasing Lender agreed to increase its Revolving Credit Commitment (or by the amount allocated to such Lender pursuant to the next to last sentence of Section 2.18(b)) as of such Increase Date; provided, however, that the Agent shall have received on or before such Increase Date the following, each dated such date:
(i)(A) certified copies of resolutions of the Board of Directors of the Borrower approving the Commitment Increase and the corresponding modifications to this Agreement, (B) an opinion of counsel for the Borrower (which may be in-house counsel), in form and substance reasonably acceptable to the Required Lenders and (C) a certificate from a duly authorized officer of the Borrower, stating that the conditions set forth in Section 3.02(a) and Section 3.02(b) are satisfied;
(ii)an assumption agreement from each Assuming Lender, if any, in form and substance satisfactory to the Borrower and the Agent (each an “Assumption Agreement”), duly
56

executed by such Assuming Lender, the Agent, the Borrower and each other Person required to consent thereto, as applicable under Section 8.07(b)(iii); and
(iii)confirmation from each Increasing Lender of the increase in the amount of its Revolving Credit Commitment in a writing satisfactory to the Borrower and the Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.18(d), the Agent shall notify the Lenders (including, without limitation, each Assuming Lender) and the Borrower, on or before 1:00 p.m., by telecopier, of the occurrence of the Commitment Increase to be effected on such Increase Date and shall record in the Register the relevant information with respect to each Increasing Lender and each Assuming Lender on such date. Each Increasing Lender and each Assuming Lender shall, before 2:00 p.m. on the Increase Date, make available for the account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds, in the case of such Assuming Lender, an amount equal to such Assuming Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase) and, in the case of such Increasing Lender, an amount equal to the excess of (i) such Increasing Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase) over (ii) such Increasing Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment (without giving effect to the relevant Commitment Increase) as a percentage of the aggregate Revolving Credit Commitments (without giving effect to the relevant Commitment Increase). After the Agent’s receipt of such funds from each such Increasing Lender and each such Assuming Lender, the Agent will promptly thereafter cause to be distributed like funds to the other Lenders for the account of their respective Applicable Lending Offices in an amount to each other Lender such that the aggregate amount of the outstanding Advances owing to each Lender after giving effect to such distribution equals such Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase).
Section 2.19Affected Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes an Affected Lender, then the following provisions shall apply for so long as such Lender is an Affected Lender:
(a)fees shall cease to accrue on the Unused Commitment of such Affected Lender pursuant to Section 2.04(a);
(b)the Revolving Credit Commitment and Advances of such Affected Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 8.01), other than any waiver, amendment or modification requiring the consent of all Lenders or of each Lender affected;
(c)if (x) there shall be any Available Amount under any outstanding Letter of Credit or (y) any Swingline Exposure shall exist during any time a Lender is an Affected Lender, then:
(i)so long as no Default or Event of Default has occurred and is continuing, all or any part of the Available Amount of all such Letters of Credit and Swingline Exposure shall be reallocated among the non-Affected Lenders in accordance with their respective Ratable Shares (disregarding any Affected Lender’s Revolving Credit Commitment) but only to the extent that
57

with respect to each non-Affected Lender the sum of (A) the aggregate principal amount of all Revolving Advances made by such non-Affected Lender (in its capacity as a Lender) and outstanding at such time plus (B) such non-Affected Lender’s Ratable Share (after giving effect to the reallocation contemplated in this Section 2.19(c)(i)) of the outstanding L/C Obligations plus (C) such non-Affected Lender’s Ratable Share (after giving effect to the reallocation contemplated in this Section 2.19(c)(i)) of the outstanding Swingline Exposure, does not exceed such non-Affected Lender’s Revolving Credit Commitment;
(ii)if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business Day following notice by the Agent (x) first, prepay such unallocable Swingline Exposure and (y) second, Cash Collateralize for the benefit of the applicable Issuing Bank only the Borrower’s obligations corresponding to such Affected Lender’s Ratable Share of the Available Amount of outstanding Letters of Credit (after giving effect to any partial reallocation pursuant to clause (i) above) (the “Affected Lender Share”) in accordance with the procedures set forth in Section 2.03(h) for so long as such there shall be any Available Amount of outstanding Letters of Credit;
(iii)if the Ratable Share of the Available Amount of outstanding Letters of Credit and the Swingline Exposure of the non-Affected Lenders is reallocated pursuant to this Section 2.19(c), then the fees payable to the Lenders pursuant to Section 2.04(a) and Section 2.04(b) shall be adjusted in accordance with such non-Affected Lenders’ Ratable Shares;
(iv)if any Affected Lender Share is not reallocated pursuant to clause (i) above and if the Borrower fails to Cash Collateralize any portion of such Affected Lender Share pursuant to clause (ii) above, then, without prejudice to any rights or remedies of any Issuing Bank or any Lender hereunder, the fee payable under Section 2.04(b) with respect to such Affected Lender Share shall be payable to the Issuing Bank until such Affected Lender Share is reallocated; and
(v)if the Borrower Cash Collateralizes any portion of any Affected Lender Share pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Affected Lender pursuant to Section 2.04(b)(i) or the applicable Issuing Bank pursuant to Section 2.04(b)(ii) (solely with respect to any fronting fee) with respect to such Affected Lender’s Affected Lender Share during the period such Affected Lender’s Affected Lender Share is Cash Collateralized;
(d)to the extent the Agent receives any payments or other amounts for the account of an Affected Lender under this Agreement, such Affected Lender shall be deemed to have requested that the Agent use such payment or other amount to fulfill such Affected Lender’s previously unsatisfied obligations to fund a Revolving Advance under Section 2.03(c) or Section 2.03A(c) or L/C Advance or any other unfunded payment obligation of such Affected Lender under this Agreement; and
(e)subject to Section 8.18, for the avoidance of doubt, the Borrower, each Issuing Bank, the Swingline Lender, the Agent and each other Lender shall retain and reserve its other rights and remedies respecting each Affected Lender.
In the event that the Agent, the Borrower, the Swingline Lender and the Issuing Banks each agrees that an Affected Lender has adequately remedied all matters that caused such Lender to be an Affected Lender, then the Ratable Shares of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Revolving Credit Commitment and on such date such Lender shall purchase at par such of
58

the Revolving Advances of the other Lenders as the Agent shall determine may be necessary in order for such Lender to hold such Revolving Advances in accordance with its Ratable Share. In addition, at such time as the Affected Lender is replaced by another Lender pursuant to Section 2.20, the Ratable Shares of the Lenders will be readjusted to reflect the inclusion of the replacing Lender’s Commitment in accordance with Section 2.20. In either such case, this Section 2.19 will no longer apply.
Section 2.20Replacement of Lenders. If any Lender requests compensation under Section 2.11, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, or if any Lender is an Affected Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 8.07), all of its interests, rights and obligations under this Agreement and the related Loan Documents to one or more assignees that shall assume such obligations (which any such assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a)the Borrower shall have paid to the Agent the assignment fee specified in Section 8.07(b);
(b)such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Advances and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 8.04(e)) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(c)in the case of any such assignment resulting from a claim for compensation under Section 2.11 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments thereafter; and
(d)such assignment does not conflict with applicable Laws.
A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Section 2.21Extension of Termination Date.
(a)The Borrower may at any time from time to time not more than ninety (90) days and not less than thirty (30) days prior to any anniversary of the Effective Date, by notice to the Agent (who shall promptly notify the Lenders) not later than 10 Business Days prior to the date on which the Lenders are requested to respond thereto (each such date, a “Lender Notice Date”), request that each Lender extend (each such date on which such extension occurs, an “Extension Date”) such Lender’s Termination Date to the date that is one year after the Termination Date then in effect for such Lender (the “Existing Termination Date”).
(b)Each Lender, acting in its sole and individual discretion, shall, by notice to the Agent given not later than the applicable Lender Notice Date, advise the Agent whether or not such Lender agrees to such extension (each Lender that determines to so extend its Termination Date, an “Extending Lender”). Each Lender that determines not to so extend its Termination Date (a “Non-Extending Lender”) shall notify the Agent of such fact promptly after such determination (but in any event no later
59

than the Lender Notice Date), and any Lender that does not so advise the Agent on or before the Lender Notice Date shall be deemed to be a Non-Extending Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree, and it is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by the Borrower for extension of the Termination Date.
(c)The Agent shall promptly notify the Borrower of each Lender’s determination under this Section.
(d)The Borrower shall have the right, but shall not be obligated, on or before the applicable Termination Date for any Non-Extending Lender to replace such Non-Extending Lender with, and add as “Lenders” under this Agreement in place thereof, one or more financial institutions that are Eligible Assignees (each, an “Additional Commitment Lender”) approved by the Agent, each Issuing Bank and the Swingline Lender in accordance with the procedures provided in Section 8.07, each of which Additional Commitment Lenders shall have entered into an Assignment and Assumption (in accordance with and subject to the restrictions contained in Section 8.07, with the Borrower obligated to pay any applicable processing or recordation fee) with such Non-Extending Lender, pursuant to which such Additional Commitment Lenders shall, effective on or before the Termination Date for such Non-Extending Lender, assume a Revolving Credit Commitment (and, if any such Additional Commitment Lender is already a Lender, its Revolving Credit Commitment shall be in addition to such Lender’s Revolving Credit Commitment hereunder on such date). The Agent may effect such amendments to this Agreement as are reasonably necessary to provide for any such extensions with the consent of the Borrower but without the consent of any other Lenders.
(e)If (and only if) the total of the Revolving Credit Commitments of the Lenders that have agreed to extend their Termination Date and the additional Revolving Credit Commitments of the Additional Commitment Lenders is more than 50% of the aggregate amount of the Revolving Credit Commitments in effect immediately prior to the applicable Extension Date, then, effective as of the applicable Extension Date, the Termination Date of each Extending Lender and of each Additional Commitment Lender shall be extended to the date that is one year after the Existing Termination Date (except that, if such date is not a Business Day, such Termination Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall thereupon become a “Lender” for all purposes of this Agreement and shall be bound by the provisions of this Agreement as a Lender hereunder and shall have the obligations of a Lender hereunder.
(f)Notwithstanding the foregoing, (x) no more than two (2) extensions of the Termination Date shall be permitted hereunder and (y) any extension of any Termination Date pursuant to this Section 2.21 shall not be effective with respect to any Extending Lender unless as of the applicable Extension Date and immediately after giving effect thereto:
(i)there shall exist no Default;
(ii)the representations and warranties made by the Borrower contained herein shall be true and correct; and
(iii)the Agent shall have received a certificate from the Borrower signed by an Authorized Officer of the Borrower (A) certifying the accuracy of the foregoing clauses (i) and (ii) and (B) certifying and attaching the resolutions adopted by the Borrower approving or consenting to such extension.
60

(g)On the Termination Date of each Non-Extending Lender, (i) the Revolving Credit Commitment of each Non-Extending Lender shall automatically terminate and (ii) the Borrower shall repay such Non-Extending Lender in accordance with Section 2.06 (and shall pay to such Non-Extending Lender all of the other obligations owing to it under this Agreement) and after giving effect thereto shall prepay any Revolving Advances outstanding on such date (and pay any additional amounts required pursuant to Section 2.02) to the extent necessary to keep outstanding Revolving Advances ratable with any revised Ratable Share of the respective Lenders effective as of such date, and the Agent shall administer any necessary reallocation of the outstanding Advances (without regard to any minimum borrowing, pro rata borrowing and/or pro rata payment requirements contained elsewhere in this Agreement).
(h)This Section shall supersede any provisions in Section 2.02 or Section 8.01 to the contrary.
Article III

CONDITIONS PRECEDENT
Section3.01Conditions Precedent to Effectiveness. This Agreement shall become effective on and as of the first date (the “Effective Date”) on which the following conditions precedent have been satisfied:
(a)The Lenders shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have requested.
(b)The Borrower shall have paid all accrued fees and agreed expenses of the Agent, the Arrangers and the Lenders and the reasonable accrued fees and expenses of one law firm acting as counsel to the Agent that have been invoiced at least one Business Day prior to the Effective Date.
(c)On the Effective Date, the following statements shall be true and the Agent shall have received a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that:
(i)The representations and warranties contained in Section 4.01 are true and correct on and as of the Effective Date, and
(ii)No event has occurred and is continuing that constitutes a Default.
(d)The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent and the Lenders:
(i)Receipt by the Agent of executed counterparts of this Agreement properly executed by a duly authorized officer of the Borrower and by each Lender.
(ii)The Notes, payable to the order of the Lenders to the extent requested by any Lender pursuant to Section 2.16.
(iii)The articles of incorporation of the Borrower certified to be true and complete as of a recent date by the appropriate governmental authority of the state or other jurisdiction of its
61

incorporation and certified by a secretary, assistant secretary or associate secretary of the Borrower to be true and correct as of the Effective Date.
(iv)The bylaws of the Borrower certified by a secretary, assistant secretary or associate secretary of the Borrower to be true and correct as of the Effective Date.
(v)Certified copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes.
(vi)A certificate of the secretary, assistant secretary or associate secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder.
(vii)A certificate as of a recent date from the Borrower’s state of incorporation evidencing that the Borrower is in good standing in such state.
(viii)A favorable opinion of counsel for the Borrower, in form and substance reasonably acceptable to the Lenders.
(ix)A favorable opinion of Sidley Austin LLP, counsel for the Agent, in form and substance reasonably acceptable to the Lenders.
(e)[Reserved].
(f)The Agent shall have received evidence satisfactory to it that that certain $500,000,000 Five-Year Credit Agreement dated as of June 29, 2017 by and among the Borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, shall have been terminated and cancelled and all indebtedness and other amounts due and unpaid thereunder shall have been (or shall concurrently with the effectiveness of this Agreement be) fully repaid on terms and conditions reasonably acceptable to the Agent.
(g)The Agent shall have received reasonably satisfactory evidence that each of (i) that certain $200,000,000 Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021, by and among PWCC, as borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, and (ii) that certain $500,000,000 Five-Year Credit Agreement, dated as of May 28, 2021, by and among Borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, shall be effective prior to or substantially concurrently with the effectiveness of this Agreement.
(h)PATRIOT Act. At least five days prior to the Effective Date, the Borrower shall have provided to the Agent and the Lenders the documentation and other information reasonably requested by the Agent, and reasonably available to the Borrower, in order to comply with requirements of the PATRIOT Act.
(i)In the event that the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, the Borrower shall deliver, at least five days prior to the Effective Date, a Beneficial Ownership Certification in relation to the Borrower.
62

Section3.02Conditions Precedent to Each Credit Extension and Commitment Increase. The obligation of each Lender to make an Advance (other than an L/C Advance or an Advance made pursuant to Section 2.03(c) or Section 2.03A(c)) on the occasion of each Borrowing, the obligation of each Issuing Bank to issue a Letter of Credit, and each Commitment Increase shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Borrowing or such issuance (as the case may be), or the applicable Increase Date, the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or request for issuance and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or date of such issuance such statements are true):
(a)the representations and warranties contained in Section 4.01 (other than Section 4.01(k)), and in the case of a Borrowing or issuance of a Letter of Credit, Section 4.01(e)(ii) and Section 4.01(f)(ii)) are correct on and as of such date, before and after giving effect to such Borrowing or issuance of a Letter of Credit, or such Commitment Increase and to the application of the proceeds therefrom, as though made on and as of such date;
(b)no event has occurred and is continuing, or would result from such Borrowing or issuance of a Letter of Credit, or such Commitment Increase or from the application of the proceeds therefrom, that constitutes a Default;
(c)all required regulatory authorizations including the 2020 Order and/or any Subsequent Order in respect of such Credit Extension have been obtained and are in full force and effect and, before and after giving effect to such Borrowing or such issuance of a Letter of Credit and to the application of the proceeds therefrom, the Borrower is in compliance with the provisions of the applicable order; and
(d)before and after giving effect to such Credit Extension and to the application of the proceeds therefrom, as though made on and as of such date, the Indebtedness of the Borrower does not exceed that permitted by (i) applicable resolutions of the Board of Directors of the Borrower, (ii) applicable Arizona Law, or (iii) the 2020 Order or any Subsequent Order, whichever is in force and effect at such time.
Each request for Credit Extension (which shall not include a Conversion or a continuation of Eurodollar Rate Advances) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 3.02(a) through (d) have been satisfied on and as of the date of the applicable Credit Extension.
Section3.03Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01 and the satisfaction of each Lender with respect to letters delivered to it from the Borrower as set forth in Section 4.01(a), Section 4.01(e) and Section 4.01(f), each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower designates as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify the Lenders and the Borrower of the occurrence of the Effective Date.
63

Article IV

REPRESENTATIONS AND WARRANTIES
Section4.01Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:
(a)Each of the Borrower and each Material Subsidiary: (i) is a corporation or other entity duly organized and validly existing under the Laws of the jurisdiction of its incorporation or organization; (ii) has all requisite corporate or if the Material Subsidiary is not a corporation, other comparable power necessary to own its assets and carry on its business as presently conducted; (iii) has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as presently conducted, if the failure to have any such license, authorization, consent or approval is reasonably likely to have a Material Adverse Effect and except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion) and except that (A) the Borrower from time to time may make minor extensions of its lines, plants, services or systems prior to the time a related franchise, certificate of convenience and necessity, license or permit is procured, (B) from time to time communities served by the Borrower may become incorporated and considerable time may elapse before such a franchise is procured, (C) certain such franchises may have expired prior to the renegotiation thereof, (D) certain minor defects and exceptions may exist which, individually and in the aggregate, are not material and (E) certain franchises, certificates, licenses and permits may not be specific as to their geographical scope); and (iv) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify is reasonably likely to have a Material Adverse Effect.
(b)The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not or did not (i) contravene the Borrower’s articles of incorporation or by-laws, (ii) contravene any Law (including without limitation the 2020 Order and/or any Subsequent Order), decree, writ, injunction or determination of any Governmental Authority, in each case applicable to or binding upon the Borrower or any of its properties, (iii) contravene any contractual restriction binding on or affecting the Borrower or (iv) cause the creation or imposition of any Lien upon the assets of the Borrower or any Material Subsidiary, except for Liens created under this Agreement and except where such contravention or creation or imposition of such Lien is not reasonably likely to have a Material Adverse Effect.
(c)No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes to be delivered by it, except for the 2020 Order or any Subsequent Order, which has been duly obtained and is in full force and effect, and any notices or compliance filings required therein.
(d)This Agreement has been, and each of the other Loan Documents upon execution and delivery will have been, duly executed and delivered by the Borrower. This Agreement is, and each of the other Loan Documents upon execution and delivery will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms, subject,
64

however, to the application by a court of general principles of equity and to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally.
(e)(i) The Consolidated balance sheet of the Borrower as of December 31, 2020, and the related Consolidated statements of income and cash flows of the Borrower for the fiscal year then ended, accompanied by an opinion thereon of Deloitte & Touche LLP, independent registered public accountants and the condensed Consolidated balance sheets of the Borrower as of March 31, 2021, and the related condensed Consolidated statements of income and cash flows of the Borrower for the three months then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to the Agent, fairly present in all material respects, subject, in the case of said balance sheet at March 31, 2021, and said statements of income and cash flows for the three months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower as at such dates and the Consolidated results of the operations of the Borrower for the periods ended on such dates, all in accordance with GAAP (except as disclosed therein), and (ii) except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion), since December 31, 2020, there has been no Material Adverse Effect.
(f)There is no pending or, to the knowledge of an Authorized Officer of the Borrower, threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the consummation of the transactions contemplated hereby or (ii) would be reasonably likely to have a Material Adverse Effect (except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion)) and there has been no adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of such disclosed litigation that would be reasonably likely to have a Material Adverse Effect.
(g)No proceeds of any Advance will be used to acquire any equity security not issued by the Borrower of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934.
(h)The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, in any case in violation of Regulation U. After application of the proceeds of any Advance, not more than 25% of the value of the assets subject to any restriction under this Agreement on the right to sell, pledge, transfer, or otherwise dispose of such assets is represented by margin stock.
(i)The Borrower and its Subsidiaries have filed all United States of America Federal income Tax returns and all other material Tax returns which are required to be filed by them and have paid all Taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except to the extent that (i) such Taxes are being contested in good faith and by appropriate proceedings and that appropriate reserves for the payment thereof have been maintained by the Borrower and its Subsidiaries in accordance with GAAP or (ii) the failure to make such filings or such payments is not reasonably likely to have a Material Adverse Effect. The charges, accruals and reserves on the books
65

of the Borrower and its Material Subsidiaries as set forth in the most recent financial statements of the Borrower delivered to the Agent pursuant to Section 4.01(e) or Section 5.01(h)(i) or Section 5.01(h)(ii) hereof in respect of Taxes and other governmental charges are, in the opinion of the Borrower, adequate.
(j)Set forth on Schedule 4.01(j) hereto (as such schedule may be modified from time to time by the Borrower by written notice to the Agent) is a complete and accurate list of all the Subsidiaries of the Borrower and, as of the Effective Date, no such Subsidiary of the Borrower is a Material Subsidiary.
(k)Set forth on Schedule 4.01(k) hereto is a complete and accurate list identifying any Indebtedness of the Borrower outstanding in a principal amount equal to or exceeding $5,000,000 and which is not described in the financial statements referred to in Section 4.01(e).
(l)The Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.
(m)No report, certificate or other written information furnished by the Borrower or any of its Subsidiaries to the Agent, any Arranger or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) at the time so furnished, when taken together as a whole with all such written information so furnished, contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except as would not reasonably be expected to result in a Material Adverse Effect; provided that with respect to any projected financial information, forecasts, estimates or forward-looking information, the Borrower represents only that such information and materials have been prepared in good faith on the basis of assumptions believed to be reasonable at the time of preparation of such forecasts, and no representation or warranty is made as to the actual attainability of any such projections, forecasts, estimates or forward-looking information.
(n)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower, any of their respective Affiliates over which any of the foregoing exercises management control (each, a “Controlled Affiliate”) or any director or officer of the Borrower, any of its Subsidiaries or any of their respective Controlled Affiliates (each, a “Manager”) is a Prohibited Person, and the Borrower, its Subsidiaries and, to the knowledge of the Borrower, such Controlled Affiliates are in compliance with all applicable orders, rules and regulations of OFAC.
(o)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower, any of their respective Controlled Affiliates or Managers: (i) is the target of Sanctions; (ii) is owned or controlled by, or acts on behalf of, any Person that is targeted by United States or multilateral economic or trade sanctions currently in force; (iii) is, or is owned or controlled by, a Person who is located, organized or resident in a country, region or territory that is, or whose government is, the subject of Sanctions, including, without limitation, Crimea, Cuba, Iran, North Korea and Syria, or (iv) is named, identified or described on any list of Persons with whom United States Persons may not conduct business, including any such blocked persons list, designated nationals list, denied persons list, entity list, debarred party list, unverified list, sanctions list or other such lists published or maintained by the United States, including OFAC, the United States Department of Commerce or the United States Department of State, or any other applicable Governmental Authority.
(p)None of the Borrower’s or its Subsidiaries’ assets constitute property of, or are beneficially owned, directly or indirectly, by any Person that is the target of Sanctions, including but not
66

limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. (the “Trading With the Enemy Act”), any of the foreign assets control regulations of the Treasury (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or regulations promulgated thereunder or executive order relating thereto (which includes, without limitation, (i) Executive Order No. 13224, effective as of September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (ii) the PATRIOT Act), if the result of such ownership would be that any Credit Extension made by any Lender would be in violation of law (“Embargoed Person”); (a) no Embargoed Person has any interest of any nature whatsoever in the Borrower if the result of such interest would be that any Credit Extension would be in violation of law; (b) the Borrower has not engaged in business with Embargoed Persons if the result of such business would be that any Credit Extension made by any Lender would be in violation of law; (c) the Borrower will not, directly or indirectly, use the proceeds of the Credit Extension, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions or Anti-Corruption Laws by any Person (including any Person participating in the Credit Extensions, whether as a Lender or otherwise), and (d) neither the Borrower nor any Controlled Affiliate (i) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (ii) to the knowledge of the Borrower, engages in any dealings or transactions, or be otherwise associated, with any such “blocked person”. For purposes of determining whether or not a representation is true under this Section 4.01(p) with respect to the securities of the Borrower, the Borrower shall not be required to make any investigation into (x) the ownership of publicly traded stock or other publicly traded securities or (y) the beneficial ownership of any collective investment fund.
(q)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower and its Subsidiaries, any of their respective Managers, has failed to comply with the U.S. Foreign Corrupt Practices Act, as amended from time to time (the “FCPA”), or any other applicable Anti-Corruption Laws, and it and they have not made, offered, promised or authorized, and will not make, offer, promise or authorize, whether directly or indirectly, any payment, of anything of value to a Government Official while knowing or having a reasonable belief that all or some portion will be used for the purpose of: (a) influencing any act, decision or failure to act by a Government Official in his or her official capacity, (b) inducing a Government Official to use his or her influence with a government or instrumentality to affect any act or decision of such  government or entity or (c) securing an improper advantage, in each case in order to obtain, retain or direct business.
(r)If Borrower is required to deliver a Beneficial Ownership Certification, as of the Effective Date, the information included in the Beneficial Ownership Certification, as updated from time to time in accordance with this Agreement, is accurate, complete and correct in all respects as of the Effective Date and as of the date any such update is delivered. The Borrower acknowledges and agrees that the Beneficial Ownership Certification is one of the Loan Documents.
(s)The Borrower is not an Affected Financial Institution.
(t)None of the Borrower or any of its Subsidiaries is an entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery nor performance of this Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, including the making of any Advance and the issuing of any Letter of
67

Credit, will give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
Article V

COVENANTS OF THE BORROWER
Section5.01Affirmative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower shall:
(a)Compliance with Laws, Etc. (i) Comply, and cause each of its Material Subsidiaries to comply, in all material respects, with all applicable Laws of Governmental Authorities, such compliance to include, without limitation, compliance with ERISA and Environmental Laws, unless the failure to so comply is not reasonably likely to have a Material Adverse Effect and (ii) comply at all times with the 2020 Order, any Subsequent Order, Arizona Revised Statutes, Section 40-302 and all similar or comparable Laws, orders, decrees, writs, injunctions or determinations of any Governmental Authority relating to the incurrence or maintenance of Indebtedness by the Borrower, such compliance to include, without limitation, compliance with the PATRIOT Act, all applicable orders, rules and regulations of OFAC, the FCPA, the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970 and other Anti-Corruption Laws, except (other than in the case of the PATRIOT Act, the applicable orders, rules and regulations of OFAC, or the FCPA, or any similar applicable laws) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b)Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, all Taxes imposed upon it or upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such Tax (i) that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained in accordance with GAAP or (ii) if the failure to pay such Tax is not reasonably likely to have a Material Adverse Effect.
(c)Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates; provided, however, that the Borrower and its Subsidiaries may self-insure to the same extent as other companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and to the extent consistent with prudent business practice.
(d)Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises (other than “franchises” as described in Arizona Revised Statutes, Section 40-283 or any successor provision) reasonably necessary in the normal conduct of its business, if the failure to maintain such rights or privileges is reasonably likely to have a Material Adverse Effect, and will use its commercially reasonable efforts to preserve and maintain such franchises reasonably necessary in the normal conduct of its business, except that (i) the Borrower from time to time may make minor extensions of its lines, plants, services or systems prior to the time a related franchise, certificate of convenience and necessity, license or permit is procured, (ii) from time to time communities served by the Borrower may become incorporated and considerable time may elapse before such a franchise is procured, (iii) certain
68

such franchises may have expired prior to the renegotiation thereof, (iv) certain minor defects and exceptions may exist which, individually and in the aggregate, are not material and (v) certain franchises, certificates, licenses and permits may not be specific as to their geographical scope; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(b).
(e)Visitation Rights. At any reasonable time and from time to time, permit and cause each of its Subsidiaries to permit the Agent or any of the Lenders or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors; provided, however, that the Borrower and its Subsidiaries reserve the right to restrict access to any of its properties in accordance with reasonably adopted procedures relating to safety and security; and provided further that the costs and expenses incurred by such Lender or its agents or representatives in connection with any such examinations, copies, abstracts, visits or discussions shall be, upon the occurrence and during the continuation of a Default, for the account of the Borrower and, in all other circumstances, for the account of such Lender.
(f)Keeping of Books. Keep, and cause each of its Material Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in a manner that permits the preparation of financial statements in accordance with GAAP.
(g)Maintenance of Properties, Etc. Keep, and cause each Material Subsidiary to keep, all property useful and necessary in its business in good working order and condition (ordinary wear and tear excepted), if the failure to do so is reasonably likely to have a Material Adverse Effect, it being understood that this covenant relates only to the working order and condition of such properties and shall not be construed as a covenant not to dispose of properties.
(h)Reporting Requirements. Furnish to the Agent:
(i)as soon as available and in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, commencing with the fiscal quarter ending June 30, 2021, (A) for each such fiscal quarter of the Borrower, Consolidated statements of income and cash flows of the Borrower for such fiscal quarter and the related Consolidated balance sheet of the Borrower as of the end of such fiscal quarter, setting forth in each case in comparative form the corresponding figures for the corresponding fiscal quarter in (or, in the case of the balance sheet, as of the end of) the preceding fiscal year and (B) for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, Consolidated statements of income and cash flows of the Borrower for such period setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year; provided that so long as the Borrower remains subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Borrower may provide, in satisfaction of the requirements of this first sentence of this Section 5.01(h)(i), its report on Form 10-Q for such fiscal quarter.  Each set of financial statements provided under this Section 5.01(h)(i) shall be accompanied by a certificate of an Authorized Officer, which certificate shall state that said Consolidated financial statements fairly present in all material respects the Consolidated financial condition and results of operations and cash flows of the Borrower in accordance with GAAP (except as disclosed therein), as at the end of, and for, such
69

period (subject to normal year-end audit adjustments) and shall set forth reasonably detailed calculations demonstrating compliance with Section 5.03;
(ii)as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2021, audited Consolidated statements of income and cash flows of the Borrower for such year and the related Consolidated balance sheet of the Borrower as at the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year; provided that, so long as the Borrower remains subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Borrower may provide, in satisfaction of the requirements of this first sentence of this Section 5.01(h)(ii), its report on Form 10-K for such fiscal year. Each set of financial statements provided pursuant to this Section 5.01(h)(ii) shall be accompanied by (A) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said Consolidated financial statements fairly present in all material respects the Consolidated financial condition and results of operations of the Borrower as at the end of, and for, such fiscal year, in accordance with GAAP (except as disclosed therein) and (B) a certificate of an Authorized Officer, which certificate shall set forth reasonably detailed calculations demonstrating compliance with Section 5.03;
(iii)as soon as possible and in any event within five days after any Authorized Officer of the Borrower knows of the occurrence of each Default continuing on the date of such statement, a statement of an Authorized Officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto;
(iv)promptly after the sending or filing thereof, copies of all reports and registration statements (other than exhibits thereto and registration statements on Form S-8 or its equivalent) that the Borrower or any Subsidiary files with the Securities and Exchange Commission;
(v)promptly after an Authorized Officer becomes aware of the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f), except, with respect to any matter referred to in Section 4.01(f)(ii), to the extent disclosed in a report on Form 8-K, Form 10-Q or Form 10-K of the Borrower;
(vi)promptly after (A) any amendment or modification of the 2020 Order, (B) any amendment or modification of Arizona Revised Statutes, Section 40-302, or the promulgation, amendment or modification of any successor or similar statute, or (C) the promulgation, amendment or modification of any Subsequent Order by the Arizona Corporation Commission or any successor thereto, in any case if such amendment, modification or promulgation could affect the validity or enforceability of the indebtedness of the Borrower pursuant to this Agreement, a copy thereof;
(vii)promptly after an Authorized Officer becomes aware of the occurrence thereof, notice of any change by Moody’s or S&P of its respective Public Debt Rating or of the cessation (or subsequent commencement) by Moody’s or S&P of publication of their respective Public Debt Rating;
(viii)promptly after the occurrence thereof, notice of the occurrence of any ERISA Event, together with (x) a written statement of an Authorized Officer of the Borrower specifying
70

the details of such ERISA Event and the action that the Borrower has taken and proposes to take with respect thereto, (y) a copy of any notice with respect to such ERISA Event that may be required to be filed with the PBGC and (z) a copy of any notice delivered by the PBGC to the Borrower or an ERISA Affiliate with respect to such ERISA Event;
(ix)as soon as possible and in any event within five days after any Authorized Officer of the Borrower knows of the occurrence thereof, notice of any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in parts (c) or (d) of such certification; and
(x)promptly following request therefor, (a) such information and documentation reasonably requested by the Agent or any Lender for purposes of compliance with applicable “know your customer” requirements under the PATRIOT Act or other applicable anti-money laundering laws; (b) confirmation of the accuracy of the information set forth in the most recent Beneficial Ownership Certification provided to the Agent and Lenders; or (c) such other information respecting the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request.
Information required to be delivered pursuant to Section 5.01(h)(i), Section 5.01(h)(ii) and Section 5.01(h)(iv) above shall be deemed to have been delivered on the date on which the Borrower provides notice to the Agent that such information has been posted on PWCC’s website on the Internet at www.pinnaclewest.com, at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Lenders without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01(h)(i) or Section 5.01(h)(ii) and (ii) the Borrower shall deliver paper copies of the information referred to in Section 5.01(h)(i), Section 5.01(h)(ii), and Section 5.01(h)(iv) to any Lender which requests such delivery.
(i)Change in Nature of Business. Conduct the same general type of business conducted on the date hereof.
Section5.02Negative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower shall not:
(a)Liens, Etc. Create or suffer to exist, or permit any of its Material Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Material Subsidiaries to assign, any right to receive income, other than:
(i)Permitted Liens;
(ii)Liens upon or in, or conditional sales agreements or other title retention agreements with respect to, any real or personal property acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such property, or the construction of or improvements to such property, or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such property to be subject to such Liens (including any Liens placed on such property within 180 days after the latest of the acquisition, completion of construction or improvement of such property), or Liens existing on such property at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such
71

property) or extensions, renewals, refundings or replacements of any of the foregoing for the same or a lesser amount, provided, however, that no such Lien shall extend to or cover any properties of any character other than the property being acquired, constructed or improved and proceeds, improvements and replacements thereof and no such extension, renewal, refunding or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed, refunded or replaced;
(iii)assignments of the right to receive income, and Liens on property, of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower;
(iv)Liens with respect to the leases and related documents entered into by the Borrower in connection with PVNGS Unit 2 and Liens with respect to the leased interests and related rights if the Borrower reacquires ownership in any of those interests or acquires any of the equity or owner participants’ interests in the trusts that hold title to such leased interests, whether or not it also directly assumes the Sale Leaseback Obligation Bonds, and Liens on the Borrower’s interests in the trusts that hold title to such leased interests and related rights in the event that the Borrower acquires any of the equity or owner participants’ interests in such trusts pursuant to a “special transfer” under the Borrower’s existing PVNGS Unit 2 sale and leaseback transactions and any Liens resulting or deemed to have resulted if the PVNGS Unit 2 leases are required to be accounted for as capital leases in accordance with GAAP;
(v)other assignments of the right to receive income and Liens securing Indebtedness or claims in an aggregate principal amount not to exceed 20% of the Borrower’s total assets as stated on the most recent balance sheet of the Borrower provided pursuant to Section 4.01(e)(i) or 5.01(h)(ii) hereof at any time outstanding; and
(vi)the replacement, extension or renewal of any Lien permitted by clause (iii) or (iv) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Indebtedness secured thereby.
(b)Mergers, Etc. Merge or consolidate with or into any Person, or permit any of its Material Subsidiaries to do so, except that (i) any Material Subsidiary of the Borrower may merge or consolidate with or into any other Material Subsidiary of the Borrower, (ii) any Subsidiary of the Borrower may merge into the Borrower or any Material Subsidiary of the Borrower and (iii) the Borrower or any Material Subsidiary may merge with any other Person so long as the Borrower or such Material Subsidiary is the surviving corporation, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom.
(c)Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Material Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets to any Person other than the Borrower or any Subsidiary of the Borrower, except (i) dispositions in the ordinary course of business, including, without limitation, sales or other dispositions of electricity and related and ancillary services, other commodities, emissions credits and similar mechanisms for reducing pollution, and damaged, obsolete, worn out or surplus property no longer required or useful in the business or operations of the Borrower or any of its Subsidiaries, (ii) sale or other disposition of patents, copyrights, trademarks or other intellectual property that are, in the Borrower’s reasonable judgment, no longer economically practicable to maintain or
72

necessary in the conduct of the business of the Borrower or its Subsidiaries and any license or sublicense of intellectual property that does not interfere with the business of the Borrower or any Material Subsidiary, (iii) in a transaction authorized by subsection (b) of this Section, (iv) individual dispositions occurring in the ordinary course of business which involve assets with a book value not exceeding $5,000,000, (v) sales, leases, transfers or dispositions of assets during the term of this Agreement having an aggregate book value not to exceed 30% of the total of all assets properly appearing on the most recent balance sheet of the Borrower provided pursuant to Section 4.01(e)(i) or Section 5.01(h)(ii) hereof, (vi) at any time following the consummation of the Four Corners Acquisition, which occurred on December 30, 2013, and the closure by the Borrower of Units 1, 2 and 3 of the Four Corners Power Plant near Farmington, New Mexico, as described in the SEC Reports, disposition of all or any portion of the Borrower’s interests in such Units 1, 2 and 3, and (vii) any Lien permitted under Section 5.02(a).
Section5.03Financial Covenant. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower will maintain a ratio of (a) Consolidated Indebtedness to (b) the sum of Consolidated Indebtedness plus Consolidated Net Worth of not greater than 0.65 to 1.0.
Article VI

EVENTS OF DEFAULT
Section6.01Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:
(a)The Borrower shall fail to pay when due (i) any principal of any Advance, (ii) any drawing under any Letter of Credit, or (iii) any interest on any Advance or any other fees or other amounts payable under this Agreement or any other Loan Documents, and (in the case of this clause (iii) only), such failure shall continue for a period of three Business Days; or
(b)Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in any certificate or other document delivered in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material respect when made or deemed made or furnished (other than, for the avoidance of doubt, any Pricing Certificate Inaccuracy; provided that the Borrower complies with Section 1.06(d) with respect to such Pricing Certificate Inaccuracy); or
(c)(i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.17, Section 5.01(d) (as to the corporate existence of the Borrower), Section 5.01(h)(iii), Section 5.01(h)(vi), Section 5.02 or Section 5.03, or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in Section 5.01(e) if such failure shall remain unremedied for 15 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender or (iii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or any other Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender; or
(d)(i) The Borrower or any of its Material Subsidiaries shall fail to pay (A) any principal of or premium or interest on any Indebtedness that is outstanding in a principal amount of at least $35,000,000 in the aggregate (but excluding Indebtedness outstanding hereunder), or (B) an amount, or
73

post collateral as contractually required in an amount, of at least $35,000,000 in respect of any Hedge Agreement, of the Borrower or such Material Subsidiary (as the case may be), in each case, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness or Hedge Agreement; or (ii) any event of default shall exist under any agreement or instrument relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or
(e)The Borrower or any of its Material Subsidiaries shall fail to pay any principal of or premium or interest in respect of any operating lease in respect of which the payment obligations of the Borrower have a present value of at least $35,000,000, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in such operating lease, if the effect of such failure is to terminate, or to permit the termination of, such operating lease; or
(f)The Borrower or any of its Material Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Material Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Material Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or
(g)Judgments or orders for the payment of money that exceeds any applicable insurance coverage (the insurer of which shall be rated at least “A” by A.M. Best Company) by more than $35,000,000 in the aggregate shall be rendered against the Borrower or any Material Subsidiary and such judgments or orders shall continue unsatisfied or unstayed for a period of 45 days; or
(h)(i) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of 30% or more of the equity securities of PWCC entitled to vote for members of the board of directors of PWCC; or (ii) during any period of 24 consecutive months, a majority of the members of the board of directors of PWCC cease (other than due to death or disability) to be composed of individuals (A) who were members of that board on the first day of such period, (B) whose election or nomination to that board was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or (C) whose election or nomination to that board was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board; or (iii) PWCC shall cease for any reason to own, directly or indirectly, 80% of the Voting Stock of the Borrower; or
74

(i)(i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $35,000,000, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $35,000,000;
then, and in any such event, the Agent shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances (other than L/C Advances) and of the Issuing Banks to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States of America, (A) the obligation of each Lender to make Advances (other than L/C Advances) and of the Issuing Banks to issue Letters of Credit shall automatically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower and (iii) exercise all rights and remedies available to it under this Agreement, the other Loan Documents and applicable Law.
Section6.02Actions in Respect of Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Agent may with the consent, or shall at the request, of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, (a) make demand upon the Borrower to, and forthwith upon such demand the Borrower will Cash Collateralize the aggregate Available Amount of all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder) or (b) make such other arrangements in respect of the outstanding Letters of Credit as shall be acceptable to the Required Lenders, provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States of America, the Borrower will Cash Collateralize the aggregate Available Amount of all Letters of Credit then outstanding, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. If at any time the Agent determines that any funds held in the L/C Cash Deposit Account are subject to any right or interest of any Person other than the Agent, the Issuing Banks and the Lenders or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the L/C Cash Deposit Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Deposit Account that are free and clear of any such right and interest. Upon the drawing of any Letter of Credit, to the extent funds are on deposit in the L/C Cash Deposit Account, such funds shall be applied to reimburse the Issuing Banks to the extent permitted by applicable Law, or each Lender to the extent such Lender has funded a Revolving Advance in respect of such Letter of Credit. The Borrower hereby grants to the Agent, for the benefit of the Issuing Banks and the Lenders, a Lien upon and security interest in the L/C Cash Deposit Account and all amounts held therein from time to time as security for the L/C Obligations, and for application to the Borrower’s reimbursement obligations as and when the same shall arise. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. After all such Letters of Credit shall have expired or been fully drawn upon and all other obligations of the Borrower hereunder and under the other Loan Documents shall have
75

been paid in full, the balance, if any, in such L/C Cash Deposit Account shall be promptly returned to the Borrower.
Article VII

THE AGENT
Section7.01Appointment and Authority. Each of the Lenders (for purposes of this Article, references to the Lenders shall also mean the Issuing Banks) hereby irrevocably appoints Barclays to act on its behalf as the Agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as set forth in Section 7.06, the provisions of this Article are solely for the benefit of the Agent and the Lenders, and neither the Borrower nor any of its Affiliates shall have rights as a third party beneficiary of any of such provisions.
Section7.02Rights as a Lender. The Person serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Agent hereunder and without any duty to account therefor to the Lenders.
Section7.03Exculpatory Provisions. The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agent:
(a)    shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
(b)    shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein), provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable Law; and
(c)    shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.
The Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 6.01 and Section 8.01) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final, non-appealable judgment by a court of competent jurisdiction. The Agent shall be
76

deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Agent by the Borrower or a Lender.
The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.
Section7.04Reliance by Agent. The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of any Advance, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Agent may presume that such condition is satisfactory to such Lender or such Issuing Bank unless the Agent shall have received notice to the contrary from such Lender or such Issuing Bank prior to the making of such Advance or the issuance of such Letter of Credit. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in good faith in accordance with the advice of any such counsel, accountants or experts.
Section7.05Delegation of Duties. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.
Section7.06Resignation of Agent. The Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower so long as no Event of Default has occurred and is continuing, to appoint a successor, which shall be a bank with an office in the United States of America, or an Affiliate of any such bank with an office in the United States of America. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 45 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent meeting the qualifications set forth above; provided that if the Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a
77

successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Agent shall be as agreed between the Borrower and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 8.04 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent.
Section7.07Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section7.08No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Arrangers, Syndication Agent, Co-Sustainability Structuring Agents, Co-Documentation Agents or other agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Agent or a Lender hereunder.
Section7.09Issuing Banks. Each Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each Issuing Bank shall have all of the benefits and immunities provided in this Article VII (other than Section 7.02) to the same extent as such provisions apply to the Agent.
Section7.10Certain ERISA Matters.
(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower, that at least one of the following is and will be true:
(i)such Lender is not using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Advances, the Letters of Credit or the Commitments,
(ii)the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance
78

company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement,
(iii)(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Advances, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement, or
(iv)such other representation, warranty and covenant as may be agreed in writing between the Agent, in its sole discretion, and such Lender.
(b)In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower, that none of the Agent or the Arrangers, or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Agent under this Agreement, any Loan Document or any documents related to hereto or thereto).
(c)The Agent and each Arranger hereby inform the Lenders that each such Person is not undertaking to provide investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Advances, the Letters of Credit, the Commitments and this Agreement, (ii) may recognize a gain if it extended the Advances, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Advances, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
Section7.11Erroneous Payments.
79

(a)Each Lender hereby agrees that (x) if the Agent notifies such Lender that the Agent has determined in its sole discretion that any funds received by such Lender from the Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such Lender (whether or not known to such Lender), and demands the return of such Payment (or a portion thereof), such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender shall not assert, and hereby waives, as to the Agent, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Payments received, including without limitation any defense based on “discharge for value” or any similar doctrine. A notice of the Agent to any Lender under this Section 7.11 shall be conclusive, absent manifest error.
(b)Each Lender hereby further agrees that if it receives a Payment from the Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on notice, in each such case, that an error has been made with respect to such Payment. Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender shall promptly notify the Agent of such occurrence and, upon demand from the Agent, it shall promptly, but in no event later than one Business Day thereafter, return to the Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(c)The Borrower hereby agrees that (x) in the event an erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Payment (or portion thereof) for any reason, the Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower, except, in each case of this clause (y), to the extent such erroneous Payment is, and solely with respect to the amount of such erroneous Payment that is, comprised of funds received by the Agent from the Borrower for the purpose of making such erroneous Payment.
(d)Each party’s obligations under this Section 7.11 shall survive the resignation or replacement of the Agent or any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations under any Loan Document.
(e)For purposes of this Section 7.11, the term “Lender” includes any Issuing Bank.
80

Article VIII

MISCELLANEOUS
Section8.01Amendments, Etc. Except as provided in Section 2.08(c) with respect to alternate rates of interest and Section 2.21 with respect to the extension of the then-existing Termination Date, no amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall
(a)unless agreed to by each Lender directly affected thereby, (i) reduce or forgive the principal amount of any Advance or the Borrower’s obligations to reimburse any drawing on a Letter of Credit, reduce the rate of or forgive any interest thereon (provided that only the consent of the Required Lenders shall be required to waive the applicability of any post-default increase in interest rates), or reduce or forgive any fees hereunder (other than fees payable to the Agent, the Arrangers, any Issuing Bank or the Swingline Lender, if any, for their own respective accounts), (ii) extend the final scheduled maturity date or any other scheduled date for the payment of any principal of or interest on any Advance, extend the time of payment of any obligation of the Borrower to reimburse any drawing on any Letter of Credit or any interest thereon, extend the expiry date of any Letter of Credit beyond the Letter of Credit Expiration Date, or extend the time of payment of any fees hereunder (other than fees payable to the Agent, the Arrangers, any Issuing Bank or the Swingline Lender, if any, for their own respective accounts), or (iii) reinstate or increase any Revolving Credit Commitment of any such Lender over the amount thereof in effect or extend the maturity thereof (it being understood that a waiver of any condition precedent set forth in Section 3.02 or of any Default, if agreed to by the Required Lenders or all Lenders (as may be required hereunder with respect to such waiver), shall not constitute such an increase);
(b)unless agreed to by all of the Lenders, (i) reduce the percentage of the aggregate Revolving Credit Commitments or of the aggregate unpaid principal amount of the Advances, or the number or percentage of Lenders, that shall be required for the Lenders or any of them to take or approve, or direct the Agent to take, any action hereunder or under any other Loan Document (including as set forth in the definition of “Required Lenders”), (ii) change any other provision of this Agreement or any of the other Loan Documents requiring, by its terms, the consent or approval of all the Lenders for such amendment, modification, waiver, discharge or termination thereof or any consent to any departure by the Borrower therefrom, or (iii) change or waive any provision of Section 2.15, any other provision of this Agreement or any other Loan Document requiring pro rata treatment of any Lenders, or this Section 8.01 or Section 2.19(b); and
(c)unless agreed to by the Issuing Banks, the Swingline Lender, if any, or the Agent in addition to the Lenders required as provided hereinabove to take such action, affect the respective rights or obligations of the Issuing Banks, the Swingline Lender, if any, or the Agent, as applicable, hereunder or under any of the other Loan Documents.
(d)Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) pursuant to an increase in the Revolving Credit Commitment pursuant to Section 2.18 with only the consents prescribed by such Section.
81

(e)If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower, each Issuing Bank and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 8.07, and (ii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Section 2.11 and Section 2.14, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 8.04(e) had the Advances of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.
Section8.02Notices, Etc.
(a)All notices and other communications provided for hereunder shall be either (x) in writing (including facsimile communication) and mailed, faxed or delivered or (y) as and to the extent set forth in Sections 8.02(b) and (c) and in the proviso to this Section 8.02(a), if to the Borrower, at the address specified on Schedule 8.02; if to any Lender, at its Domestic Lending Office; if to the Agent, at the address specified on Schedule 8.02; if to the Swingline Lender, at the address specified by the Swingline Lender to the Borrower and the Agent, and if to any Issuing Bank, at the address specified on Schedule 8.02 or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed or faxed, be effective when deposited in the mails or faxed, respectively, except that notices and communications to the Agent pursuant to Article II, Article III or Article VIII shall not be effective until received by the Agent. Delivery by facsimile of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b). Upon request of the Borrower, the Agent will provide to the Borrower (i) copies of each Administrative Questionnaire or (ii) the address of each Lender.
(b)Notices and other communications to the Lenders, the Agent and the Issuing Banks hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Agent and agreed to by the Borrower, provided that the foregoing shall not apply to notices to any Lender or the Issuing Banks pursuant to Article II if such Lender or the Issuing Banks, as applicable, has notified the Agent and the Borrower that it is incapable of receiving notices under such Article by electronic communication. The Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Agent and the Borrower otherwise agree, (i) notices and other communications sent to an e-mail address shall be deemed received
82

upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(c)The Borrower agrees that the Agent may make materials delivered to the Agent pursuant to Section 5.01(h)(i), Section 5.01(h)(ii) and Section 5.01(h)(iv), as well as any other written information, documents, instruments and other material relating to the Borrower or any of its Subsidiaries and relating to this Agreement, the Notes or the transactions contemplated hereby, or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby (collectively, the “Communications”) available to the Lenders by posting such notices on Intralinks or a substantially similar electronic system (the “Platform”). The Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Agent or any of its Affiliates in connection with the Platform.
(d)Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender for purposes of this Agreement; provided that if requested by any Lender the Agent shall deliver a copy of the Communications to such Lender by e-mail, facsimile or mail. Each Lender agrees (i) to notify the Agent in writing of such Lender’s e-mail address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Agent has on record an effective e-mail address for such Lender) and (ii) that any Notice may be sent to such e-mail address.
(e)The Borrower hereby acknowledges that certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that (w) all Communications that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Communications “PUBLIC,” the Borrower shall be deemed to have authorized the Agent, the Arrangers and the Lenders to treat such Communications as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States of America federal and state securities laws; (y) all Communications marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor;” and (z) the Agent and the Arrangers shall be entitled to treat any Communications that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public Investor.” Notwithstanding the foregoing, the Borrower shall be under no obligation to mark any Communications “PUBLIC.” Notwithstanding anything to the contrary herein, the Borrower and the Agent need not provide to any
83

Public Lender any information, notice, or other document hereunder that is not public information, including without limitation, the Notice of Borrowing and any notice of Default.
Section8.03No Waiver; Cumulative Remedies; Enforcement. No failure by any Lender, any Issuing Bank or the Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Borrower shall be vested exclusively in, and all actions and proceedings at Law in connection with such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with Article VI for the benefit of all the Lenders and the Issuing Banks; provided, however, that the foregoing shall not prohibit (a) the Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents, (b) any Issuing Bank from exercising the rights and remedies that inure to its benefit (solely in its capacity as an Issuing Bank) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 8.05 (subject to the terms of Section 2.15), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agent pursuant to Article VI and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.15, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
Section8.04Costs and Expenses; Indemnity; Damage Waiver.
(a)The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the administration, modification and amendment of this Agreement, the Notes and the other Loan Documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of one law firm acting as counsel for the Agent with respect thereto and with respect to advising the Agent as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other Loan Documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender in connection with the enforcement of rights under this Section 8.04(a).
(b)The Borrower agrees to indemnify and hold harmless the Agent (and any sub-agent thereof), each Lender, each Arranger, the Syndication Agent, the Co-Sustainability Structuring Agents, the Co-Documentation Agents and each Related Party of any of the foregoing (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in
84

connection therewith, whether based on contract, tort or any other theory), (i) the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of any Advance or Letter of Credit (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), in each case, whether or not the transactions contemplated herein or therein are consummated, or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, provided that such indemnity shall not, as to any Indemnified Party, be available to the extent (a) such fees and expenses are expressly stated in this Agreement to be payable by the Indemnified Party, included expenses payable under Section 2.14, Section 5.01(e) and Section 8.07(b) or (b) such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence, willful misconduct or material breach of its obligations under this Agreement, in which case any fees and expenses previously paid or advanced by the Borrower to such Indemnified Party in respect of such indemnified obligation will be returned by such Indemnified Party. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, equityholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto, and whether or not the transactions contemplated hereby are consummated, provided that if the Borrower and such Indemnified Party are adverse parties in any such litigation or proceeding, and the Borrower prevails in a final, non-appealable judgment by a court of competent jurisdiction, any amounts under this Section 8.04(b) previously paid or advanced by the Borrower to such Indemnified Party pursuant to this Section 8.04(b) will be returned by such Indemnified Party.
(c)To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Agent (or any sub-agent thereof), any Issuing Bank or any Related Party of any of the foregoing (and without limiting its obligation to do so), each Lender severally agrees to pay to the Agent (or any such sub-agent), such Issuing Bank or such Related Party, as the case may be, such Lender’s Ratable Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub-agent) or such Issuing Bank in its capacity as such, or against any Related Party of any of the foregoing acting for the Agent (or any such sub-agent) or such Issuing Bank in connection with such capacity.
(d)Without limiting the rights of indemnification of the Indemnified Parties set forth in this Agreement with respect to liabilities asserted by third parties, each party hereto also agrees not to assert any claim for special, indirect, consequential or punitive damages against the other parties hereto, or any Related Party of any party hereto, on any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any other Loan Document, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or the Letters of Credit. No Indemnified Party shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems (including Intralinks, SyndTrak or similar systems) in connection with this Agreement or the other Loan Documents, provided that such indemnity shall not, as to any Indemnified Party, be available to the extent such damages are found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct.
85

(e)If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Revolving Advance, as a result of a payment or Conversion pursuant to Section 2.08(e) or (f), Section 2.10 or Section 2.12, acceleration of the maturity of the Revolving Advances pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Revolving Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by the Borrower pursuant to Section 2.19, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Revolving Advance.
(f)Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Section 2.02(c), Section 2.11, Section 2.14 and Section 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes.
Section8.05Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Advances due and payable pursuant to the provisions of Section 6.01, each Lender, each Issuing Bank and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender, such Issuing Bank or any such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or Issuing Bank, whether or not such Lender or Issuing Bank shall have made any demand under this Agreement or such Note and although such obligations may be contingent or unmatured or are owed to a branch or office of such Lender or such Issuing Bank different from the branch or office holding such deposit or obligated on such indebtedness. Each Lender and each Issuing Bank agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and each Issuing Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have.
Section8.06Effectiveness; Binding Effect. Except as provided in Section 3.01, this Agreement shall become effective when it shall have been executed by the Borrower and the Agent and when the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders (and any purported assignment without such consent shall be null and void).
Section8.07Successors and Assigns.
(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may
86

not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Agent and each Lender (and any purported assignment or transfer without such consent shall be null and void) and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)Any Lender may at any time assign to one or more assignees (other than to an Ineligible Institution) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, Swingline Exposure and the Revolving Advances (including for purposes of this subsection (b), participations in L/C Obligations) at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i)Minimum Amounts.
(A)    in the case of an assignment of the entire remaining amount of the assigning Lender’s Revolving Credit Commitment and the Revolving Advances at the time owing to it or in the case of an assignment to a Lender, no minimum amount need be assigned; and
(B)    in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Revolving Credit Commitment (which for this purpose includes Revolving Advances outstanding thereunder) or, if the Revolving Credit Commitment is not then in effect, the principal outstanding balance of the Revolving Advances of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to which such assignment is delivered to the Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
(ii)Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Revolving Advances, L/C Obligations, Swingline Exposure or the Revolving Credit Commitment assigned, and each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement;
(iii)Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
(A)    the consent of the Borrower (such consent not to be unreasonably withheld or delayed; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Agent within ten (10) Business Days after having received written notice thereof) shall be required
87

unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;
(B)    the consent of the Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender;
(C)    the consent of each Issuing Bank (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender; and
(D)    the consent of the Swingline Lender, if any, (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under Swingline Advances (whether or not then outstanding).
(iv)Assignment and Assumption. The parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that no such fee shall be payable in the case of an assignment made at the request of the Borrower to an existing Lender. The assignee, if it is not a Lender, shall deliver to the Agent an Administrative Questionnaire.
(v)No Assignment to Ineligible Institutions. No such assignment shall be made to any Ineligible Institution.
Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section and notice thereof to the Borrower, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 2.11, Section 2.14 and Section 8.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.
(c)Register. The Agent shall maintain at the Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Credit Commitments of, and principal amounts of the Advances and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall
88

be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d)Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Agent, sell participations to any Person (other than an Ineligible Institution) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, Swingline Exposure and/or the Revolving Advances (including such Lender’s participations in L/C Obligations) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Agent, the Lenders and the Issuing Banks shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, any Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, any Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification addressing the matters set forth in clause (iv) above to the extent subject to such participation. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.11, Section 2.14 and Section 8.04(e) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 8.05 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Advances or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Advances or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Advance or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.
(e)Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 2.11 or Section 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is
89

notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as though it were a Lender.
(f)Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central banking authority; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(g)Resignation as an Issuing Bank after Assignment. Notwithstanding anything to the contrary contained herein, if at any time any Issuing Bank assigns all of its Revolving Credit Commitment and Revolving Advances pursuant to subsection (b) above, such Issuing Bank may, upon 30 days’ notice to the Borrower and the Lenders, resign as an Issuing Bank. If any Issuing Bank resigns, it shall retain all the rights, powers, privileges and duties of an Issuing Bank hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an Issuing Bank and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Advances or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).
(h)The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent.
Section8.08Confidentiality. Neither the Agent nor any Lender may disclose to any Person any confidential, proprietary or non-public information of the Borrower furnished to the Agent or the Lenders by the Borrower (such information being referred to collectively herein as the “Borrower Information”), except that each of the Agent and each of the Lenders may disclose Borrower Information (i) to its and its Affiliates’ employees, officers, directors, agents and advisors having a need to know in connection with this Agreement (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Borrower Information and instructed to keep such Borrower Information confidential on substantially the same terms as provided herein), (ii) to the extent requested by any regulatory authority or self-regulatory body, (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisions substantially the same as those of this Section 8.08, (A) to any assignee or participant or prospective assignee or participant, (B) to any direct, indirect, actual or prospective counterparty (and its advisor) to any swap, derivative or securitization transaction related to the obligations under this Agreement and (C) to any credit insurance provider relating to the Borrower and its Obligations, (vii) to the extent such Borrower Information (A) is or becomes generally available to the public on a non-confidential basis other than as a result of a breach of this Section 8.08 by the Agent or such Lender or their Related Parties, or (B) is or becomes available to the Agent or such Lender on a nonconfidential basis from a source other than the Borrower (provided that the source of such information was not known by the recipient after inquiry to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Borrower or any other Person with respect to such information) and (viii) with the
90

consent of the Borrower. The obligations under this Section 8.08 shall survive for two calendar years after the date of the termination of this Agreement.
Section8.09Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the Laws of the State of New York.
Section8.10Counterparts; Integration. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” and words of like import in this Agreement or in any Loan Documents shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
Section8.11Jurisdiction, Etc.
(a)Each of the parties hereto hereby submits to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in the Borough of Manhattan in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by Law, in such federal court.
(b)Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State court or federal court of the United States of America sitting in the Borough of Manhattan in New York City, and any appellate court from any thereof. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
Section8.12Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Agent, any Issuing Bank or any Lender, or the Agent, any Issuing Bank or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent, such Issuing Bank or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and each Issuing Bank severally agrees to
91

pay to the Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the Issuing Banks under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
Section8.13Patriot Act and Beneficial Ownership Regulation. The Agent and each Lender hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act and the Beneficial Ownership Regulation, it is required to obtain, verify and record information that identifies each borrower (including the Borrower), guarantor or grantor (the “Loan Parties”), which information includes the name and address of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the PATRIOT Act and the Beneficial Ownership Regulation. The Borrower shall provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Agent or any Lender in order to assist the Agent and such Lender in maintaining compliance with the PATRIOT Act and the Beneficial Ownership Regulation.
Section8.14Waiver of Jury Trial. EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR THE ACTIONS OF THE BORROWER, THE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section8.15No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower, on the one hand, and the Agent, each of the Lenders and each of the Arrangers, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each of the Agent, the Lenders and the Arrangers is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Agent nor any Lender or Arranger has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Agent or any Lender or Arranger has advised or is currently advising the Borrower or any of its Affiliates on other matters) and neither the Agent nor any Lender or Arranger has any obligation to the Borrower with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Agent, each of the Lenders and the Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Agent nor any Lender or Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Agent and each Lender and Arranger have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the
92

Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by Law, any claims that it may have against the Agent and each Lender and Arranger with respect to any breach or alleged breach of agency or fiduciary duty in connection with the Loan Documents.
Section8.16Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Agent and each Lender, regardless of any investigation made by the Agent or any Lender or on their behalf, and shall continue in full force and effect as long as any Advance or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
Section8.17Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section8.18Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b)the effects of any Bail-In Action on any such liability, including, if applicable:
(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
Section8.19Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the
93

Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to an Affected Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
(b)As used in this Section 8.19, the following terms have the following meanings:
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following:
(i)a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b)
(ii)a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii)a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).
Section VIII.20Amendment and Restatement; Departing Lenders.
(a)The parties to this Agreement agree that, upon (a) the execution and delivery by each of the parties hereto of this Agreement and (b) satisfaction of the conditions set forth in Section 3.01, the terms and provisions of the Existing Credit Agreement shall be and hereby are amended, superseded and
94

restated in their entirety by the terms and provisions of this Agreement. This Agreement is not intended to and shall not constitute a novation. All Advances made and obligations incurred under the Existing Credit Agreement which are outstanding on the Effective Date shall continue as Advances and obligations under (and shall be governed by the terms of) this Agreement and the other Loan Documents. Without limiting the foregoing, upon the Effective Date: (i) all references in the “Loan Documents” (as defined in the Existing Credit Agreement) to the “Agent”, the “Credit Agreement” and the “Loan Documents” shall be deemed to refer to the Agent, this Agreement and the Loan Documents, respectively, (ii) the Existing Letters of Credit which remain outstanding on the Effective Date shall continue as Letters of Credit under (and shall be governed by the terms of) this Agreement, (iii) all obligations with any Lender or any Affiliate of any Lender under the Existing Credit Agreement or the “Loan Documents” (as defined in the Existing Credit Agreement) which are outstanding on the Effective Date shall continue as obligations under this Agreement and the other Loan Documents (subject to clause (b) below), and (iv) the Agent shall make such reallocations, sales, assignments or other relevant actions in respect of outstanding Advances under the Existing Credit Agreement as are necessary to keep outstanding Revolving Advances ratable with the revised Ratable Share of the Lenders on the Effective Date.
(b)Each Departing Lender desires and hereby agrees to assign all of its rights and obligations as a Lender under the Existing Credit Agreement to the other Lenders in accordance with this clause (b). Each of the Agent, the Lenders and the Borrower hereby consents to (i) the reallocation of the Commitments held by each Departing Lender under the Existing Credit Agreement to the other Lenders, and (ii) each Departing Lender’s assignment of its rights, interests, liabilities and obligations under the Existing Credit Agreement to the other Lenders, in each case, as described below. On the Effective Date and after giving effect to such reallocation and assignment, the Commitment of each Departing Lender under the Existing Credit Agreement shall terminate and the Commitment of each Lender hereunder shall be as set forth on Schedule 1.01(a) attached hereto, and each Lender hereby consents to the Commitments set forth on Schedule 1.01(a) attached hereto. The reallocation of the aggregate Commitments hereunder among the Lenders, including the assignment by each Departing Lender of all of its respective rights, interests, liabilities and obligations under the Existing Credit Agreement to the other Lenders, shall be deemed to have been consummated pursuant to the terms of the Assignment and Assumption attached as Exhibit C to the Existing Credit Agreement as if the Lenders and each Departing Lender had executed an Assignment and Assumption with respect to such reallocation; provided that in connection with such reallocation, each Departing Lender shall receive on the Effective Date payment of an amount equal to the outstanding principal of its Advances, accrued interest thereon, accrued fees and all other amounts payable to it under the Existing Credit Agreement and the other “Loan Documents” (as defined in the Existing Credit Agreement) (other than obligations to pay fees and expenses with respect to which the Borrower has not received an invoice, contingent indemnity obligations and other contingent obligations owing to it under the “Loan Documents” (as defined in the Existing Credit Agreement)). The Departing Lenders shall not be Lenders hereunder, and for the avoidance of doubt, each Departing Lender is only a party to this Agreement with respect to this Section 8.20 and has no other rights or obligations under this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

95

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
ARIZONA PUBLIC SERVICE COMPANY
By    /s/ Andrew Cooper            
Name:    Andrew Cooper
Title:    Vice President and Treasurer

96

ADMINISTRATIVE AGENT:    BARCLAYS BANK PLC, as Agent, Co-Sustainability     Structuring Agent, Issuing Bank and Lender

By    /s/ Sam Yoo                
Name:     Sam Yoo            
Title:    Managing Director        

97

MIZUHO BANK, LTD., as Syndication Agent, Co-    Sustainability
Structuring Agent, Issuing Bank and Lender

By    /s/ Edward Sacks            
Name:    /s/ Edward Sacks        
Title:    Executive Director        

98

LENDERS:    Bank of America, as a Lender and as an Issuing Bank

By    /s/ Michael Moulton            
Name:    Michael Moulton            
Title:    Vice President            

99

LENDERS:    BNP Paribas, as a Lender and as an Issuing Bank

By    /s/ Nicole Rodriquez            
Name:    Nicole Rodriguez            
Title:    Director            

By    /s/ Christopher Sked            
Name:    Christopher Sked            
Title:    Managing Director        

100

LENDERS:    JPMorgan Chase Bank, N.A as a Lender and as an
Issuing Bank

By    /s/ Nancy R. Barwig            
Name:    Nancy R. Barwig            
Title:    Executive Director        

101

LENDERS:    MUFG Bank, Ltd., as a Lender and as an Issuing Bank

By    /s/ Ricky Vargas            
Name:    Ricky Vargas            
Title:    Vice President            

102

LENDERS:    Truist Bank, as a Lender

By    /s/ Andrew Johnson            
Name:    Andrew Johnson            
Title:    Managing Director        
103

LENDERS:    Wells Fargo Bank, National Association, as a Lender
and as an Issuing Bank

By    /s/ Gregory R. Gredvig            
Name:    Gregory R. Gredvig            
Title:    Director            

104

LENDERS:    Bank of Montreal, Chicago Branch, as a Lender

By    /s/ Darren Thomas            
Name:    Darren Thomas                
Title:    Director            

105

LENDERS:    The Bank of New York Mellon, as a Lender

By    /s/ Molly H. Ross            
Name:    Molly H. Ross                
Title:    Vice President            

106

LENDERS:    The Bank of Nova Scotia, as a Lender

By    /s/ David Dewar            
Name:    David Dewar                
Title:    Director            
107

LENDERS:    CITIBANK, N.A., as a Lender

By    /s/ Hans Lin                
Name:    Hans Lin                
Title:    Director            

108

LENDERS:    KEYBANK NATIONAL ASSOCIATION, as a
Lender

By    /s/ Keven D. Smith            
Name:    Keven D. Smith                
Title:    Senior Vice President        

109

LENDERS:    PNC Bank, National Association, as a Lender

By    /s/ Richard G. Tutich            
Name:    Richard G. Tutich            
Title:    Vice President            

110

LENDERS:    Royal Bank of Canada, as a Lender

By    /s/ Martina Wellik            
Name:    Martina Wellik                
Title:    Authorized Signatory        

111

LENDERS:    TD Bank, N.A. as a Lender

By    /s/ Steve Levi                
Name:    Steve Levi                
Title:    Senior Vice President        

112

LENDERS:    U.S. Bank National Bank, as a Lender

By    /s/ Ryan Hutchins            
Name:    Ryan Hutchins                
Title:    Senior Vice President        
113

Each of the undersigned Departing Lenders hereby acknowledges and agrees that, from and after the Effective Date, it is no longer a party to the Existing Credit Agreement or any of the Loan Documents executed in connection therewith and is a party to this Agreement solely with respect to Section 8.20 of this Agreement.

    ZIONS BANCORPORATION, N.A. DBA
NATIONAL BANK OF A, as a Departing Lender

By    /s/ Sabrina Aaronson            
Name:    Sabrina Aaronson            
Title:    Vice President            

SCHEDULE 1.01(a)
COMMITMENTS AND RATABLE SHARES

Bank	Revolving Credit
Commitment	Ratable Share	
Barclays Bank PLC	$35,000,000.04	7.00%	
Mizuho Bank, Ltd.	$35,000,000.00	7.00%	
Bank of America, N.A.	$35,000,000.00	7.00%	
BNP Paribas	$35,000,000.00	7.00%	
JPMorgan Chase Bank, N.A.	$35,000,000.00	7.00%	
MUFG Bank, Ltd.	$35,000,000.00	7.00%	
Truist Bank	$35,000,000.00	7.00%	
Wells Fargo Bank, National Association	$35,000,000.00	7.00%	
Bank of Montreal, Chicago Branch	$24,444,444.44	4.89%	
The Bank of New York Mellon	$24,444,444.44	4.89%	
The Bank of Nova Scotia	$24,444,444.44	4.89%	
Citibank, N.A.	$24,444,444.44	4.89%	
KeyBank National Association	$24,444,444.44	4.89%	
PNC Bank, National Association	$24,444,444.44	4.89%	
Royal Bank of Canada	$24,444,444.44	4.89%	
TD Bank, N.A.	$24,444,444.44	4.89%	
U.S. Bank National Association	$24,444,444.44	4.89%	
TOTAL	$500,000,000.00	100.000000000%	

SCHEDULE 1.01(b)
SUSTAINABILITY TABLE

KPI Metric	Annual Sustainability Targets:
Carbon Intensity Targets and OSHA Incident Targets	
Reference Year	2021	2022	2023	2024	2025		
Carbon Intensity Target (Minimum)	599	592	578	540	491		
Carbon Intensity Target (Maximum)	732	723	706	660	600		
OSHA Incident Target (Minimum)	31	31	31	31	31		
OSHA Incident Target (Maximum)	37	37	37	37	37		

The OSHA Incident Amount for the fiscal year ending December 31, 2019 is 41.
The OSHA Incident Amount for the fiscal year ending December 31, 2020 is 25, excluding COVID-19.

SCHEDULE 4.01(j)
SUBSIDIARIES1

Bixco, Inc.
Axiom Power Solutions, Inc.
PWE Newco, Inc.

1 The Borrower’s three nuclear decommissioning trusts relating to PVNGS may also be deemed to be subsidiaries under a literal reading of the definition.

SCHEDULE 4.01(k)
EXISTING INDEBTEDNESS

None.

SCHEDULE 8.02
CERTAIN ADDRESSES FOR NOTICES

BORROWER:
Arizona Public Service Company
400 North 5th Street
Mail Station 9040
Phoenix, AZ 85004
Attention: Treasurer
Telephone: (602) 250-3300
Telecopier: (602) 250-3920
Electronic: Andrew.Cooper@pinnaclewest.com
AGENT:
Agent’s Office
(for payments and Requests for Credit Extensions):
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attention: Philip Naber
Telephone: (212) 526-7375
Email: Philip.Naber@barclays.com

with copies to:

Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019
Attention: Bank Debt Management
Telephone: (212) 526-9531
Email: LTMNY@barclays.com

Agent’s Account/Barclays Bank Agency Service Wiring Information
Barclays Bank PLC
New York, New York
ABA: 026002574               
Account Number: 050-019104  
Account Name: Clad Control Account
Ref: Pinnacle West Capital Corporation

Other Notices as Agent:
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attention: Philip Naber
Telephone: (212) 526-7375
Email: Philip.Naber@barclays.com

with copies to:

Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019
Attention: Bank Debt Management
Telephone: (212) 526-9531
Email: LTMNY@barclays.com

ISSUING BANKS:
Barclays Bank PLC
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attn. US Letter of Credit Team
Email xraletterofcredit@barclays.com

Mizuho Bank, Ltd.

Mizuho Bank, Ltd.
1800 Plaza Ten
Harborside Financial Ctr.
Jersey City, NJ 07311
Attention: Hyunsook (Sophia) Hwang
Telephone: 201-626-9416
Facsimile: 201-626-9941
Email: LAU_USCORP3@MIZUHOCBUS.COM

Bank of America, N.A.

Bank of America, N.A.
100 N. Tryon Street
Charlotte, NC 28255-0001
Attention: William A. Merritt, III
Telephone: (980) 386-9762
Facsimile: (980) 683-6339
E-mail: william.merritt@baml.com

BNP Paribas

BNP Paribas
c/o BNP Paribas RCC, Inc.
Newport Tower – Suite 188
525 Washington Boulevard
Jersey City, New Jersey 07310
Attn: Letters of Credit
E-mail: nyls.agency.support@us.bnpparibas.com
With a cc to: NYTFStandby@us.bnpparibas.com

JPMorgan Chase Bank, N.A.

JPMorgan Chase Bank, N.A.

8181 Communications Pkwy
Plano, TX 75024
Attention: Nancy R. Barwig
Telephone: (972) 324-1721
Facsimile: (312) 732-1762
E-mail: nancy.r.barwig@jpmorgan.com
With a cc to: cb.lc.service.team@chase.com

MUFG Bank, Ltd.

MUFG Bank, Ltd.
1221 Avenue of the Americas
New York, NY 10020-1104
Facsimile: 201-521-2304; 201-521-2305        
E-Mail: 2015212304@njhr2163.btmna.com; irisuscb@us.mufg.jp

Truist Bank

Truist Securities, Inc.
Truist Bank
3333 Peachtree Road
Atlanta, GA 30326
Attention: Andrew Johnson
Telephone: (404) 439-7451
Facsimile: (404) 439-7470
E-mail: Andrew.johnson@truist.com

Wells Fargo Bank, National Association

Wells Fargo Bank, N.A.
Wholesale Loan Services
7711 Plantation Road
MAC R4058-010
Roanoke, VA  24019
Attention: Tammy Pentecost
Telephone: 540-759-3118 
Facsimile: 866-270-7214
E-mail: tammy.pentecost@wellsfargo.com
With a cc to: sheila.shaffer@wellsfargo.com

EXHIBIT A — FORM OF
PROMISSORY NOTE

______________, 20__

FOR VALUE RECEIVED, the undersigned, ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation (the “Borrower”), hereby promises to pay to the order of _______ or its registered assigns (the “Lender”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of each Advance from time to time made by the Lender to the Borrower pursuant to the Amended and Restated Five-Year Credit Agreement dated as of May 28, 2021 among the Borrower, the Lender and certain other lenders parties thereto, Barclays Bank PLC, as Agent for the Lender and such other lenders, and the issuing banks and other agents party thereto (as amended or modified from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined) outstanding on such date.
The Borrower promises to pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United States of America to the Agent for the account of the Lender in same day funds at the address and account specified on Schedule 8.02. Each Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time the Lender’s Unused Commitment, the indebtedness of the Borrower resulting from each such Advance being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
ARIZONA PUBLIC SERVICE COMPANY

By                        
 Name:                    
 Title:                    
A-1

ADVANCES AND PAYMENTS OF PRINCIPAL

															
Date	Amount of Advance	Amount of Principal Paid or Prepaid	Unpaid Principal Balance	Notation
Made By	

A-2

EXHIBIT B — FORM OF NOTICE OF
BORROWING

Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below

Attention: Loan Operations

[Date]

Ladies and Gentlemen:

The undersigned, Arizona Public Service Company, refers to the Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021 (as amended or modified from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto, Barclays Bank PLC, as Agent for said Lenders and the Issuing Banks and other agents party thereto, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 2.02(a) of the Credit Agreement:
(i)    The Business Day of the Proposed Borrowing is ____________, 20___.
(ii)    The Type of Revolving Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii)    The aggregate amount of the Proposed Borrowing is $_____________.
[(iv)    The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is ___month[s].
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A)    the representations and warranties contained in Section 4.01 (other than Sections 4.01(k), 4.01(e)(ii) and 4.01(f)(ii)) of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;
(B)    no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default;
(C)    all required regulatory authorizations including the 2020 Order and/or any Subsequent Order in respect of the Proposed Borrowing have been obtained and are in full force and effect and, before and after giving effect to the Proposed Borrowing and to the application of
B-1

the proceeds therefrom, the Borrower is in compliance with the provisions of the applicable order; and
(D)    before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, the Indebtedness of the Borrower does not exceed that permitted by (i) applicable resolutions of the Board of Directors of the Borrower, (ii) applicable Arizona Laws, or (iii) the 2020 Order or any Subsequent Order, whichever is in force and effect at such time.
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY

By                        
 Name:                    
 Title:                    
B-2

EXHIBIT C — FORM OF
ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. Annex 1 attached hereto (the “Standard Terms and Conditions”) is hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date referred to below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including without limitation any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable Law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at Law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the “Assigned Interest”). Each such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor. Assignee shall deliver (if it is not already a Lender) to the Agent an Administrative Questionnaire.
1.Assignor: ________________________________
2.Assignee: ________________________________
[and is an Affiliate of [identify Bank]2]
3.Borrower: Arizona Public Service Company
4.Agent: Barclays Bank PLC, as the administrative agent under the Credit Agreement
5.Credit Agreement: The Amended and Restated Five-Year Credit Agreement dated as of May 28, 2021, by and among the Borrower, the Lenders party thereto, the Agent and the Issuing Banks and other agents party thereto.
6.Assigned Interest:

2 Select as applicable.
C-1

												
Aggregate Amount
of Commitment for
all Lenders	Amount of Commitment Assigned	Percentage Assigned of Commitment3	CUSIP Number	
				
$____________	$____________	___________%		

[7. Trade Date: ]4
Effective Date: ___, 20___[TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]

By                        
 Name:                    
 Title:                    
ASSIGNEE
[NAME OF ASSIGNEE]

By                        
 Name:                    
 Title:                    
[Consented to and]5 Accepted:
BARCLAYS BANK PLC, as Agent

By ___________________________
Name:
Title:

[Consented to:]6
[BARCLAYS BANK PLC, as Issuing Bank]

By ___________________________
Name:
Title:

3 Set forth, to at least 9 decimals, as a percentage of the Commitment of all Banks thereunder.
4 To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.
5 To be added only if the consent of the Agent is required by the terms of the Credit Agreement.
6 To be added only if the consent of the Borrower and/or other parties (e.g. Issuing Bank) is required by the terms of the Credit Agreement.
C-2

[MIZUHO BANK, LTD., as Issuing Bank]

By ___________________________
Name:
Title:

[BANK OF AMERICA, N.A., as Issuing Bank]

By ___________________________
Name:
Title:

[BNP PARIBAS, as Issuing Bank]

By ___________________________
Name:
Title:

[JPMORGAN CHASE BANK, N.A., as Issuing Bank]

By ___________________________
Name:
Title:

[MUFG BANK, LTD., as Issuing Bank]

By ___________________________
Name:
Title:

[TRUIST BANK, as Issuing Bank]

By ___________________________
Name:
Title:

[WELLS FARGO BANK, NATIONAL ASSOCIATION, as Issuing Bank]

By ___________________________
Name:
Title:

ARIZONA PUBLIC SERVICE COMPANY

By ___________________________
Name:
Title:

C-3

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1.    Representations and Warranties.
1.1    Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower of any of its obligations under any Loan Document.
1.2    Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Eligible Assignee under Section 8.07 of the Credit Agreement (subject to such consents, if any, as may be required under Section 8.07 of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements referred to in Section 4.01(e) or delivered pursuant to Section 5.01(h), as applicable, thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, (vi) it has, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, and (vii) if it is a foreign lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2.    Payments. From and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other
C-4

amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
3.    General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the Law of the State of New York.
C-5

EXHIBIT D — FORM OF PRICING CERTIFICATE

Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below

Attention: Loan Operations

[Date]

Ladies and Gentlemen:

Please refer to the Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021 (as amended or modified from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among Arizona Public Service Company, as Borrower, certain Lenders party thereto, Barclays Bank PLC, as Agent for said Lenders and the Issuing Banks and other agents party thereto. This Pricing Certificate (this “Certificate”) is being delivered pursuant to Section 1.06 of the Credit Agreement.
The undersigned hereby certifies solely in [his/her] capacity as [insert title of officer] of the Borrower and not in an individual capacity (and without personal liability) that:
1.    I am the duly elected [insert title of officer] of the Borrower, and I am authorized to deliver this Certificate on behalf of the Borrower;
2.    The calculation of Carbon Intensity (including the Energy Efficiency and Distributed Generation Amounts), the OSHA Incident Amount and the Sustainability Margin Adjustment, in each case, for the 20[__] Reference Year, and attached hereto as Annex A, are true and correct as of the date hereof and evidences the Borrower’s qualification for a Sustainability Margin Adjustment (x) with respect to Eurodollar Rate Advances and Base Rate Advances, equal to [____]% per annum and (y) with respect to the Commitment Fee, equal to  [____]% per annum.
3.    The public reporting of the information set forth on Annex A for such Reference Year can be found at the following website of PWCC: [____________________].
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY

By    _________________            
 Name:    _________________        
 Title:    _________________        
D-1

ANNEX A

Carbon Intensity, OSHA Incident Amount and the Sustainability Margin Adjustment
D-2

U.S. $500,000,000
FIVE-YEAR CREDIT AGREEMENT
Dated as of May 28, 2021
among
ARIZONA PUBLIC SERVICE COMPANY,
as Borrower,

THE LENDERS PARTY HERETO,

BARCLAYS BANK PLC,
as Agent and Issuing Bank,

MIZUHO BANK, LTD.,
as Syndication Agent,

BARCLAYS BANK PLC,
MIZUHO BANK, LTD.,
as Co-Sustainability Structuring Agents,

MIZUHO BANK, LTD.,
BANK OF AMERICA, N.A.,
BNP PARIBAS,
JPMORGAN CHASE BANK, N.A.,
MUFG UNION BANK, N.A.,
TRUIST BANK
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Issuing Banks,

BANK OF AMERICA, N.A.,
BNP PARIBAS,
JPMORGAN CHASE BANK, N.A.,
MUFG UNION BANK, N.A.,
TRUIST BANK
and
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Co-Documentation Agents,

BARCLAYS BANK PLC,
MIZUHO BANK, LTD.,
BNP PARIBAS SECURITIES CORP.,
BOFA SECURITIES, INC.,
JPMORGAN CHASE BANK, N.A.,
MUFG UNION BANK, N.A.,
TRUIST SECURITIES, INC.
and
WELLS FARGO SECURITIES, LLC,
as Joint Lead Arrangers and Joint Book Runners

TABLE OF CONTENTS

						
Article I DEFINITIONS AND ACCOUNTING TERMS	1	
Section 1.01    Certain Defined Terms	1	
Section 1.02    Other Interpretive Provisions	26	
Section 1.03    Accounting Terms	26	
Section 1.04    Rounding	27	
Section 1.05    Times of Day	27	
Section 1.06    Sustainability Adjustments	27	
Article II AMOUNTS AND TERMS OF THE ADVANCES and LETTERS OF CREDIT	29	
Section 2.01    The Revolving Advances and Letters of Credit	29	
Section 2.02    Making the Revolving Advances	29	
Section 2.03    Letters of Credit	31	
Section 2.03A    Swingline Advances	37	
Section 2.04    Fees    	39	
Section 2.05    Optional Termination or Reduction of the Commitments	40	
Section 2.06    Repayment of Advances	40	
Section 2.07    Interest on Advances	41	
Section 2.08    Interest Rate Determination	42	
Section 2.09    Optional Conversion of Revolving Advances	44	
Section 2.10    Prepayments of Advances	44	
Section 2.11    Increased Costs	45	
Section 2.12    Illegality	46	
Section 2.13    Payments and Computations	46	
Section 2.14    Taxes	47	
Section 2.15    Sharing of Payments, Etc	51	
Section 2.16    Evidence of Debt	52	
Section 2.17    Use of Proceeds	52	
Section 2.18    Increase in the Aggregate Revolving Credit Commitments	52	
Section 2.19    Affected Lenders	54	
Section 2.20    Replacement of Lenders	56	
Section 2.21    Extension of Termination Date	56	
Article III CONDITIONS PRECEDENT	57	
Section 3.01    Conditions Precedent to Effectiveness	57	
Section 3.02    Conditions Precedent to Each Credit Extension and Commitment Increase	59	
Section 3.03    Determinations Under Section 3.01	60	
Article IV REPRESENTATIONS AND WARRANTIES	60	
Section 4.01    Representations and Warranties of the Borrower	60	
Article V COVENANTS OF THE BORROWER	64	
Section 5.01    Affirmative Covenants	64	
Section 5.02    Negative Covenants	67	
i

						
Section 5.03    Financial Covenant	69	
Article VI EVENTS OF DEFAULT	69	
Section 6.01    Events of Default	69	
Section 6.02    Actions in Respect of Letters of Credit upon Default	71	
Article VII THE AGENT	72	
Section 7.01    Appointment and Authority	72	
Section 7.02    Rights as a Lender	72	
Section 7.03    Exculpatory Provisions	72	
Section 7.04    Reliance by Agent	73	
Section 7.05    Delegation of Duties	73	
Section 7.06    Resignation of Agent	73	
Section 7.07    Non-Reliance on Agent and Other Lenders	74	
Section 7.08    No Other Duties, Etc	74	
Section 7.09    Issuing Banks	74	
Section 7.10    Certain ERISA Matters	74	
Section 7.11    Erroneous Payments	75	
Article VIII MISCELLANEOUS	76	
Section 8.01    Amendments, Etc	76	
Section 8.02    Notices, Etc	77	
Section 8.03    No Waiver; Cumulative Remedies; Enforcement	79	
Section 8.04    Costs and Expenses; Indemnity; Damage Waiver	80	
Section 8.05    Right of Set-off	81	
Section 8.06    Effectiveness; Binding Effect	82	
Section 8.07    Successors and Assigns	82	
Section 8.08    Confidentiality	85	
Section 8.09    Governing Law	86	
Section 8.10    Counterparts; Integration	86	
Section 8.11    Jurisdiction, Etc	86	
Section 8.12    Payments Set Aside	86	
Section 8.13    Patriot Act and Beneficial Ownership Regulation	87	
Section 8.14    Waiver of Jury Trial	87	
Section 8.15    No Advisory or Fiduciary Responsibility	87	
Section 8.16    Survival of Representations and Warranties	88	
Section 8.17    Severability	88	
Section 8.18    Acknowledgement and Consent to Bail-In of Affected Financial Institutions	88	
Section 8.19    Acknowledgement Regarding Any Supported QFCs	88	

Schedules

Schedule 1.01(a) Commitments and Ratable Shares
ii

Schedule 1.01(b) Sustainability Table
Schedule 4.01(j) Subsidiaries
Schedule 4.01(k) Existing Indebtedness
Schedule 8.02 Certain Address for Notices

Exhibits

Exhibit A Form of Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Assignment and Assumption
Exhibit D Form of Pricing Certificate

iii

FIVE-YEAR CREDIT AGREEMENT

Dated as of May 28, 2021

ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation (the “Borrower”), the banks, financial institutions and other institutional lenders (the “Initial Lenders”) and initial issuing banks (the “Initial Issuing Banks”) listed on the signature pages hereof, the other Lenders (as hereinafter defined), BARCLAYS BANK PLC, as Agent for the Lenders (as hereinafter defined), MIZUHO BANK, LTD., as Syndication Agent, BARCLAYS BANK PLC and MIZUHO BANK, LTD., as Co-Sustainability Structuring Agents and BANK OF AMERICA, N.A., BNP PARIBAS, JPMORGAN CHASE BANK, N.A., MUFG UNION BANK, N.A., TRUIST BANK and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Documentation Agents, agree as follows:
The Borrower has requested that the Lenders provide a revolving credit facility for the purposes set forth herein, and the Lenders are willing to do so on the terms and conditions set forth herein.
In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:
Article I

DEFINITIONS AND ACCOUNTING TERMS
Section1.01Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings:
“2020 Order” means Decision No. 77853, dated December 17, 2020, of the Arizona Corporation Commission.
“Additional Commitment Lender” has the meaning specified in Section 2.21(d).
“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Agent.
“Advance” means a Revolving Advance or a Swingline Advance.
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affected Lender” means any Lender, as reasonably determined by the Agent or if the Agent is the Affected Lender, by the Required Lenders, that (a) has failed to (i) fund all or any portion of any Revolving Advance within three (3) Business Days of the date such Revolving Advances were required to be funded hereunder unless such Lender notifies the Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in writing) has not been satisfied, or (ii) pay to the Agent, any Issuing Bank, the Swingline Lender, if any, or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit and funding obligations in respect of Swingline Advances) within three (3) Business Days of the date when due, (b) has notified the Borrower, the Agent, any Issuing Bank or any Lender in writing of its intention not to fund any Revolving Advance or any of its other funding

obligations under this Agreement, (c) has failed, within three Business Days after written request by the Agent, or if the Agent is the Affected Lender, by the Required Lenders, to confirm that it will comply with the terms of this Agreement relating to its obligations to fund prospective Revolving Advances and other funding obligations under this Agreement, (d) shall (or whose parent company shall) generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or shall have had any proceeding instituted by or against such Lender (or its parent company) seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 30 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or custodian for, it or for any substantial part of its property) shall occur, or shall take (or whose parent company shall take) any corporate action to authorize any of the actions set forth above in this subsection (d) or (e) has become the subject of a Bail-In Action, provided that a Lender shall not be deemed to be an Affected Lender solely by virtue of the ownership or acquisition of any equity interest in any Lender or any Person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person or is a director or officer of such Person. For purposes of this definition, the term “control” (including the terms “controlling”, “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by contract or otherwise.
“Agent” means Barclays in its capacity as administrative agent under any of the Loan Documents, or any successor administrative agent.
“Agent’s Account” means the account of the Agent designated on Schedule 8.02 under the heading “Agent’s Account” or such other account as the Agent may designate to the Lenders and the Borrower from time to time.
“Agent’s Office” means the Agent’s address and, as appropriate, the Agent’s Account, or such other address or account as the Agent may from time to time notify the Borrower and the Lenders.
“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to bribery, corruption or money laundering.
“Applicable Lending Office” means, with respect to each Lender, such Lender’s Domestic Lending Office in the case of a Base Rate Advance and such Lender’s Eurodollar Lending Office in the case of a Eurodollar Rate Advance.
2

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

Public Debt Rating S&P/Moody’s	Eurodollar Rate Advances	Base Rate Advances	Commitment Fee	
Level 1
AA-/Aa3 or above	0.750%	0.000%	0.060%	
Level 2
A+/A1	0.875%	0.000%	0.075%	
Level 3
A/A2	1.000%	0.000%	0.100%	
Level 4
A-/A3	1.125%	0.125%	0.125%	
Level 5
BBB+/Baa1 or below	1.250%	0.250%	0.175%	

It is hereby understood and agreed that the Applicable Rate shall be adjusted from time to time based upon the Sustainability Margin Adjustment (to be calculated and applied as set forth in Section 1.06); provided that in no event shall the Applicable Rate be less than zero.
“Approved Fund” means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of any entity that administers or manages a Lender.
“Arrangers” means, collectively, Barclays, Mizuho Bank, Ltd., BNP Paribas Securities Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A. (together with any affiliates it deems appropriate to provide the services contemplated herein), MUFG Union Bank, N.A., Truist Securities, Inc. and Wells Fargo Securities, LLC.
“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an Eligible Assignee, and accepted by the Agent, in substantially the form of Exhibit C hereto.
“Assuming Lender” has the meaning specified in Section 2.18(d).
“Assumption Agreement” has the meaning specified in Section 2.18(d)(ii).
“Authorized Officer” means the chairman of the board, chief executive officer, chief operating officer, chief financial officer, chief accounting officer, president, any vice president, treasurer, controller or any assistant treasurer of the Borrower.
“Available Amount” of any Letter of Credit means, at any time, the maximum amount available to be drawn under such Letter of Credit at such time (assuming compliance at such time with all conditions to drawing).
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if the then-current Benchmark is a term rate, any tenor for such Benchmark that is or may be used for determining the length of an Interest Period or (y) otherwise, any payment period for interest calculated with reference to such Benchmark, as applicable, pursuant to this Agreement as of such date.
3

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.
“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, rule, regulation or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).
“Barclays” means Barclays Bank PLC.
“Base Rate” means for any day a fluctuating rate per annum equal to the highest of:
(a)    the rate of interest in effect for such day as publicly announced from time to time by the Agent as its “prime rate”;
(b)    the Federal Funds Rate plus 0.50%; and
(c)    an amount equal to (i) the Eurodollar Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus (ii) 1%; provided that clause (c) shall not be applicable during any period in which the Eurodollar Rate is unavailable or unascertainable; provided further that, if the Base Rate shall be less than 1%, such rate shall be deemed to be 1% for purposes of this Agreement.
“Base Rate Advance” means a Revolving Advance that bears interest as provided in Section 2.07(a)(i).
“Benchmark” means, initially, LIBO Rate; provided that if a replacement of the Benchmark has occurred pursuant to Section 2.08(c), then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate. Any reference to “Benchmark” shall include, as applicable, the published component used in the calculation thereof.
“Benchmark Replacement” means, for any Available Tenor:
(1)    For purposes of Section 2.08(c)(i), the first alternative set forth below that can be determined by the Agent:
(a)    the sum of: (i) Term SOFR and (ii) 0.11448% (11.448 basis points) for an Available Tenor of one-month’s duration, 0.26161% (26.161 basis points) for an Available Tenor of three-months’ duration, and 0.42826% (42.826 basis points) for an Available Tenor of six-months’ duration, or
(b)    the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of LIBO Rate with a SOFR-based rate having approximately the same length as the interest payment period specified in Section 2.08(c)(i); and
4

(2)    For purposes of Section 2.08(c)(ii), the sum of (a) the alternate benchmark rate and (b) an adjustment (which may be a positive or negative value or zero), in each case, that has been selected by the Agent and the Borrower as the replacement for such Available Tenor of such Benchmark giving due consideration to any evolving or then-prevailing market convention, including any applicable recommendations made by the Relevant Governmental Body, for U.S. dollar-denominated syndicated credit facilities at such time;
provided that, if the Benchmark Replacement as determined pursuant to clause (1) or (2) above would be less than the Floor, the Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “Interest Period,” timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods, the applicability of breakage provisions, and other technical, administrative or operational matters) that the Agent decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by the Agent in a manner substantially consistent with market practice (or, if the Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Agent determines that no market practice for the administration of such Benchmark Replacement exists, in such other manner of administration as the Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Benchmark Transition Event” means, with respect to any then-current Benchmark other than LIBO Rate, the occurrence of a public statement or publication of information by or on behalf of the administrator of the then-current Benchmark, the regulatory supervisor for the administrator of such Benchmark, the Board of Governors of the Federal Reserve System, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark, a resolution authority with jurisdiction over the administrator for such Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark, announcing or stating that (a) such administrator has ceased or will cease on a specified date to provide all Available Tenors of such Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark or (b) all Available Tenors of such Benchmark are or will no longer be representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored.
“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation in form and substance acceptable to the Agent in its discretion.
“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.
“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Internal Revenue Code to which Section 4975 of the Internal Revenue Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Internal Revenue Code) the assets of any such “employee benefit plan” or “plan”.
5

“Borrower” has the meaning given to such term in the introductory paragraph hereof.
“Borrower Information” has the meaning specified in Section 8.08.
“Borrowing” means (a) a borrowing consisting of simultaneous Revolving Advances of the same Type made by each of the Lenders pursuant to Section 2.01(a) or (b) Swingline Advances.
“Business Day” means a day of the year on which banks are not required or authorized by Law to close in New York City or Phoenix, Arizona and, if the applicable Business Day relates to any Advance in which interest is calculated by reference to the Eurodollar Rate, on which dealings are carried on in the London interbank market.
“Capital Lease Obligations” means, subject to Section 1.03, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease or a finance lease on the balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
“Carbon Intensity” shall mean, for any Reference Year, the measurement of total carbon emissions, measured in pounds, per megawatt hour of energy delivered by the Borrower to its customers, and determined on a basis consistent with the determination of the Carbon Intensity Target (Minimum) and Carbon Intensity Target (Maximum) as of the Effective Date, as reported on the applicable Pricing Certificate pursuant to Section 1.06(f) and reflected in PWCC’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage) for such Reference Year. For the avoidance of doubt, energy delivered by the Borrower to customers also includes energy efficiency (consisting of total kilowatt hour sales lost due to programs designed to help customers avoid using electricity) and distributed generation (consisting of total kilowatt hour sales lost to customer-installed electricity generation and storage technologies) as determined on a basis consistent with the determination of the Carbon Intensity Target (Minimum) and Carbon Intensity Target (Maximum) as of the Effective Date (the “Energy Efficiency and Distributed Generation Amounts”).
“Carbon Intensity Applicable Rate Adjustment Amount” means, with respect to any period between Sustainability Pricing Adjustment Dates:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances:
(i)negative 0.025%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the Carbon Intensity Target (Minimum) for such Reference Year;
(ii) 0.00%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the Carbon Intensity Target (Minimum) for such Reference Year but less than the Carbon Intensity Target (Maximum) for such Reference Year; and
(iii)positive 0.025%, if (A) the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the Carbon Intensity Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report the Carbon Intensity on any Pricing
6

Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f);
(b)with respect to the Commitment Fee:
(i)negative 0.005%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the Carbon Intensity Target (Minimum) for such Reference Year;
(ii)0.000%, if the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the Carbon Intensity Target (Minimum) for such Reference Year but less than the Carbon Intensity Target (Maximum) for such Reference Year; and
(iii)positive 0.005%, if (A) the Carbon Intensity for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the Carbon Intensity Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report the Carbon Intensity on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
“Carbon Intensity Target (Maximum)” means, with respect to any Reference Year, the Carbon Intensity Target (Maximum) for such Reference Year as set forth in the Sustainability Table.
“Carbon Intensity Target (Minimum)” means, with respect to any Reference Year, the Carbon Intensity Target (Minimum) for such Reference Year as set forth in the Sustainability Table.
“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption of any Law, (b) any change in any Law or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, rules, guideline, requirement or directive (whether or not having the force of law) by any Governmental Authority; provided, however, that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed a “Change in Law” regardless of the date enacted, adopted, issued or implemented.

“Commitment” means a Revolving Credit Commitment or a Letter of Credit Commitment.
“Commitment Date” has the meaning specified in Section 2.18(b).
“Commitment Fee” has the meaning specified in Section 2.04(a).
“Commitment Increase” has the meaning specified in Section 2.18(a).
“Consolidated” refers to the consolidation of accounts in accordance with GAAP.
7

“Consolidated Indebtedness” means, at any date, the Indebtedness of the Borrower and its Consolidated Subsidiaries determined on a Consolidated basis as of such date; provided, however, that so long as the creditors of the VIE Lessor Trusts have no recourse to the assets of the Borrower, “Consolidated Indebtedness” shall not include any Indebtedness or other obligations of the VIE Lessor Trusts.
“Consolidated Net Worth” means, at any date, the sum as of such date of (a) the par value (or value stated on the books of the Borrower) of all classes of capital stock of the Borrower and its Subsidiaries, excluding the Borrower’s capital stock owned by the Borrower and/or its Subsidiaries, plus (or minus in the case of a surplus deficit) (b) the amount of the Consolidated surplus, whether capital or earned, of the Borrower, determined in accordance with GAAP as of the end of the most recent calendar month (excluding the effect on the Borrower’s accumulated other comprehensive income/loss of the ongoing application of Accounting Standards Codification Topic 815).
“Consolidated Subsidiary” means, at any date, any Subsidiary or other entity the accounts of which would be Consolidated with those of the Borrower on its Consolidated financial statements if such financial statements were prepared as of such date; provided that in no event will Consolidated Subsidiaries include the VIE Lessor Trusts.
“Controlled Affiliate” has the meaning specified in Section 4.01(n).
“Convert”, “Conversion”, “Converted” and “Converting” each refers to a conversion of Revolving Advances of one Type into Revolving Advances of the other Type pursuant to Section 2.08, Section 2.09 or Section 2.12.
“Credit Extension” means each of the following: (a) a Borrowing and (b) the issuance of a Letter of Credit.
“Daily Simple SOFR” means, for any day, SOFR, with the conventions for this rate (which will include a lookback) being established by the Agent in accordance with the conventions for this rate recommended by the Relevant Governmental Body for determining “Daily Simple SOFR” for syndicated business loans; provided, that if the Agent decides that any such convention is not administratively feasible for the Agent, then the Agent may establish another convention in its reasonable discretion.
“Debtor Relief Laws” means the Bankruptcy Code of the United States of America, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States of America or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
“Default” means any Event of Default or any event that would constitute an Event of Default but for the requirement that notice be given or time elapse or both.
“Dollars” or “$” means dollars of the United States of America.
“Domestic Lending Office” means, with respect to any Lender, the office of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Agent.
8

“Early Opt-in Effective Date” means, with respect to any Early Opt-in Election, the sixth (6th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, so long as the Agent has not received, by 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Early Opt-in Election is provided to the Lenders, written notice of objection to such Early Opt-in Election from Lenders comprising the Required Lenders.
“Early Opt-in Election” means the occurrence of:
(1)    a notification by the Agent to (or the request by the Borrower to the Agent to notify) each of the other parties hereto that at least five currently outstanding U.S. dollar-denominated syndicated credit facilities at such time contain (as a result of amendment or as originally executed) a SOFR-based rate (including SOFR, a term SOFR or any other rate based upon SOFR) as a benchmark rate (and such syndicated credit facilities are identified in such notice and are publicly available for review), and
(2)    the joint election by the Agent and the Borrower to trigger a fallback from LIBO Rate and the provision by the Agent of written notice of such election to the Lenders.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Effective Date” has the meaning specified in Section 3.01.
“Eligible Assignee” means any Person that meets the requirements to be an assignee under Section 8.07(b)(iii) and Section 8.07(b)(v) (subject to such consents, if any, as may be required under Section 8.07(b)(iii)).
“Energy Efficiency and Distributed Generation Amounts” has the meaning set forth in the definition of Carbon Intensity.
“Environmental Action” means any action, suit, demand, demand letter, claim, notice of non-compliance or violation, notice of liability or potential liability, investigation, proceeding, consent order or consent agreement relating in any way to any Environmental Law, Environmental Permit or Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment and relating to any Environmental Law, including, without limitation, (a) by any Governmental Authority for enforcement, cleanup, removal, response, remedial or other actions or damages and (b) by any Governmental Authority or any third party for damages, contribution, indemnification, cost recovery, compensation or injunctive relief.
9

“Environmental Law” means any federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, judgment, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the environment, natural resources or, to the extent relating to exposure to Hazardous Materials, human health or safety, including, without limitation, those relating to the use, handling, transportation, treatment, storage, disposal, release or discharge of Hazardous Materials.
“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974.
“ERISA Affiliate” means any trade or business (whether or not incorporated) under common control with the Borrower within the meaning of Section 414(b) or (c) of the Internal Revenue Code (and Sections 414(m) and (o) of the Internal Revenue Code for purposes of provisions relating to Section 412 of the Internal Revenue Code).
“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower or any ERISA Affiliate.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“Eurodollar Lending Office” means, with respect to any Lender, the office of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Borrower and the Agent.
“Eurodollar Rate” means, subject to the implementation of a Benchmark Replacement in accordance with Section 2.08(c), for any Interest Period as to any Eurodollar Rate Advance, (i) the rate per annum determined by the Agent to be the offered rate which appears on the page of the Reuters Screen which displays the London interbank offered rate administered by ICE Benchmark Administration Limited (such page currently being the LIBOR01 page) (the “LIBO Rate”) for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time), two Business Days prior to the commencement of such Interest Period, or (ii) in the event the rate referenced in the preceding clause (i) does not appear on such page or service or if such page or service shall cease to be available, the rate determined by the Agent to be the offered rate on such other page or other service which displays the LIBO Rate for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period; provided that if LIBO Rates are quoted under either
10

of the preceding clauses (i) or (ii), but there is no such quotation for the Interest Period elected, the LIBO Rate shall be equal to the Interpolated Rate; and provided, further, that if any such rate determined pursuant to this definition is below zero, the Eurodollar Rate will be deemed to be zero.
“Eurodollar Rate Advance” means a Revolving Advance that bears interest at a rate based on the Eurodollar Rate (other than a Base Rate Advance bearing interest at a rate based on the Eurodollar Rate).
“Events of Default” has the meaning specified in Section 6.01.
“Excluded Taxes” means, with respect to the Agent, any Lender, any Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) Taxes imposed on or measured by its overall net income (however denominated), and franchise Taxes imposed on it (in lieu of net income Taxes), by the United States of America or the jurisdiction (or any political subdivision thereof) under the Laws of which such recipient is organized or does business or in which its principal office is located or, in the case of any Lender, in which its Applicable Lending Office is located, (b) any branch profits Taxes imposed by the United States of America or any similar Tax imposed by any other jurisdiction in which the Borrower is located, (c) any backup withholding Tax that is required by the Internal Revenue Code to be withheld from amounts payable to a Lender that has failed to comply with clause (A) of Section 2.14(e)(ii), (d) in the case of a Foreign Lender (other than as agreed to between any assignee and the Borrower pursuant to a request by the Borrower under Section 2.20), any United States of America withholding Tax that (i) is required to be imposed on amounts payable to such Foreign Lender pursuant to the Laws in force at the time such Foreign Lender becomes a party hereto (or designates a new Applicable Lending Office) or (ii) is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with clause (B) of Section 2.14(e)(ii), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new Applicable Lending Office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.14(a)(i) or (ii) and (v) any United States withholding Tax imposed by FATCA.
“Executive Order” has the meaning specified in Section 4.01(p).
“Existing Termination Date” has the meaning specified in Section 2.21(a).
“Extending Lender” has the meaning specified in Section 2.21(b).
“Extension Date” has the meaning specified in Section 2.21(a).
“FATCA” means Section 1471 through 1474 of the Internal Revenue Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b)(1) of the Internal Revenue Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement, treaty or convention among Governmental Authorities and implementing such Sections of the Internal Revenue Code.

“FCA” has the meaning specified in Section 2.08(c)(i).

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the
11

Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to the Agent on such day on such transactions as determined by the Agent, and (c) solely for purposes for determining the Money Market Rate, any such other publication or means of determining the rate for federal funds as agreed to between the Borrower and Swingline Lender; provided further, that if the Federal Funds Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

“Fee Letters” means (a) each of the following letters to the Borrower dated May 10, 2021: (i) the letter from Barclays and Mizuho Bank, Ltd., (ii) the letter from Bank of America, N.A., BNP Paribas, BNP Paribas Securities Corp., BofA Securities, Inc., JPMorgan Chase Bank, N.A., MUFG Bank, Ltd., MUFG Union Bank, N.A., Truist Securities, Inc., Wells Fargo Bank, National Association and Wells Fargo Securities, LLC and (iii) the agent fee letter from Barclays, as Agent, each relating to certain fees payable by the Borrower to such parties in respect of the transactions contemplated by this Agreement and (b) any letter between the Borrower and any Issuing Bank other than an Initial Issuing Bank relating to certain fees payable to such Issuing Bank in its capacity as such, each as amended, modified, restated or supplemented from time to time.
“Floor” means the benchmark rate floor, if any, provided in this Agreement initially (as of the execution of this Agreement, the modification, amendment or renewal of this Agreement or otherwise) with respect to LIBO Rate.
“Foreign Lender” means any Lender that is organized under the Laws of a jurisdiction other than that in which the Borrower is resident for tax purposes (including such a Lender when acting in the capacity of an Issuing Bank or a Swingline Lender). For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.
“Four Corners Acquisition” means the acquisition by the Borrower from Southern California Edison Company (“SCE”) of SCE’s interests in Units 4 and 5 of the Four Corners Power Plant near Farmington, New Mexico, pursuant to the Purchase and Sale Agreement, dated as of November 8, 2010, by and between SCE and the Borrower.
“Fund” means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.
“GAAP” has the meaning specified in Section 1.03.
“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International
12

Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

“Government Official” shall mean (a) an executive, official, employee or agent of a governmental department, agency or instrumentality, (b) a director, officer, employee or agent of a wholly or partially government-owned or -controlled company or business, (c) a political party or official thereof, or candidate for political office or (d) an executive, official, employee or agent of a public international organization (e.g., the International Monetary Fund or the World Bank).

“Guarantee” means as to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, agreements to keep well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise), provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
“Hazardous Materials” means (a) petroleum and petroleum products, byproducts or breakdown products, radioactive materials, asbestos-containing materials, polychlorinated biphenyls and radon gas and (b) any other chemicals, materials or substances designated, classified or regulated as hazardous or toxic or as a pollutant or contaminant under any Environmental Law.
“Hedge Agreement” means any interest rate swap, cap or collar agreement, interest rate future or option contract, currency swap agreement, currency future or option contract, commodity future or option contract, commodity forward contract or other similar agreement.
“IBA” has the meaning specified in Section 2.08(c)(i).
“Increase Date” has the meaning specified in Section 2.18(a).
“Increasing Lender” has the meaning specified in Section 2.18(b).
“Indebtedness” means as to any Person at any date (without duplication): (a) indebtedness created, issued, incurred or assumed by such Person for borrowed money or evidenced by bonds, debentures, notes or similar instruments; (b) all obligations of such Person to pay the deferred purchase price of property or services, excluding, however, trade accounts payable (other than for borrowed money) arising in, and accrued expenses incurred in, the ordinary course of business of such Person so long as such trade accounts payable are paid within 180 days (unless subject to a good faith dispute) of the date incurred; (c) all Indebtedness secured by a Lien on any asset of such Person, to the extent such Indebtedness has been assumed by, or is a recourse obligation of, such Person; (d) all Guarantees by such Person; (e) all Capital Lease Obligations of such Person; and (f) the amount of all reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers’ acceptances, surety or other bonds and similar instruments in support of Indebtedness; provided that Indebtedness, in accordance with Section 1.03, shall exclude any obligation or liability arising from the application or interpretation of ASC Topic 840 or 842 or any related, similar or successor pronouncement, guideline, publication or rule, or which is otherwise excluded in accordance with Section 1.03.
“Indemnified Taxes” means Taxes other than Excluded Taxes.
13

“Ineligible Institution” means (a) a natural person, (b) any Affected Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute an Affected Lender or a Subsidiary thereof, (c) the Borrower, any of its Subsidiaries or any of its Affiliates, or (d) a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof.
“Initial Issuing Banks” has the meaning given to such term in the introductory paragraph hereof.
“Initial Lenders” has the meaning given to such term in the introductory paragraph hereof.
“Interest Period” means, for each Eurodollar Rate Advance comprising part of the same Borrowing, the period commencing on (i) the date such Eurodollar Rate Advance is disbursed, (ii) the date of the Conversion of any Base Rate Advance into such Eurodollar Rate Advance or (iii) the effective date of the most recent continuation of such Eurodollar Rate Advance, as the case may be, and ending on the last day of the period selected by the Borrower pursuant to the provisions below and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of the period selected by the Borrower pursuant to the provisions below. The duration of each such Interest Period shall be one, three or six months, as the Borrower may, upon notice received by the Agent not later than 12:00 noon on the third Business Day prior to the first day of such Interest Period, select; provided, however, that:
(a)    the Borrower may not select any Interest Period that ends after the Termination Date;
(b)    Interest Periods commencing on the same date for Eurodollar Rate Advances comprising part of the same Borrowing shall be of the same duration;
(c)    whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall be extended to occur on the next succeeding Business Day, provided, however, that, if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and
(d)    whenever the first day of any Interest Period occurs on a day of an initial calendar month for which there is no numerically corresponding day in the calendar month that succeeds such initial calendar month by the number of months equal to the number of months in such Interest Period, such Interest Period shall end on the last Business Day of such succeeding calendar month.
“Internal Revenue Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder.
“Interpolated Rate” means, in relation to the LIBO Rate, the rate which results from interpolating on a linear basis between:
(a)    the applicable LIBO Rate for the longest period (for which that LIBO Rate is available) which is less than the Interest Period of that Advance; and
(b)    the applicable LIBO Rate for the shortest period (for which that LIBO Rate is available) which exceeds the Interest Period of that Advance,
14

each as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period of that Advance.
“ISP” means, with respect to any Letter of Credit, the “International Standby Practices 1998” published by the Institute of International Banking Law & Practice, Inc. (or such later version thereof as may be in effect at the time of issuance).
“Issuing Bank” means the Initial Issuing Banks or any other Lender approved by the Borrower that may agree to issue Letters of Credit pursuant to an Assignment and Assumption or other agreement in form satisfactory to the Borrower and the Agent, so long as such Lender expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Agreement are required to be performed by it as an Issuing Bank and notifies the Agent of its Applicable Lending Office (which information shall be recorded by the Agent in the Register), for so long as such Initial Issuing Bank or Lender, as the case may be, shall have a Letter of Credit Commitment.
“KPI Metric Target” means each of the Carbon Intensity Target (Maximum), the Carbon Intensity Target (Minimum), the OSHA Incident Target (Maximum) and the OSHA Incident Target (Minimum).
“L/C Advance” means, with respect to each Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Ratable Share.
“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made nor refinanced as a Base Rate Advance.
“L/C Cash Deposit Account” means an interest bearing cash deposit account to be established and maintained by the Agent, over which the Agent shall have sole dominion and control, upon terms as may be satisfactory to the Agent.
“L/C Obligations” means, as at any date of determination, the aggregate Available Amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Rule 3.14 of the ISP, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn.
“L/C Related Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by any Issuing Bank and the Borrower or in favor of any Issuing Bank and relating to such Letter of Credit.
“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, licenses, authorizations and permits of, and agreements with, any Governmental Authority.
“Lender Notice Date” has the meaning specified in Section 2.21(a).
“Lenders” means the Initial Lenders, each Issuing Bank, the Swingline Lender, if any, each Assuming Lender that shall become a party hereto pursuant to Section 2.18 and each Person that shall become a party hereto pursuant to Section 8.07.
15

“Letter of Credit” has the meaning specified in Section 2.01(b).
“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by any Issuing Bank.
“Letter of Credit Commitment” means, with respect to each Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower from time to time in an aggregate amount equal to (a) for each of the Initial Issuing Banks, $10,000,000 and (b) for any other Issuing Bank, as separately agreed to by such Issuing Bank and the Borrower. The Letter of Credit Commitment is part of, and not in addition to, the Revolving Credit Commitments.
“Letter of Credit Expiration Date” means the day that is five Business Days prior to the Termination Date.
“LIBO Rate” has the meaning specified in the definition of “Eurodollar Rate.”
“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or otherwise), charge or other security interest or preferential arrangement that has the practical effect of creating a security interest, including, without limitation, the lien or retained security title of a conditional vendor and any easement, right of way or other encumbrance on title to real property, and any capital lease having substantially the same economic effect as any of the foregoing.
“Loan Documents” mean this Agreement, each Note, each L/C Related Document and the Fee Letters.
“Material Adverse Effect” means a material adverse effect on (a) the financial condition, operations, business or property of the Borrower and its Subsidiaries taken as a whole, (b) the rights and remedies of the Agent or any Lender under this Agreement or any Note or (c) the ability of the Borrower to perform its obligations under this Agreement or any Note.
“Material Subsidiary” means, at any time, a Subsidiary of the Borrower which as of such time meets the definition of a “significant subsidiary” included as of the date hereof in Regulation S-X of the Securities and Exchange Commission or whose assets at such time exceed 10% of the assets of the Borrower and the Subsidiaries (on a consolidated basis).
“Money Market Rate” means (a) the Federal Funds Rate plus (b) the Applicable Rate for Eurodollar Rate Advances.
“Money Market Rate Advance” means a Swingline Advance that bears interest at a rate based on the Money Market Rate.
“Moody’s” means Moody’s Investors Service, Inc.
“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.
“Non-Extending Lender” has the meaning specified in Section 2.21(b).
16

“Note” means a promissory note of the Borrower payable to the order of any Lender, delivered pursuant to a request made under Section 2.16 in substantially the form of Exhibit A hereto.
“Notice of Borrowing” has the meaning specified in Section 2.02(a).
“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, the Borrower arising under any Loan Document or otherwise with respect to any Revolving Advance, Swingline Advance or Letter of Credit, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue under any Loan Document after the commencement by or against the Borrower of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding.
“OFAC” means Office of Foreign Assets Control of the United States Department of the Treasury.
“OSHA Incident Amount” shall mean, for any Reference Year, the total number of injuries or illnesses, excluding COVID-19, that meet the general recording criteria, and are therefore “recordable” for such Reference Year in accordance with the recordkeeping and reporting rules of the United States Department of Labor – Occupational Safety and Health Administration Severe Injury Reports (or any replacement(s) thereof) pursuant to 29 C.F.R. §1904, as reported on the applicable Pricing Certificate pursuant to Section 1.06(f) and reflected in PWCC’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage); it being understood and agreed that on the date hereof PWCC applies the US-OSHA Recordkeeping rules (www.osha.gov/recordkeeping (as in effect on the date of this Agreement) to determine recordable injuries for PWCC and its Subsidiaries in the aggregate, and reported numbers include the performance of PWCC’s and its Subsidiaries’ employees and supervised contractors (e.g., agency temp workers and other workers under the direct supervision of PWCC or any of its Subsidiaries); provided that in the event that (i) the methodologies or other basis upon which such reporting shall change from the methodologies and basis for the determination of the OSHA Incident Target (Maximum) and OSHA Incident Target (Minimum) or (ii) OSHA shall cease to require the recording of the total number of injuries or illnesses, excluding COVID-19, that are “recordable” by PWCC, the OSHA Incident Amount shall be deemed to be equal to an amount that will result in no adjustment to the Applicable Rate for the applicable Reference Year; provided, further, that in the event that the combined number of employees and supervised contractors (e.g., agency temp workers and other workers under the direct supervision of PWCC or any of its Subsidiaries) of PWCC and its subsidiaries for any Reference Year increases or decreases by ten percent (10%) or more over the combined number of employees and supervised contractors of PWCC and its subsidiaries for the immediately preceding Reference Year, the OSHA Incident Amount shall be deemed to be equal to an amount that will result in no adjustment to the Applicable Rate for the applicable Reference Year and each Reference Year thereafter unless otherwise agreed in writing by the Borrower, the Agent and the Required Lenders.
“OSHA Incident Amount (Three-Year Average)” shall mean, for any Reference Year, an amount equal to (a) the sum of (i) the OSHA Incident Amount for the immediately preceding two (2) fiscal years prior to such Reference Year plus (ii) the OSHA Incident Amount for such Reference Year divided by (b) three (3). For purposes of calculating the OSHA Incident Amount (Three-Year Average) for the Reference Years ending on December 31, 2021 and December 31, 2022, the OSHA Incident Amount for the fiscal years ending December 31, 2019 and December 31, 2020 shall be as set forth in the Sustainability Table.
17

“OSHA Incident Applicable Rate Adjustment Amount” means, with respect to any period between Sustainability Pricing Adjustment Dates:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances:
(i)negative 0.025%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the OSHA Incident Target (Minimum) for such Reference Year;
(ii)0.00%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the OSHA Incident Target (Minimum) for such Reference Year but less than the OSHA Incident Target (Maximum) for such Reference Year; and
(iii)positive 0.025%, if (A) the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the OSHA Incident Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report an OSHA Incident Amount (Three-Year Average) on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
(b)with respect to the Commitment Fee:
(i)negative 0.005%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is less than or equal to the OSHA Incident Target (Minimum) for such Reference Year;
(ii)0.000%, if the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than the OSHA Incident Target (Minimum) for such Reference Year but less than the OSHA Incident Target (Maximum) for such Reference Year; and
(iii)positive 0.005%, if (A) the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year as set forth in the Pricing Certificate for such Reference Year is greater than or equal to the OSHA Incident Target (Maximum) for such Reference Year or (B) the Borrower shall fail to deliver a Pricing Certificate (or omit to report an OSHA Incident Amount (Three-Year Average) on any Pricing Certificate) for such Reference Year on or prior to the last permitted date to receive such Pricing Certificate pursuant to Section 1.06(f).
“OSHA Incident Target (Maximum)” means, with respect to any Reference Year, the OSHA Incident Target (Maximum) for such Reference Year as set forth in the Sustainability Table.
“OSHA Incident Target (Minimum)” means, with respect to any Reference Year, the OSHA Incident Target (Minimum) for such Reference Year as set forth in the Sustainability Table.
“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or under any other
18

Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.
“Participant” has the meaning specified in Section 8.07(d).
“Participant Register” has the meaning specified in Section 8.07(d).
“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended.
“Payment” has the meaning specified in Section 7.11(a).
“Payment Notice” has the meaning specified in Section 7.11(b).
“PBGC” means the Pension Benefit Guaranty Corporation.
“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by the Borrower or any ERISA Affiliate or to which the Borrower or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five plan years.
“Permitted Lien” of the Borrower or any Material Subsidiary means any of the following:
(i)Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been made;
(ii)Liens imposed by or arising by operation of law, such as Liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the ordinary course of business, including, without limitation, landlord’s liens arising under Arizona Law under leases entered into by the Borrower in the 1986 sale and leaseback transactions with respect to PVNGS Unit 2 and securing the payment of rent under such leases, in each case, for sums not overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been made;
(iii)Liens incurred in the ordinary course of business in connection with worker’s compensation, unemployment insurance or other forms of governmental insurance or benefits or other similar statutory obligations;
(iv)Liens to secure obligations on surety or appeal bonds;
(v)Liens on cash deposits in the nature of a right of setoff, banker’s lien, counterclaim or netting of cash amounts owed arising in the ordinary course of business on deposit accounts, commodity accounts or securities accounts;
19

(vi)easements, restrictions, reservations, licenses, covenants, and other defects of title that are not, in the aggregate, materially adverse to the use of such property for the purpose for which it is used;
(vii)Liens securing claims against or other obligations of any Person other than the Borrower or any Subsidiary of the Borrower neither assumed nor guaranteed by the Borrower or any Subsidiary of the Borrower nor on which the Borrower or any Subsidiary of the Borrower customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by the Borrower or any Subsidiary of the Borrower for use in the operation of the business of the Borrower or any Subsidiary of the Borrower, including, without limitation, for the generation, transmission or distribution of electric energy, transportation, telephonic, telegraphic, radio, wireless or other electronic communication or any other purpose;
(viii)rights reserved to or vested in and Liens on assets arising out of obligations or duties to any municipality or public authority with respect to any right, power, franchise, grant, license or permit, or by any provision of Law;
(ix)rights reserved to or vested in others to take or receive any part of the power pursuant to firm power commitment contracts, purchased power contracts, tolling agreements and similar agreements, coal, gas, oil or other minerals, timber or other products generated, developed, manufactured or produced by, or grown on, or acquired with, any property of the Borrower;
(x)rights reserved to or vested in any municipality or public authority to control or regulate any property of the Borrower, or to use such property in a manner that does not materially impair the use of such property for the purposes for which it is held by the Borrower;
(xi)security interests granted in favor of the lessors in the Borrower’s Decommissioning Trust Agreement (PVNGS Unit 2) dated as of January 31, 1992 (such agreement, as amended or otherwise modified from time to time, being the “Unit 2 Trust Agreement”) entered into in connection with the PVNGS Unit 2 sale leaseback transaction to secure the Borrower’s obligations in respect of the decommissioning of PVNGS Unit 2 or related facilities;
(xii)Liens that may exist with respect to the Unit 2 Trust Agreement (other than as described in paragraph (xi) above) or with respect to either of the Borrower’s Decommissioning Trust Agreement (PVNGS Unit 1) or Decommissioning Trust Agreement (PVNGS Unit 3), each dated as of July 1, 1991, as amended or otherwise modified from time to time, relating to the Borrower’s obligation to set aside funds for the decommissioning and retirement from service of such Units;
(xiii)pledges of pollution control bonds and related rights to secure the Borrower’s reimbursement obligations in respect of letters of credit, bond insurance, and other credit or liquidity enhancements supporting pollution control bond transactions, provided that such pollution control bonds are not secured by any other assets of the Borrower or any Material Subsidiary;
(xiv)rights and interests of Persons other than the Borrower or any Material Subsidiary (including, without limitation, acquisition rights), related obligations of the Borrower or any Material Subsidiary and restrictions on it or its property arising out of contracts,
20

agreements and other instruments to which the Borrower or any Material Subsidiary is a party that relate to the common ownership or joint use of property or other use of property for the benefit of one or more third parties or that allow a third party to purchase property of the Borrower or any Material Subsidiary and all Liens on the interests of Persons other than the Borrower or any Material Subsidiary in such property;
(xv)transfers of operational or other control of facilities to a regional transmission organization or other similar body and Liens on such facilities to cover expenses, fees and other costs of such an organization or body;
(xvi)Liens established on specified bank accounts of the Borrower to secure the Borrower’s reimbursement obligations in respect of letters of credit supporting commercial paper issued by the Borrower and similar arrangements for collateral security with respect to refinancings or replacements of the same;
(xvii)rights of transmission users or any regional transmission organizations or similar entities in transmission facilities;
(xviii)Liens on property of the Borrower sold in a transaction permitted by Section 5.02(a) to another Person pursuant to a conditional sales agreement where the Borrower retains title;
(xix)Liens created under this Agreement;
(xx)Liens on cash or cash equivalents not to exceed $200,000,000 (A) deposited in margin accounts with or on behalf of futures contract brokers or paid over to other contract counterparties or (B) pledged or deposited as collateral to a contract counterparty to secure obligations with respect to (1) contracts (other than for Indebtedness) for commercial and trading activities in the ordinary course of business for the purchase, transmission, distribution, sale, storage, lease or hedge of any energy or energy related commodity or (2) Hedge Agreements;
(xxi)Liens granted on cash or cash equivalents to defease Indebtedness of the Borrower or any of its Subsidiaries;
(xxii)Liens granted on cash or cash equivalents constituting proceeds from any sale or disposition of assets that is not prohibited by Section 5.02(c) deposited in escrow accounts or otherwise withheld or set aside to secure obligations of the Borrower or any Subsidiary providing for indemnification, adjustment of purchase price or any similar obligations, in each case, in an amount not to exceed the amount of gross proceeds received by the Borrower or any Subsidiary in connection with such sale or disposition;
(xxiii)Liens, deposits and similar arrangements to secure the performance of bids, tenders or contracts (other than contracts for borrowed money), public or statutory obligations, performance bonds and other obligations of a like nature incurred in the ordinary course of business by the Borrower or any of its Subsidiaries;
(xxiv)rights of lessees arising under leases entered into by the Borrower or any of its Subsidiaries as lessor, in the ordinary course of business;
21

(xxv)any Liens on or reservations with respect to governmental and other licenses, permits, franchises, consents and allowances;
(xxvi)Liens on property which is the subject of a Capital Lease Obligation designating the Borrower or any of its Subsidiaries as lessee and all right, title and interest of the Borrower or any of its Subsidiaries in and to such property and in, to and under such lease agreement, whether or not such lease agreement is intended as a security;
(xxvii)licenses of intellectual property entered into in the ordinary course of business;
(xxviii) Liens solely on any cash earnest money deposits made by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;
(xxix) deposits or funds established for the removal from service of operating facilities and coal mines and related facilities or other similar facilities used in connection therewith; and
(xxx)Liens on cash deposits used to secure letters of credit under defaulting lender provisions in credit or reimbursement facilities;
provided, however, that no Lien in favor of the PBGC shall, in any event, be a Permitted Lien.
“Person” means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.
“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by the Borrower or, with respect to any such plan that is subject to Section 412 of the Internal Revenue Code or Title IV of ERISA, any ERISA Affiliate.
“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.
“Pricing Certificate” means a certificate substantially in the form of Exhibit D executed by an officer of the Borrower setting forth in reasonable detail the calculation of Carbon Intensity (including the Energy Efficiency and Distributed Generation Amounts), the OSHA Incident Amount and the Sustainability Margin Adjustment, in each case, for the Reference Year covered thereby, and confirming the website for the concurrent public reporting of such information on PWCC’s publicly-available Corporate Responsibility webpage (or similar publicly-available webpage) for such Reference Year.
“Prime Rate” means the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. or, if The Wall Street Journal ceases to quote such rate, the highest per annum interest rate published by the Federal Reserve Board in Federal Reserve Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime loan” rate or, if such rate is no longer quoted therein, any similar rate quoted therein (as determined by the Agent) or any similar release by the Federal Reserve Board (as determined by the Agent).
“Prohibited Person” means any Person (a) listed in the Annex to the Executive Order or identified pursuant to Section 1 of the Executive Order; (b) that is owned or controlled by, or acting for or on behalf of, any Person listed in the Annex to the Executive Order or identified pursuant to the provisions of
22

Section 1 of the Executive Order; (c) with whom a Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or anti-laundering law, including the Executive Order; (d) who commits, threatens, conspires to commit, or support “terrorism” as defined in the Executive Order; (e) who is named as a “Specially designated national or blocked person” on the most current list published by the OFAC at its official website, at http://www.treas.gov/offices/enforcement/ofac/sdn/t11sdn.pdf or any replacement website or other replacement official publication of such list; or (f) who is owned or controlled by a Person listed above in clause (c) or (e).
“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.
“Public Debt Rating” means, as of any date, the rating that has been most recently announced by either S&P or Moody’s, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower or, if any such rating agency shall have issued more than one such rating, the lowest such rating issued by such rating agency. For purposes of the foregoing, (a) if only one of S&P and Moody’s shall have in effect a Public Debt Rating, the Applicable Rate shall be determined by reference to the available rating; (b) except as set forth in the proviso at the end of this definition, if neither S&P nor Moody’s shall have in effect a Public Debt Rating, the Applicable Rate will be set in accordance with Level 5 under the definition of “Applicable Rate”; (c) if the ratings established by S&P and Moody’s shall fall within different levels, the Applicable Rate shall be based upon the higher rating unless such ratings differ by two or more levels, in which case the applicable level will be deemed to be one level below the higher of such levels; and (d) if any rating established by S&P or Moody’s shall be changed (other than as a result of a change in the basis on which ratings are established), such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change; provided that if the Public Debt Rating system of S&P or Moody’s shall change, or if either such rating agency shall cease to be in the business of rating corporate debt obligations, the Borrower and the Lenders shall negotiate in good faith to amend the definition of “Applicable Rate” to reflect such changed rating system or the unavailability of ratings from such rating agency and, pending the effectiveness of any such amendment, the Applicable Rate will be set in accordance with the level most recently in effect under the definition of “Applicable Rate” prior to such change or cessation.
“PVNGS” means the Palo Verde Nuclear Generating Station.
“PWCC” means Pinnacle West Capital Corporation, an Arizona corporation.
“Ratable Share” of any amount means, with respect to any Lender at any time but subject to the provisions of Section 2.19, the product of such amount times a fraction the numerator of which is the amount of such Lender’s Revolving Credit Commitment at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or Section 6.01, such Lender’s Revolving Credit Commitment as in effect immediately prior to such termination) and the denominator of which is the aggregate amount of all Revolving Credit Commitments at such time (or, if the Revolving Credit Commitments shall have been terminated pursuant to Section 2.05 or Section 6.01, the aggregate amount of all Revolving Credit Commitments as in effect immediately prior to such termination).
“Reference Year” means, with respect to any Pricing Certificate, the fiscal year ending immediately prior to the date of such Pricing Certificate.
“Register” has the meaning specified in Section 8.07(c).
23

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.
“Relevant Governmental Body” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than events for which the 30-day notice period has been waived under the final regulations issued under Section 4043, as in effect as of the date of this Agreement (the “Section 4043 Regulations”). Any changes made to the Section 4043 Regulations that become effective after the Effective Date shall have no impact on the definition of Reportable Event as used herein unless otherwise amended by the Borrower and the Required Lenders.
“Required Lenders” means, at any time, but subject to Section 2.19, Lenders holding in the aggregate more than 50% of (a) the Revolving Credit Commitments or (b) if the Revolving Credit Commitments have been terminated, the Total Outstandings.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Revolving Advance” means an advance by a Lender to the Borrower as part of a Borrowing, including a Base Rate Advance made pursuant to Section 2.03(c), but excluding any L/C Advance made as part of an L/C Borrowing and any Swingline Advance, and refers to a Base Rate Advance or a Eurodollar Rate Advance (each of which shall be a Type of Revolving Advance).
“Revolving Credit Commitment” means, as to any Lender, its obligation to (a) make Revolving Advances to the Borrower pursuant to Section 2.01 and Section 2.03(c), (b) purchase participations in L/C Obligations and (c) make Revolving Advances pursuant to Section 2.03A(c) for the purpose of repaying Swingline Advances, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth opposite such Lender’s name on Schedule 1.01(a) under the column “Revolving Credit Commitment” or if such Lender has become a Lender hereunder pursuant to an Assumption Agreement or if such Lender has entered into any Assignment and Assumption, the amount set forth for such Lender in the Register, in each case as such amount may be reduced pursuant to Section 2.05 or increased pursuant to Section 2.18.
“S&P” means Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc.
“Sale Leaseback Obligation Bonds” means any bonds issued by or on behalf of the Borrower in connection with a sale/leaseback transaction and any refinancing or refunding of such obligations.
“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by OFAC and any similar economic or financial sanctions or trade embargoes of the type described in Sections 4.01(n) through (q) and imposed, administered or enforced from time to time by the U.S. government, including the U.S. Department of State, or any other applicable Governmental Authority.
24

“SEC Reports” means the Borrower’s (i) Form 10-K Report for the year ended December 31, 2020, (ii) Form 10-Q Report for the quarter ended March 31, 2021 and (iii) Form 8-K Reports filed on March 3, 2021, April 1, 2021, May 7, 2021 and May 21, 2021.
“SOFR” means a rate per annum equal to the secured overnight financing rate for such Business Day published by the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate) on the website of the Federal Reserve Bank of New York, currently at http://www.newyorkfed.org (or any successor source for the secured overnight financing rate identified as such by the administrator of the secured overnight financing rate from time to time).
“Subsequent Order” means any decision, order or ruling of the Arizona Corporation Commission issued after the Effective Date relating to the incurrence or maintenance of Indebtedness by the Borrower and that amends, supersedes or otherwise modifies the 2020 Order or any successor decision, order or ruling.
“Subsidiary” of any Person means any corporation, partnership, joint venture, limited liability company, trust or estate of which (or in which) more than 50% of (a) the issued and outstanding Voting Stock, (b) the interest in the capital or profits of such limited liability company, partnership or joint venture or (c) the beneficial interest in such trust or estate, is at the time directly or indirectly owned or controlled by such Person, by such Person and one or more of its other Subsidiaries or by one or more of such Person’s other Subsidiaries; provided that in no event will Subsidiaries include the VIE Lessor Trusts.
“Sustainability Pricing Adjustment Date” has the meaning specified in Section 1.06(a).
“Sustainability Margin Adjustment” means with respect to any Pricing Certificate for any period between Sustainability Pricing Adjustment Dates, an amount (whether negative, zero or positive), expressed as a percentage, equal to:
(a)with respect to Eurodollar Rate Advances and Base Rate Advances, the sum of (i) the Carbon Intensity Applicable Rate Adjustment Amount and (ii) the OSHA Incident Applicable Rate Adjustment Amount, in each case for Eurodollar Rate Advances and Base Rate Advances; and
(b)with respect to the Commitment Fee, the sum of (i) the Carbon Intensity Applicable Rate Adjustment Amount and (ii) the OSHA Incident Applicable Rate Adjustment Amount, in each case for the Commitment Fee.
“Sustainability Table” means the Sustainability Table set forth on Schedule 1.01(b).
“Swingline Advance” means an advance made by the Swingline Lender, if any, to the Borrower pursuant to Section 2.03A.
“Swingline Eurodollar Rate Advance” means a Swingline Advance that bears interest at a rate equivalent to (a) clause (ii) under the definition of Eurodollar Rate, plus (b) the Applicable Rate for Eurodollar Rate Advances.

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Advances outstanding at such time. The Swingline Exposure of any Lender shall be its Ratable Share of the total Swingline Exposure at such time.
25

“Swingline Lender” means, upon notice to the Agent by such Lender and the Borrower, any Lender approved by the Borrower and the Agent from time to time that may agree to fund Swingline Advances.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“Termination Date” means the earlier of (a) May 28, 2026, subject to extension (in the case of, and solely with respect to, each Lender consenting thereto) as provided in Section 2.21 in which case one or more different Termination Dates may exist which shall relate to individual Lender Commitments and (b) the date of termination in whole of the Commitments pursuant to Section 2.05 or Section 6.01.
“Term SOFR” means, for the applicable corresponding tenor, the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Total Outstandings” means the sum of (a) the aggregate principal amount of all Revolving Advances plus (b) all L/C Obligations outstanding plus (c) the aggregate Swingline Exposure.
“Type” means a Base Rate Advance or a Eurodollar Rate Advance.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person subject to IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.
“Unreimbursed Amount” has the meaning specified in Section 2.03(c)(i).
“Unissued Letter of Credit Commitment” means, with respect to any Issuing Bank, the obligation of such Issuing Bank to issue Letters of Credit for the account of the Borrower in an amount equal to the excess of (a) the amount of its Letter of Credit Commitment over (b) the aggregate Available Amount of all Letters of Credit issued by such Issuing Bank.
“Unused Commitment” means, with respect to each Lender at any time, (a) such Lender’s Revolving Credit Commitment at such time minus (b) the sum of (i) the aggregate principal amount of all Revolving Advances made by such Lender (in its capacity as a Lender) and outstanding at such time and (ii) such Lender’s Ratable Share of the aggregate L/C Obligations and, other than for the purposes of calculation of the Commitment Fees, such Lender’s Ratable Share of the aggregate Swingline Exposure outstanding at such time.
“VIE Lessor Trusts” means the three (3) separate variable-interest entity lessor trusts that purchased from, and leased back to, the Borrower certain interests in the PVNGS Unit 2 and related common facilities, as described in Note 6 of Combined Notes to Condensed Consolidated Financial Statements in the Borrower’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2021.
26

“Voting Stock” means capital stock issued by a corporation, or equivalent interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
Section1.02Other Interpretive Provisions. With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:
(a)The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s permitted successors and permitted assigns, (iii) the words “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.
(b)In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”
(c)Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.
Section1.03Accounting Terms. Unless otherwise specified herein, and subject to the provision below, all accounting terms used herein shall be interpreted, all accounting determinations
27

hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with generally accepted accounting principles as in effect from time to time, applied on a basis consistent (except for changes concurred in by the Borrower’s independent public accountants) with the most recent audited Consolidated financial statements of the Borrower delivered to the Agent (“GAAP”). If at any time any change in GAAP or in the interpretation thereof would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP or in the interpretation thereof (subject to the approval of the Required Lenders); provided that, unless and until so amended, such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein. Notwithstanding the foregoing, (a) for purposes of all financial or covenant calculations made under this Agreement and for purposes of defining and calculating Capital Lease Obligations, Indebtedness and Consolidated Indebtedness hereunder for such purposes, all leases or other agreements of any Person deemed to be a lease or other obligation under GAAP (as in effect from time to time) (whether such lease or other agreement is existing as of the date hereof or hereafter entered into) that would not be characterized as (i) a Capital Lease Obligation, (ii) Indebtedness or (iii) Consolidated Indebtedness, in each case, under this Agreement based on GAAP as in effect as of December 31, 2015, will not be deemed to be (i) a Capital Lease Obligation, (ii) Indebtedness or (iii) Consolidated Indebtedness, respectively, as a result of any change in GAAP, or the interpretation or application thereof required or approved by such Person’s independent certified public accountants, occurring or coming into or taking effect after December 31, 2015, including ASC Topic 840 or 842 or any related, similar or successor pronouncement, guidance, publication or rule and (b) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made (i) without giving effect to any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of any Person at “fair value”, as defined therein and (ii) without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof.
Section1.04Rounding. Any financial ratios required to be maintained by the Borrower pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).
Section1.05Times of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).
Section1.06Sustainability Adjustments.
(a)Following the date on which Borrower provides a Pricing Certificate in respect of the most recently ended Reference Year, the Applicable Rate shall be adjusted, as applicable, pursuant to the Sustainability Margin Adjustment as set forth in such Pricing Certificate. For purposes of the foregoing, (i) the Sustainability Margin Adjustment shall be determined as of the fifth Business Day following receipt by the Agent of a Pricing Certificate delivered pursuant to Section 1.06(f) based upon the Carbon Intensity and OSHA Incident Amount (Three-Year Average) for the applicable Reference Year set forth
28

in such Pricing Certificate and the calculations of the Sustainability Margin Adjustment, therein (such day, the “Sustainability Pricing Adjustment Date”) and (ii) each change in the Applicable Rate resulting from a Pricing Certificate (or the non-delivery or delivery of an incomplete Pricing Certificate) shall be effective during the period commencing on and including the applicable Sustainability Pricing Adjustment Date and ending on the date immediately preceding the next such Sustainability Pricing Adjustment Date (or, in the case of non-delivery of a Pricing Certificate, the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 1.06(f)).
(b)For the avoidance of doubt, only one Pricing Certificate may be delivered in respect of any Reference Year. It is further understood and agreed that the Applicable Rate (i) with respect to Eurodollar Rate Advances and Base Rate Advances will never be reduced or increased by more than 0.05% and (ii) with respect to the Commitment Fee will never be reduced or increased by more than 0.01%, in each case, pursuant to the Sustainability Margin Adjustment during any calendar year. For the avoidance of doubt, any adjustment to the Applicable Rate by reference to the KPI Metric Targets in any year shall not be cumulative year-over-year. Each applicable adjustment shall only apply until the date on which the next adjustment is due to take place.
(c)It is hereby understood and agreed that if no such Pricing Certificate is delivered, or any Pricing Certificate shall be incomplete and fail to include the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) for the applicable Reference Year, within the period set forth in Section 1.06(f), the Sustainability Margin Adjustment will be made to the Applicable Rate commencing on the last day such Pricing Certificate could have been delivered pursuant to the terms of Section 1.06(f).
(d)If (i)(A) the Borrower or any Lender becomes aware of any material inaccuracy in the Sustainability Margin Adjustment, the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) as reported in a Pricing Certificate (any such material inaccuracy, a “Pricing Certificate Inaccuracy”) and, in the case of any Lender, such Lender delivers, not later than ten (10) Business Days after obtaining knowledge thereof, a written notice to the Agent describing such Pricing Certificate Inaccuracy in reasonable detail (which description shall be shared with each Lender and the Borrower), or (B) the Borrower and the Lenders agree that there was a Pricing Certificate Inaccuracy at the time of delivery of a Pricing Certificate, and (ii) a proper calculation of the Sustainability Margin Adjustment, the Carbon Intensity or the OSHA Incident Amount (Three-Year Average) would have resulted in no adjustment or an increase to the Applicable Rate for any period, the Borrower shall be obligated to pay to the Agent for the account of the applicable Lenders or the applicable Issuing Banks, as the case may be, promptly on demand by the Agent (or, after the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under any Debtor Relief Laws, automatically and without further action by the Agent, any Lender or any Issuing Bank), but in any event within ten (10) Business Days after the Borrower has received written notice of, or has agreed in writing that there was, a Pricing Certificate Inaccuracy, an amount equal to the excess of (1) the amount of interest and fees that should have been paid for such period over (2) the amount of interest and fees actually paid for such period.
It is understood and agreed that any Pricing Certificate Inaccuracy shall not constitute a Default or Event of Default or otherwise result in the failure of any condition precedent to any advance or the issuance of any Letter of Credit; provided, that, the Borrower complies with the terms of this Section 1.06(d) with respect to such Pricing Certificate Inaccuracy. Notwithstanding anything to the contrary herein, unless such amounts shall be due upon the occurrence of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code (or any comparable event under non-U.S. Debtor Relief Laws), (a) any additional amounts required to be paid pursuant to the immediate preceding paragraph shall not be due and payable until a written demand is made for such payment by the Agent in
29

accordance with such paragraph, (b) any nonpayment of such additional amounts prior to or concurrently with such demand for payment by the Agent shall not constitute a Default (whether retroactively or otherwise) and (c) none of such additional amounts shall be deemed overdue prior to such a demand or shall accrue interest at the default rate pursuant to Section 2.07(b) prior to such a demand.
(e)Each party hereto hereby agrees that neither the Agent nor any Co-Sustainability Structuring Agent shall have any responsibility for (or liability in respect of) reviewing, auditing or otherwise evaluating any calculation by the Borrower of any Sustainability Margin Adjustment (or any of the data or computations that are part of or related to any such calculation) set forth in any Pricing Certificate (and the Agent may rely conclusively on any such certificate, without further inquiry).
(f)As soon as available and in any event within 120 days following the end of each calendar year (commencing with the calendar year ending December 31, 2021), the Borrower may deliver a Pricing Certificate to the Agent (and the Agent shall promptly provide a copy to each Lender) for the most recently-ended Reference Year; provided, that, for any Reference Year the Borrower may elect not to deliver a Pricing Certificate, and such election shall not constitute a Default or Event of Default (but such failure to so deliver a Pricing Certificate by the end of such 120-day period shall result in the Sustainability Margin Adjustment being applied as set forth in Section 1.06(c)). In the event the Borrower’s fiscal year is changed to a non-calendar year fiscal year, the Borrower will be permitted to adjust the timing of delivery of the Pricing Certificate at its election in a manner intended to maintain consistency with the foregoing.
Article II

AMOUNTS AND TERMS OF THE ADVANCES AND
LETTERS OF CREDIT
Section2.01The Revolving Advances and Letters of Credit.
(a)The Revolving Advances. Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Revolving Advances in Dollars to the Borrower from time to time on any Business Day during the period from the Effective Date until the Termination Date in an amount not to exceed such Lender’s Unused Commitment. Each Borrowing (other than a Swingline Advance) shall be in an aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and shall consist of Revolving Advances of the same Type made on the same day by the Lenders ratably according to their respective Revolving Credit Commitments. Within the limits of each Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.10 and reborrow under this Section 2.01(a). Any Swingline Advance shall be made and repaid in accordance with the procedures set forth in Section 2.03A.
(b)Letters of Credit. Each Issuing Bank agrees, on the terms and conditions hereinafter set forth, in reliance upon the agreements of the other Lenders set forth in this Agreement, to issue standby letters of credit (each a “Letter of Credit”) for the account of the Borrower from time to time on any Business Day during the period from the Effective Date until 30 days before the Termination Date in an aggregate Available Amount for all Letters of Credit issued by each Issuing Bank not to exceed at any time such Issuing Bank’s Letter of Credit Commitment, provided that after giving effect to the issuance of any Letter of Credit, (i) the Total Outstandings shall not exceed the aggregate Revolving Credit Commitments and (ii) each Lender’s Ratable Share of the Total Outstandings shall not exceed such Lender’s Revolving Credit Commitment. No Letter of Credit shall have an expiration date (including all
30

rights of the Borrower or the beneficiary to require renewal) later than the Letter of Credit Expiration Date. Within the limits referred to above, the Borrower may from time to time request the issuance of Letters of Credit under this Section 2.01(b). The terms “issue”, “issued”, “issuance” and all similar terms, when applied to a Letter of Credit, shall include any renewal, extension or amendment thereof.
Section2.02Making the Revolving Advances.
(a)Except as otherwise provided in Section 2.03(c), each Borrowing (other than a Swingline Advance) shall be made on notice, given not later than (x) 12:00 noon on the third Business Day prior to the date of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar Rate Advances or (y) 1:00 p.m. on the date of the proposed Borrowing in the case of a Borrowing consisting of Base Rate Advances, by the Borrower to the Agent, which shall give to each Lender prompt notice thereof by facsimile. Each such notice of a Borrowing (a “Notice of Borrowing”) shall be in writing or by facsimile in substantially the form of Exhibit B hereto, specifying therein the requested (i) date of such Borrowing, (ii) Type of Revolving Advances comprising such Borrowing, (iii) aggregate amount of such Borrowing, and (iv) in the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest Period for each such Revolving Advance. Each Lender shall, in the case of a Borrowing consisting of Base Rate Advances, before 2:00 p.m. on the date of such Borrowing, and in the case of a Borrowing consisting of Eurodollar Rate Advances, before 11:00 a.m. on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds, such Lender’s Ratable Share of such Borrowing. After the Agent’s receipt of such funds and upon fulfillment of the applicable conditions set forth in Article III, the Agent will make such funds available to the Borrower at the Agent’s address referred to in Section 8.02 or as requested by the Borrower in the applicable Notice of Borrowing.
(b)Anything in subsection (a) above to the contrary notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if the aggregate amount of such Borrowing is less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate Advances shall then be suspended pursuant to Section 2.08 or Section 2.12 and (ii) at no time shall there be more than fifteen different Interest Periods outstanding for Eurodollar Rate Advances.
(c)Each Notice of Borrowing shall be irrevocable and binding on the Borrower. In the case of any Borrowing that the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any loss, cost or expense reasonably incurred by such Lender as a result of any failure to fulfill on or before the date specified in such Notice of Borrowing for such Borrowing the applicable conditions set forth in Article III, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Revolving Advance to be made by such Lender as part of such Borrowing when such Revolving Advance, as a result of such failure, is not made on such date.
(d)Unless the Agent shall have received notice from a Lender prior to the time of the applicable Borrowing that such Lender will not make available to the Agent such Lender’s Ratable Share of such Borrowing, the Agent may assume that such Lender has made such portion available to the Agent on the date of such Borrowing in accordance with subsection (a) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Lender shall not have so made such Ratable Share available to the Agent, such Lender and the Borrower severally agree to repay to the Agent within one Business Day after demand for such Lender and within three Business Days after demand for the Borrower such
31

corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (i) in the case of the Borrower, the interest rate applicable at the time to Revolving Advances comprising such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If the Borrower and such Lender shall pay such interest to the Agent for the same or an overlapping period, the Agent shall promptly remit to the Borrower the amount of such interest paid by the Borrower for such period. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Revolving Advance as part of such Borrowing for purposes of this Agreement.
(e)The failure of any Lender to make the Revolving Advance to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Revolving Advance on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Revolving Advance to be made by such other Lender on the date of any Borrowing.
Section2.03Letters of Credit.
(a)General.
(i)No Issuing Bank shall issue any Letter of Credit, if the expiry date of such requested Letter of Credit would occur after the Letter of Credit Expiration Date, unless all the Lenders have approved such expiry date.
(ii)No Issuing Bank shall be under any obligation to issue any Letter of Credit if:
(A)any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any Law applicable to such Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital and liquidity requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which, in each such case, such Issuing Bank in good faith deems material to it;
(B)except as otherwise agreed by the Borrower and such Issuing Bank, such Letter of Credit is in an initial stated amount less than $100,000;
(C)such Letter of Credit is to be denominated in a currency other than Dollars;
(D)such Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder;
(E)subject to Section 2.03(b)(iii), the expiry date of such requested Letter of Credit would occur more than twelve months after the date of issuance or last extension; or
32

(F)any Lender is at such time an Affected Lender hereunder, unless the applicable Issuing Bank is satisfied that the related exposure will be 100% covered by the Commitments of the non-Affected Lenders or, if not so covered, until such Issuing Bank has entered into arrangements satisfactory to it in its sole discretion with the Borrower or such Affected Lender to eliminate such Issuing Bank’s risk with respect to such Affected Lender, and participating interests in any such newly issued Letter of Credit shall be allocated among non-Affected Lenders in a manner consistent with Section 2.19(c)(i) (and Affected Lenders shall not participate therein).
(iii)No Issuing Bank shall amend any Letter of Credit if such Issuing Bank would not be permitted at such time to issue such Letter of Credit in its amended form under the terms hereof.
(iv)No Issuing Bank shall be under any obligation to amend any Letter of Credit if (A) such Issuing Bank would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.
(b)Procedures for Issuance and Amendment of Letters of Credit; Auto-Extension Letters of Credit.
(i)Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Borrower delivered to the applicable Issuing Bank (with a copy to the Agent) in the form of a Letter of Credit Application appropriately completed and signed by an Authorized Officer of the Borrower, together with agreed-upon draft language for such Letter of Credit reasonably acceptable to the applicable Issuing Bank. Such Letter of Credit Application must be received by such Issuing Bank and the Agent not later than 11:00 a.m. at least three Business Days (or such later date and time as the Agent and such Issuing Bank may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be. In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the applicable Issuing Bank: (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as such Issuing Bank may require. In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail satisfactory to the applicable Issuing Bank (A) the Letter of Credit to be amended; (B) the proposed date of amendment thereof (which shall be a Business Day); (C) the nature of the proposed amendment; and (D) such other matters as such Issuing Bank may require. Additionally, the Borrower shall furnish to the applicable Issuing Bank and the Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any L/C Related Documents, as the applicable Issuing Bank or the Agent may require. In the event and to the extent that the provisions of any Letter of Credit Application or other L/C Related Document shall conflict with this Agreement, the provisions of this Agreement shall govern. Without limitation of the immediately preceding sentence, to the extent that any such Letter of Credit Application or other L/C Related Document shall impose any additional conditions on the maintenance of a Letter of Credit, any additional default provisions, collateral
33

requirements or other obligations of the Borrower to any Issuing Bank, other than as stated in this Agreement, such additional conditions, provisions, requirements or other obligations shall not have effect so long as this Agreement shall be in effect, except to the extent as expressly agreed to by the Borrower and such Issuing Bank.
(ii)Promptly after receipt of any Letter of Credit Application, the applicable Issuing Bank will confirm with the Agent (in writing) that the Agent has received a copy of such Letter of Credit Application from the Borrower and, if not, such Issuing Bank will provide the Agent with a copy thereof. Unless the applicable Issuing Bank has received written notice from the Required Lenders, the Agent or the Borrower, at least one Business Day prior to the requested date of issuance or amendment of the applicable Letter of Credit, that one or more applicable conditions contained in Article III shall not then be satisfied, then, subject to the terms and conditions hereof and any applicable Letter of Credit Application, such Issuing Bank shall, on the requested date, issue a Letter of Credit for the account of the Borrower or enter into the applicable amendment, as the case may be, in each case in accordance with such Issuing Bank’s usual and customary business practices. Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from such Issuing Bank a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Ratable Share times the amount of such Letter of Credit.
(iii)If the Borrower so requests in any applicable Letter of Credit Application, the applicable Issuing Bank may, in its sole and absolute discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit must permit such Issuing Bank to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon at the time such Letter of Credit is issued. Unless otherwise directed by the applicable Issuing Bank, the Borrower shall not be required to make a specific request to the applicable Issuing Bank for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable Issuing Bank to permit the extension of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided, however, that the applicable Issuing Bank shall not permit any such extension (or may issue a Notice of Non-Extension) if (A) such Issuing Bank has determined that it would not be permitted at such time to issue such Letter of Credit in its revised form (as extended) by reason of the provisions of clause (i) of Section 2.03(a) (or would have no obligation to issue such Letter of Credit by reason of the provisions of clause (ii) of Section 2.03(a)), or (B) it has received notice (which shall be in writing) on or before the day that is seven Business Days before the Non-Extension Notice Date (1) from the Agent that the Required Lenders have elected not to permit such extension pursuant to Section 6.02 or (2) from the Agent, the Required Lenders or the Borrower that one or more of the applicable conditions specified in Section 3.02 is not then satisfied, and in each such case directing such Issuing Bank not to permit such extension.
(iv)Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the applicable Issuing Bank will also deliver to the Borrower and the Agent a true and complete copy of such Letter of Credit or amendment.
34

(c)Drawings and Reimbursements; Funding of Participations.
(i)Subject to the provisions below, not later than 2:30 p.m. on the date (the “Honor Date”) that any Issuing Bank makes any payment on a drawing on any Letter of Credit, if the Borrower shall have received notice of such payment prior to 11:30 a.m. on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 2:30 p.m. on the next Business Day, the Borrower shall reimburse such Issuing Bank through the Agent in an amount equal to the amount of such drawing together with interest thereon. If the Borrower fails to so reimburse such Issuing Bank by such time, unless the Borrower shall have advised the Agent that it does not meet the conditions specified in either clause (B) or (C) below, the Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Lender’s Ratable Share thereof. In such event, the Borrower shall be deemed to have requested a Base Rate Advance to be disbursed on the Honor Date in an amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.01(a) or the delivery of a Notice of Borrowing but subject to (A) the amount of the aggregate Unused Commitments, (B) no Event of Default having occurred and be continuing, or resulting therefrom, and (C) the conditions specified in Section 3.02(c) and Section 3.02(d) being satisfied on and as of the date of the applicable Base Rate Advance and, to the extent so financed, the Borrower's obligation to satisfy the reimbursement obligation created by such payment by the Issuing Bank on the Honor Date shall be discharged and replaced by the resulting Base Rate Advance. Any notice given by any Issuing Bank or the Agent pursuant to this Section 2.03(c)(i) shall be given in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.
(ii)Each Lender shall upon any notice pursuant to Section 2.03(c)(i) make funds available to the Agent for the account of the applicable Issuing Bank at the Agent’s Office in an amount equal to its Ratable Share of the Unreimbursed Amount not later than 4:00 p.m. on the Business Day specified in such notice by the Agent, whereupon, subject to the provisions of Section 2.03(c)(iii), each Lender that so makes funds available shall be deemed to have made a Base Rate Advance to the Borrower in such amount. The Agent shall remit the funds so received to the applicable Issuing Bank.
(iii)With respect to any Unreimbursed Amount that is not fully refinanced by a Base Rate Advance because any of the conditions set forth in clauses (A), (B) or (C) of Section 2.03(c)(i) cannot be satisfied or for any other reason, then not later than 2:30 p.m. on the next Business Day after the day notice of the drawing is given to the Borrower, in the case of a failure to meet any such condition, or in any other case, after notice of the event resulting in the outstanding Unreimbursed Amount, the Borrower shall reimburse such Issuing Bank through the Agent in an amount equal to the amount of such outstanding Unreimbursed Amount with interest thereon. If the Borrower fails to so reimburse such Issuing Bank by such time, the Borrower shall be deemed to have incurred from the applicable Issuing Bank an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time plus 2% per annum. In such event, each Lender’s payment to the Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(ii) shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.
35

(iv)Until each Lender funds its Base Rate Advance or L/C Advance pursuant to this Section 2.03(c) to reimburse the applicable Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Ratable Share of such amount shall be solely for the account of the applicable Issuing Bank.
(v)Each Lender’s obligation to make Base Rate Advances or L/C Advances to reimburse the applicable Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against such Issuing Bank, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Base Rate Advances pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 2.03(c)(i). No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Borrower to reimburse the applicable Issuing Bank for the amount of any payment made by such Issuing Bank under any Letter of Credit, together with interest as provided herein.
(vi)If any Lender fails to make available to the Agent for the account of the applicable Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(ii), such Issuing Bank shall be entitled to recover from such Lender (acting through the Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Issuing Bank at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by such Issuing Bank in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by such Issuing Bank in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Base Rate Advance included in the relevant Borrowing or L/C Advance in respect of the relevant L/C Borrowing, as the case may be. A certificate of the applicable Issuing Bank submitted to any Lender (through the Agent) with respect to any amounts owing under this clause (vi) shall be conclusive absent manifest error.
(d)Repayment of Participations.
(i)At any time after the applicable Issuing Bank has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), if the Agent receives for the account of such Issuing Bank any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral (as defined in Section 2.03(h)) applied thereto by the Agent), the Agent will distribute to such Lender its Ratable Share thereof in the same funds as those received by the Agent.
(ii)If any payment received by the Agent for the account of the applicable Issuing Bank pursuant to Section 2.03(c)(i) is required to be returned under any of the circumstances described in Section 8.12 (including pursuant to any settlement entered into by such Issuing Bank in its discretion), each Lender shall pay to the Agent for the account of such Issuing Bank its Ratable Share thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the
36

Federal Funds Rate from time to time in effect. The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Agreement.
(e)Failure to Make Revolving Advances. The failure of any Lender to make the Revolving Advance to be made by it on the date specified in Section 2.03(c) or any L/C Advance shall not relieve any other Lender of its obligation hereunder to make its Revolving Advance or L/C Advance, as the case may be, to be made by such other Lender on such date.
(f)Obligations Absolute. The obligation of the Borrower to reimburse the applicable Issuing Bank for each drawing under each Letter of Credit and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:
(i)any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other Loan Document;
(ii)the existence of any claim, counterclaim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), any Issuing Bank or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;
(iii)any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;
(iv)any payment by the applicable Issuing Bank under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the applicable Issuing Bank under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law; or
(v)any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.
provided, however, that nothing in this Section 2.03(f) shall limit the rights of the Borrower under Section 2.03(g).
The Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity that is known to the Borrower in connection with any draw under such Letter of Credit of which the Borrower has reasonable notice, the Borrower will immediately notify the applicable Issuing Bank. To the extent allowed by applicable Law, Borrower shall be conclusively deemed to have waived any such claim against the applicable Issuing Bank and its correspondents unless such notice is given as aforesaid. Nothing herein shall require the Borrower to make any determination as
37

to whether the drawing is in accordance with the requirements of the Letter of Credit, provided that the Borrower may waive any discrepancies in the drawing on any such Letter of Credit.
(g)Role of Issuing Bank. Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, the applicable Issuing Bank shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document. None of the applicable Issuing Bank, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of such Issuing Bank shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct as determined by a final, non-appealable judgment by a court of competent jurisdiction; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or L/C Related Document. The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at Law or under any other agreement. None of the applicable Issuing Bank, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of such Issuing Bank shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.03(f); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against the applicable Issuing Bank, and such Issuing Bank may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such Issuing Bank’s willful misconduct or gross negligence as determined by a final, non-appealable judgment by a court of competent jurisdiction or such Issuing Bank’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit. In furtherance and not in limitation of the foregoing, the applicable Issuing Bank may accept documents that appear on its face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and such Issuing Bank shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.
(h)Cash Collateral. Upon the request of the Agent or the applicable Issuing Bank, if, as of the Letter of Credit Expiration Date, any L/C Obligation for any reason remains outstanding, the Borrower shall, in each case, immediately Cash Collateralize the then outstanding L/C Obligations. Section 6.02 sets forth certain additional requirements to deliver Cash Collateral hereunder. For purposes of this Section 2.03, Section 2.10(b)(ii), Section 2.19(c)(ii), (iv) and (v) and Section 6.02, “Cash Collateralize” means to pledge and deposit with or deliver to the Agent, for the benefit of the Issuing Banks and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances pursuant to documentation in form and substance satisfactory to the Agent and each Issuing Bank (which documents are hereby consented to by the Lenders) in an amount equal to 100% of the amount of the L/C Obligations as of such date plus any accrued and unpaid interest and fees thereon. Derivatives of such term have corresponding meanings. The Borrower hereby grants to the Agent, for the benefit of the Issuing Banks and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing. Cash Collateral shall be maintained in blocked, non-interest bearing deposit accounts with the Agent.
38

(i)Letter of Credit Reports. Each Issuing Bank shall furnish (A) to the Agent on the first Business Day of each month a written report summarizing issuance and expiration dates of Letters of Credit issued by such Issuing Bank during the preceding month and drawings during such month under all such Letters of Credit and (B) to the Agent on the first Business Day of each calendar quarter a written report setting forth the average daily aggregate Available Amount during the preceding calendar quarter of all Letters of Credit issued by such Issuing Bank.
(j)Interim Interest. Except as provided in Section 2.03(c)(ii) with respect to Unreimbursed Amounts refinanced as Base Rate Advances and Section 2.03(c)(iii) with respect to L/C Borrowings, unless the Borrower shall reimburse each payment by an Issuing Bank pursuant to a Letter of Credit in full on the Honor Date, the Unreimbursed Amount thereof shall bear interest, for each day from and including the Honor Date to but excluding the date that the Borrower reimburses such Issuing Bank for the Unreimbursed Amount in full, at the rate per annum equal to (i) the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time, to but excluding the next Business Day after the Honor Date and (ii) from and including the next Business Day after the Honor Date, the Base Rate in effect from time to time plus the Applicable Rate for Base Rate Advances in effect from time to time plus 2% per annum.
Section 2.03A    Swingline Advances.
(a)Amount of Swingline Advances. Subject to the terms and conditions set forth herein, the Swingline Lender will make Swingline Advances in Dollars to the Borrower from time to time during the period from the Effective Date until the Termination Date, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of all outstanding Swingline Advances exceeding $50,000,000 (or such lesser amount as agreed between the Borrower and the Swingline Lender) or (ii) the Total Outstandings exceeding the aggregate Revolving Credit Commitment. Each Swingline Advance shall be in an aggregate amount of $500,000 or an integral multiple of $100,000 in excess thereof or such greater amounts as agreed between the Borrower and the Swingline Lender. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Advances. The Swingline Lender shall be under no obligation to make a Swingline Advance if any Lender is at such time an Affected Lender hereunder, unless the Swingline Lender is satisfied that the related exposure will be 100% covered by the Commitments of the non-Affected Lenders or, if not so covered, until the Swingline Lender has entered into arrangements satisfactory to it in its sole discretion with the Borrower or such Affected Lender to eliminate the Swingline Lender’s risk with respect to such Affected Lender, and participating interests in any such newly made Swingline Advance shall be allocated among non-Affected Lenders in a manner consistent with Section 2.19(c)(i) (and Affected Lenders shall not participate therein).
(b)Borrowing Notice and Making of Swingline Advances. To request a Swingline Advance, the Borrower shall notify the Swingline Lender and the Agent of such request in writing, not later than 2:00 p.m. (or such later time as the Swingline Lender may determine in its sole discretion), on the day of such Swingline Advance. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Advance. The Swingline Lender shall promptly notify the Borrower and the Agent (and the Agent shall promptly notify each Lender) and the Swingline Lender shall make each Swingline Advance available to the Borrower by 2:30 p.m. (or such later time as may be agreed by the Swingline Lender and the Borrower) on the requested date of such Swingline Advance in a manner agreed upon by the Borrower and the Swingline Lender. Each Swingline Advance shall bear interest at the Base Rate, or, at the option of the Borrower and subject to
39

prior agreement between the Borrower and the Swingline Lender, shall be a Swingline Eurodollar Rate Advance or a Money Market Rate Advance.
(c)Repayment of Swingline Advances. Each Swingline Advance shall be paid in full by the Borrower on the earlier of (x) on or before the fourteenth (14th) Business Day after the date such Swingline Advance was made by the Swingline Lender or (y) the Termination Date. A Swingline Advance may not be repaid with the proceeds from another Swingline Advance. In addition, the Swingline Lender (i) may at any time in its sole discretion with respect to any outstanding Swingline Advance, or (ii) shall, on the fourteenth (14th) Business Day after the date any Swingline Advance is made and which has not been otherwise repaid, require each Lender (including the Swingline Lender) to make a Revolving Advance in the amount of such Lender’s Ratable Share of such Swingline Advance (including, without limitation, any interest accrued and unpaid thereon), for the purpose of repaying such Swingline Advance. Not later than 2:00 p.m. on the date of any notice received pursuant to this Section 2.03A(c), each Lender shall make available to the Agent its required Revolving Advance, in immediately available funds in the same manner as provided in Section 2.02(a) with respect to Revolving Advances made by such Lender. Revolving Advances made pursuant to this Section 2.03A(c) shall initially be Base Rate Advances and thereafter may be continued as Base Rate Advances or converted into Eurodollar Rate Advances in the manner provided in Section 2.09 and subject to the other conditions and limitations set forth in this Article II. Each Lender’s obligation to make Revolving Advances pursuant to this Section 2.03A(c) to repay Swingline Advances shall be unconditional, continuing, irrevocable and absolute and shall not be affected by any circumstances, including, without limitation, (a) any set-off, counterclaim, recoupment, defense or other right which such Lender may have against the Agent, the Swingline Lender or any other Person, (b) the occurrence or continuance of a Default or an Event of Default, (c) any adverse change in the condition (financial or otherwise) of the Borrower, or (d) any other circumstance, happening or event whatsoever. In the event that any Lender fails to make payment to the Agent of any amount due under this Section 2.03A(c), the Agent shall be entitled to receive, retain and apply against such obligation the principal and interest otherwise payable to such Lender hereunder until the Agent receives such payment from such Lender or such obligation is otherwise fully satisfied. In addition to the foregoing, if for any reason any Lender fails to make payment to the Agent of any amount due under this Section 2.03A(c), such Lender shall be deemed, at the option of the Agent, to have unconditionally and irrevocably purchased from the Swingline Lender without recourse or warranty, an undivided interest and participation in the applicable Swingline Advance in the amount of such Revolving Advance, and such interest and participation may be recovered from such Lender together with interest thereon at the Federal Funds Rate for each day during the period commencing on the date of demand and ending on the date such amount is received.
(d)    Swingline Advances Reports. The Swingline Lender shall furnish to the Agent on each Business Day a written report summarizing outstanding Swingline Advances made by the Swingline Lender and the due date for the repayment of such Swingline Advances; provided that if no Swingline Advances are outstanding, no such report shall be required to be delivered.
(e)    Successor Swingline Lender. Subject to the appointment and acceptance of a successor Swingline Lender as provided in this paragraph, the Borrower may, upon not less than ten (10) Business Days prior notice to the Agent and the Lenders, replace the existing Swingline Lender with the consent of the Agent (which consent shall not unreasonably be withheld). Upon the acceptance of its appointment as Swingline Lender hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the replaced Swingline Lender, and the replaced Swingline Lender shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Swingline Lender shall be as agreed between the Borrower and such successor. After the
40

Swingline Lender’s replacement hereunder, the provisions of this Article and Section 8.04 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Swingline Lender.
Section2.04Fees.
(a)Commitment Fee. The Borrower agrees to pay to the Agent for the account of each Lender a commitment fee (the “Commitment Fee”) on such Lender’s Unused Commitment (provided that, for the avoidance of doubt, and without duplication, such Lender’s Unused Commitment shall be calculated exclusive of such Lender’s Swingline Exposure and, if such Lender is the Swingline Lender, without giving effect to the Swingline Advances, and in no event shall the aggregate of such Commitment Fees exceed an amount calculated based on the product of (a) the aggregate Revolving Credit Commitments minus the aggregate principal amount of all Revolving Advances and aggregate L/C Obligations and (b) the Applicable Rate for Commitment Fees) from the Effective Date in the case of each Initial Lender and from the effective date specified in the Assumption Agreement or in the Assignment and Assumption pursuant to which it became a Lender in the case of each other Lender until the Termination Date at a rate per annum equal to the Applicable Rate for Commitment Fees in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December, commencing June 30, 2021, and on the Termination Date, provided that no Commitment Fee shall accrue with respect to the Unused Commitment of an Affected Lender so long as such Lender shall be an Affected Lender.
(b)Letter of Credit Fees.
(i)The Borrower shall pay to the Agent for the account of each Lender a commission on such Lender’s Ratable Share of the average daily aggregate Available Amount of all Letters of Credit outstanding from time to time at a rate per annum equal to the Applicable Rate for Eurodollar Rate Advances in effect from time to time, during such calendar quarter, payable in arrears quarterly on the last day of each March, June, September and December, commencing with the quarter ended June 30, 2021, and on the Termination Date; provided that the Applicable Rate for Eurodollar Rate Advances shall be 2% above such Applicable Rate in effect upon the occurrence and during the continuation of an Event of Default if the Borrower is required to pay default interest pursuant to Section 2.07(b).
(ii)The Borrower shall pay to each Issuing Bank, for its own account, a fronting fee with respect to each Letter of Credit issued by such Issuing Bank, payable in the amounts and at the times specified in the applicable Fee Letter between the Borrower and such Issuing Bank, and such other commissions, issuance fees, transfer fees and other fees and charges in connection with the issuance or administration of each Letter of Credit as the Borrower and such Issuing Bank shall agree promptly following receipt of an invoice therefor.
(c)Agent’s Fees. The Borrower shall pay to the Agent for its own account such fees as are agreed between the Borrower and the Agent pursuant to the Fee Letter between the Borrower and the Agent.
Section2.05Optional Termination or Reduction of the Commitments.
(a)The Borrower shall have the right, upon at least three Business Days’ notice to the Agent, to terminate in whole or permanently reduce ratably in part the Unused Commitments or the Unissued
41

Letter of Credit Commitments, provided that each partial reduction shall be in the aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess thereof.
(b)So long as no Default or Event of Default shall be continuing, the Borrower shall have the right, at any time, upon at least ten Business Days’ notice to an Affected Lender (with a copy to the Agent), to terminate in whole such Lender’s Revolving Credit Commitment and, if applicable, its Letter of Credit Commitment, without affecting the Commitments of any other Lender. Such termination shall be effective, (x) with respect to such Lender’s Unused Commitment, on the date set forth in such notice, provided, however, that such date shall be no earlier than ten Business Days after receipt of such notice and (y) with respect to each Revolving Advance outstanding to such Lender, in the case of Base Rate Advances, on the date set forth in such notice and, in the case of Eurodollar Rate Advances, on the last day of the then current Interest Period relating to such Revolving Advance. Upon termination of a Lender’s Commitments under this Section 2.05(b), the Borrower will pay or cause to be paid all principal of, and interest accrued to the date of such payment on, Revolving Advances (and if such Lender is the Swingline Lender, the Swingline Advances) owing to such Lender and, subject to Section 2.19, pay any accrued Commitment Fees or Letter of Credit fees payable to such Lender pursuant to the provisions of Section 2.04, and all other amounts payable to such Lender hereunder (including, but not limited to, any increased costs or other amounts owing under Section 2.11 and any indemnification for Taxes under Section 2.14); and, if such Lender is an Issuing Bank, shall pay to such Issuing Bank for deposit in an escrow account an amount equal to the Available Amount of all Letters of Credit issued by such Issuing Bank, whereupon all Letters of Credit issued by such Issuing Bank shall be deemed to have been issued outside of this Agreement on a bilateral basis and shall cease for all purposes to constitute a Letter of Credit issued under this Agreement, and upon such payments, except as otherwise provided below, the obligations of such Lender hereunder shall, by the provisions hereof, be released and discharged; provided, however, that (i) such Lender’s rights under Section 2.11, Section 2.14 and Section 8.04, and, in the case of an Issuing Bank, Section 8.04(c), and its obligations under Section 8.04 and 8.08, in each case in accordance with the terms thereof, shall survive such release and discharge as to matters occurring prior to such date and (ii) such escrow agreement shall be in a form reasonably agreed to by the Borrower and such Issuing Bank, but in no event shall either the Borrower or such Issuing Bank require any waivers, covenants, events of default or other provisions that are more restrictive than or inconsistent with the provisions of this Agreement. Subject to Section 2.18, the aggregate amount of the Commitments of the Lenders once reduced pursuant to this Section 2.05(b) may not be reinstated. The termination of the Commitments of an Affected Lender pursuant to this Section 2.05(b) will not be deemed to be a waiver of any right that the Borrower, the Agent, any Issuing Bank, the Swingline Lender or any other Lender may have against the Affected Lender that arose prior to the date of such termination. Upon any such termination, the Ratable Share of each remaining Lender will be revised.
Section2.06Repayment of Advances. The Borrower shall repay to the Agent for the ratable account of the Lenders on the Termination Date the aggregate principal amount of the Revolving Advances made by such Lender and then outstanding. The Borrower shall repay Swingline Advances in accordance with Section 2.03A(c).
Section2.07Interest on Advances.
(a)Scheduled Interest. The Borrower shall pay interest on the unpaid principal amount of each Advance owing to each Lender (including the Swingline Lender) from the date of such Advance until such principal amount shall be paid in full, at the following rates per annum:
42

(i)Base Rate Advances. During such periods as such Revolving Advance is a Base Rate Advance, a rate per annum equal at all times to the sum of (x) the Base Rate in effect from time to time plus (y) the Applicable Rate for Base Rate Advances in effect from time to time, payable in arrears quarterly on the last day of each March, June, September and December during such periods and on the date such Base Rate Advance shall be Converted or paid in full.
(ii)Eurodollar Rate Advances. During such periods as such Revolving Advance is a Eurodollar Rate Advance, a rate per annum equal at all times during each Interest Period for such Revolving Advance to the sum of (x) the Eurodollar Rate for such Interest Period for such Revolving Advance plus (y) the Applicable Rate for Eurodollar Rate Advances in effect from time to time, payable in arrears on the last day of such Interest Period and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period and on the date such Eurodollar Rate Advance shall be Converted or paid in full.
(iii)Swingline Advances. During such period as such Swingline Advance remains outstanding, the Base Rate or, as agreed to by the Swingline Lender and the Borrower, the Money Market Rate or the Eurodollar Rate, payable on the date such Swingline Advance is required to be repaid.
(b)Default Interest. Upon the occurrence and during the continuance of an Event of Default under Section 6.01(a), the Agent may, and upon the request of the Required Lenders shall, require the Borrower to pay interest (“Default Interest”) on (i) the unpaid principal amount of each Advance owing to each Lender, payable in arrears on the dates referred to in clause (a)(i), (a)(ii) or (a)(iii) above, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on such Advance pursuant to clause (a)(i), (a)(ii) or (a)(iii) above and (ii) to the fullest extent permitted by Law, the amount of any interest, fee or other amount payable hereunder that is not paid when due, from the date such amount shall be due until such amount shall be paid in full, payable in arrears on the date such amount shall be paid in full and on demand, at a rate per annum equal at all times to 2% per annum above the rate per annum required to be paid on Base Rate Advances pursuant to clause (a)(i) above, provided, however, that following acceleration of the Advances pursuant to Section 6.01, Default Interest shall accrue and be payable hereunder whether or not previously required by the Agent.
(c)Interest Rate Limitation. Nothing contained in this Agreement or in any other Loan Document shall be deemed to establish or require the payment of interest to any Lender at a rate in excess of the maximum rate permitted by applicable Law. If the amount of interest payable for the account of any Lender on any interest payment date would exceed the maximum amount permitted by applicable Law to be charged by such Lender, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. In the event of any such reduction affecting any Lender, if from time to time thereafter the amount of interest payable for the account of such Lender on any interest payment date would be less than the maximum amount permitted by applicable Law to be charged by such Lender, then the amount of interest payable for its account on such subsequent interest payment date shall be automatically increased to such maximum permissible amount, provided that at no time shall the aggregate amount by which interest paid for the account of any Lender has been increased pursuant to this sentence exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to the previous sentence.
43

Section2.08Interest Rate Determination.
(a)The Agent shall give prompt notice to the Borrower and the Lenders of the applicable interest rate determined by the Agent for purposes of Section 2.07(a).
(b)Subject to Section 2.08(c), if the Required Lenders determine that for any reason in connection with any request for a Eurodollar Rate Advance or a Conversion to or continuation thereof that (a) Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and Interest Period of such Eurodollar Rate Advance, (b) adequate and reasonable means do not exist for determining the Eurodollar Rate (including, without limitation, because the LIBO Rate is not available or published on a current basis) for any requested Interest Period with respect to a proposed Eurodollar Rate Advance; provided that no Benchmark Transition Event shall have occurred at such time, or (c) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Rate Advance does not adequately and fairly reflect the cost to such Lenders of funding such Revolving Advance, the Agent will promptly so notify the Borrower and each Lender, whereupon each Eurodollar Rate Advance will automatically on the last day of the then existing Interest Period therefor Convert into a Base Rate Advance. Thereafter, the obligation of the Lenders to make or maintain Eurodollar Rate Advances shall be suspended until the Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a Borrowing of, Conversion to or continuation of Eurodollar Rate Advances or, failing that, will be deemed to have Converted such request into a request for a Base Rate Advance in the amount specified therein.
(c)Benchmark Replacement Setting. Notwithstanding anything to the contrary herein or in any other Loan Document (and any Hedge Agreement shall be deemed not to be a “Loan Document” for purposes of this Section):
(i)Replacing LIBO Rate. On March 5, 2021 the Financial Conduct Authority (“FCA”), the regulatory supervisor of the LIBO Rate’s administrator (“IBA”), announced in a public statement the future cessation or loss of representativeness of overnight/Spot Next, 1-month, 3-month, 6-month and 12-month LIBO Rate tenor settings. On the earlier of (i) the date that all Available Tenors of LIBO Rate have either permanently or indefinitely ceased to be provided by IBA or have been announced by the FCA pursuant to public statement or publication of information to be no longer representative and (ii) the Early Opt-in Effective Date, if the then-current Benchmark is LIBO Rate, the Benchmark Replacement will replace such Benchmark for all purposes hereunder and under any Loan Document in respect of any setting of such Benchmark on such day and all subsequent settings without any amendment to, or further action or consent of any other party to this Agreement or any other Loan Document. If the Benchmark Replacement is Daily Simple SOFR, all interest payments will be payable on a quarterly basis.
(ii)Replacing Future Benchmarks. Upon the occurrence of a Benchmark Transition Event, the Benchmark Replacement will replace the then-current Benchmark for all purposes hereunder and under any Loan Document in respect of any Benchmark setting at or after 5:00 p.m. on the fifth (5th) Business Day after the date notice of such Benchmark Replacement is provided to the Lenders without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document so long as the Agent has not received, by such time, written notice of objection to such Benchmark Replacement from Lenders comprising the Required Lenders. At any time that the administrator of the then-current Benchmark has permanently or indefinitely ceased to provide such Benchmark or such Benchmark has been
44

announced by the regulatory supervisor for the administrator of such Benchmark pursuant to public statement or publication of information to be no longer representative of the underlying market and economic reality that such Benchmark is intended to measure and that representativeness will not be restored, the Borrower may revoke any request for a borrowing of, conversion to or continuation of Advances to be made, converted or continued that would bear interest by reference to such Benchmark until the Borrower’s receipt of notice from the Agent that a Benchmark Replacement has replaced such Benchmark, and, failing that, the Borrower will be deemed to have converted any such request into a request for a borrowing of or conversion to Base Rate Advances. During the period referenced in the foregoing sentence, the component of Base Rate based upon the Benchmark will not be used in any determination of Base Rate.
(iii)Benchmark Replacement Conforming Changes. In connection with the implementation and administration of a Benchmark Replacement, the Agent will have the right to make Benchmark Replacement Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of any other party to this Agreement.
(iv)Notices; Standards for Decisions and Determinations. The Agent will promptly notify the Borrower and the Lenders of (i) the implementation of any Benchmark Replacement and (ii) the effectiveness of any Benchmark Replacement Conforming Changes. Any determination, decision or election that may be made by the Agent or, if applicable, any Lender (or group of Lenders) pursuant to this Section, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in its or their sole discretion and without consent from any other party hereto, except, in each case, as expressly required pursuant to this Section.
(v)Unavailability of Tenor of Benchmark. At any time (including in connection with the implementation of a Benchmark Replacement), (i) if the then-current Benchmark is a term rate (including Term SOFR or LIBO Rate), then the Agent may remove any tenor of such Benchmark that is unavailable or non-representative for Benchmark (including Benchmark Replacement) settings and (ii) the Agent may reinstate any such previously removed tenor for Benchmark (including Benchmark Replacement) settings
(d)If the Borrower shall fail to select the duration of any Interest Period for any Eurodollar Rate Advances in accordance with the provisions contained in the definition of “Interest Period” in Section 1.01, the Agent will forthwith so notify the Borrower and the Lenders and such Revolving Advances will automatically, on the last day of the then existing Interest Period therefor, Convert into Base Rate Advances.
(e)On the date on which the aggregate unpaid principal amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment or prepayment or otherwise, to less than $5,000,000, such Revolving Advances shall automatically Convert into Base Rate Advances.
(f)Upon the occurrence and during the continuance of any Event of Default,
(i)with respect to Eurodollar Rate Advances, each such Revolving Advance will automatically, on the last day of the then existing Interest Period therefor, Convert into a Base
45

Rate Advance (or if such Revolving Advance is then a Base Rate Advance, will continue as a Base Rate Advance); and
(ii)the obligation of the Lenders to make Eurodollar Rate Advances or to Convert Revolving Advances into Eurodollar Rate Advances shall be suspended until the Agent shall notify the Borrower and the Lenders that the circumstances causing such suspension no longer exist.
Section2.09Optional Conversion of Revolving Advances. The Borrower may on any Business Day, upon notice given to the Agent not later than 12:00 noon on the third Business Day prior to the date of the proposed Conversion and subject to the provisions of Section 2.08 and Section 2.12, Convert all Revolving Advances of one Type comprising the same Borrowing into Revolving Advances of the other Type; provided, however, that (a) any Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made only on the last day of an Interest Period for such Eurodollar Rate Advances, (b) any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an amount not less than the minimum amount specified in Section 2.02(b), (c) no Conversion of any Revolving Advances shall result in more separate Borrowings than permitted under Section 2.02(b) and (d) no Swingline Advances may be converted. Each such notice of a Conversion shall, within the restrictions specified above, specify (i) the date of such Conversion, (ii) the Revolving Advances to be Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the duration of the initial Interest Period for each such Revolving Advance. Each notice of Conversion shall be irrevocable and binding on the Borrower.
Section2.10Prepayments of Advances.
(a)Optional. At any time and from time to time, the Borrower shall have the right to prepay any Advance, in whole or in part, without premium or penalty (except as provided in clause (y) below), upon notice at least two Business Days’ prior to the date of such prepayment, in the case of Eurodollar Rate Advances, and not later than 11:00 a.m. on the date of such prepayment in the case of Base Rate Advances and Swingline Advances, to the Agent (and, in the case of prepayment a Swingline Advance, the Swingline Lender) specifying the proposed date of such prepayment and the aggregate principal amount and Type of the Advance to be prepaid (and, in the case of Eurodollar Rate Advances, the Interest Period of the Borrowing pursuant to which made); provided, however, that (x) each partial prepayment shall be in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof, and shall be accompanied by accrued interest to the date of prepayment on the principal amount prepaid, and (y) in the event of any such prepayment of a Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant to Section 8.04(e).
(b)Mandatory.
(i)The Borrower shall prepay the aggregate principal amount of the Advances, together with accrued interest to the date of prepayment on the principal amount prepaid, without requirement of demand therefor, or shall pay or prepay any other Indebtedness then outstanding at any time, when and to the extent required to comply with applicable Laws of any Governmental Authority, including the 2020 Order and/or any Subsequent Order, or applicable resolutions of the Board of Directors of the Borrower.
(ii)If for any reason the Total Outstandings at any time exceed the aggregate Revolving Credit Commitments then in effect, the Borrower shall, within one Business Day after
46

notice thereof, prepay Advances and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided, however, that the Borrower shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.10(b) unless, after the prepayment in full of the Advances, the Total Outstandings exceed the aggregate Revolving Credit Commitments then in effect.
Section2.11Increased Costs.
(a)Increased Costs Generally. If any Change in Law shall:
(i)impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except any reserve requirement contemplated by Section 2.11(e)) or any Issuing Bank;
(ii)impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Rate Advances made by such Lender or any Letter of Credit or participation therein; or
(iii)subject the Agent or any Lender to any Taxes (other than (A) Indemnified Taxes, (B) Excluded Taxes and (C) Other Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;
and the result of any of the foregoing shall be to increase the cost to the Agent or such Lender of making, maintaining or Converting any Advance (or of maintaining its obligation to make any such Revolving Advance), or to increase the cost to the Agent, such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by the Agent, such Lender or such Issuing Bank hereunder (whether of principal, interest or any other amount) then, upon request of the Agent, such Lender or such Issuing Bank, the Borrower will pay to the Agent, such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate the Agent, such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.
(b)Capital Requirements. If any Lender or any Issuing Bank determines that any Change in Law affecting such Lender or such Issuing Bank or any Applicable Lending Office of such Lender or such Lender’s or such Issuing Bank’s holding company, if any, regarding capital and liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Advances made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy and liquidity), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.
47

(c)Certificates for Reimbursement. A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in subsection (a) or (b) of this Section and delivered to the Borrower shall be conclusive and binding upon all parties absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within 30 days after receipt thereof.
(d)Delay in Requests. Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section for any increased costs incurred or reductions suffered more than three months prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).
(e)Reserves on Eurodollar Rate Advances. The Borrower shall pay to each Lender, as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits (currently known as “Eurocurrency liabilities”), additional interest on the unpaid principal amount of each Eurodollar Rate Advance equal to the actual costs of such reserves allocated to such Revolving Advance by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error), which shall be due and payable on each date on which interest is payable on such Eurodollar Rate Advance, provided the Borrower shall have received at least 30 days’ prior notice (with a copy to the Agent) of such additional interest from such Lender. If a Lender fails to give notice 30 days prior to the relevant interest payment date, such additional interest shall be due and payable 30 days from receipt of such notice.
Section2.12Illegality. If any Lender shall have determined in good faith that the introduction of or any change in any applicable Law or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance with any guideline or request from any such Governmental Authority (whether or not having the force of law), makes it unlawful for any Lender or its Applicable Lending Office to make, maintain or fund Eurodollar Rate Advances, or to determine or charge interest rates based upon the Eurodollar Rate, or any Governmental Authority has imposed material restrictions on the authority of such Lender to purchase or sell, or to take deposits of, Dollars in the London interbank market, then, on notice thereof by such Lender to the Borrower through the Agent, any obligation of such Lender to make or continue Eurodollar Rate Advances or to Convert Base Rate Advances to Eurodollar Rate Advances shall be suspended until such Lender notifies the Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall, upon demand from such Lender (with a copy to the Agent), prepay or, if applicable, Convert all Eurodollar Rate Advances of such Lender to Base Rate Advances, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Rate Advances to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Rate Advances. Upon any such prepayment or Conversion, the Borrower shall also pay accrued interest on the amount so prepaid or Converted.
48

Section2.13Payments and Computations.
(a)All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff. The Borrower shall make each payment hereunder not later than 1:00 p.m. on the day when due in U.S. dollars to the Agent at the Agent’s Account in same day funds. The Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal, interest, fees or commissions ratably (other than amounts payable pursuant to Section 2.05(b), Section 2.11, Section 2.12, Section 2.14, Section 2.20 or Section 8.04(e)) to the Lenders for the account of their respective Applicable Lending Offices, and like funds relating to the payment of any other amount payable to any Lender to such Lender for the account of its Applicable Lending Office, in each case to be applied in accordance with the terms of this Agreement. Upon any Assuming Lender becoming a Lender hereunder as a result of a Commitment Increase pursuant to Section 2.18, and upon the Agent’s receipt of such Lender’s Assumption Agreement and recording of the information contained therein in the Register, from and after the applicable Increase Date, the Agent shall make all payments hereunder and under any Notes issued in connection therewith in respect of the interest assumed thereby to the Assuming Lender. Upon its acceptance of an Assignment and Assumption and recording of the information contained therein in the Register pursuant to Section 8.07(c), from and after the effective date specified in such Assignment and Assumption, the Agent shall make all payments hereunder and under the Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Assignment and Assumption shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves.
(b)All computations of interest based on the Base Rate (when the Base Rate is based on the Prime Rate) shall be made by the Agent on the basis of a year of 365 or 366 days, as the case may be, and all other computations of interest and fees hereunder (including computations of interest based on the Eurodollar Rate and the Federal Funds Rate and of fees and Letter of Credit commissions) shall be made by the Agent on the basis of a year of 360 days, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest, fees or commissions are payable. Interest on Swingline Advances shall be calculated on the basis of a year of 360 days or such other basis agreed to by the Swingline Lender and the Borrower, in each case for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. Each determination by the Agent of an interest rate hereunder shall be conclusive and binding for all purposes, absent manifest error.
(c)Whenever any payment hereunder or under the Notes shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest, fees or commissions, as the case may be; provided, however, that, if such extension would cause payment of interest on or principal of Eurodollar Rate Advances to be made in the next following calendar month, such payment shall be made on the next preceding Business Day.
(d)Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due to such Lender. If and to the extent the Borrower shall not have so made such payment in full to the Agent, each Lender shall repay to the Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount
49

is distributed to such Lender until the date such Lender repays such amount to the Agent, at the Federal Funds Rate.
Section2.14Taxes.
(a)Payments Free of Taxes; Obligation to Withhold; Payments on Account of Taxes.
(i)Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall to the extent permitted by applicable Laws be made free and clear of and without reduction or withholding for any Taxes. If, however, applicable Laws require the Borrower or the Agent to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such Laws as determined by the Borrower or the Agent, as the case may be, upon the basis of the information and documentation to be delivered pursuant to subsection (e) below.
(ii)If the Borrower or the Agent shall be required by the Internal Revenue Code to withhold or deduct any Taxes, including both United States of America Federal backup withholding and withholding Taxes, from any payment, then (A) the Agent shall withhold or make such deductions as are determined by the Agent to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Agent shall timely pay the full amount withheld or deducted to the relevant Governmental Authority in accordance with the Internal Revenue Code, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the Agent, Lender or Issuing Bank, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.
(b)Payment of Other Taxes by the Borrower. Without limiting the provisions of subsection (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable Laws.
(c)Tax Indemnifications.
(i)Without limiting the provisions of subsection (a) or (b) above, the Borrower shall, and does hereby, indemnify the Agent, each Lender and each Issuing Bank, and shall make payment in respect thereof within 30 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) withheld or deducted by the Borrower or the Agent or paid by the Agent, such Lender or such Issuing Bank, as the case may be, and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. The Borrower shall also, and does hereby, indemnify the Agent, and shall make payment in respect thereof within 10 days after demand therefor, for any amount which a Lender or an Issuing Bank for any reason fails to pay indefeasibly to the Agent as required by clause (ii) of this subsection. A certificate as to the amount of any such payment or liability delivered to the Borrower by a Lender or an Issuing Bank (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.
50

(ii) Each Lender and each Issuing Bank shall, within 30 days after demand therefor, severally (A) indemnify the Agent for (x) any Indemnified Taxes and Other Taxes attributable to such Lender or such Issuing Bank (but only to the extent that the Borrower has not already indemnified the Agent for such Indemnified Taxes and Other Taxes and without limiting the obligation of the Borrower to do so), (y) any Taxes attributable to such Lender’s or such Issuing Bank’s failure to comply with the provisions of Section 8.07(d) relating to the maintenance of a Participant Register and (z) for any Excluded Taxes attributable to such Lender or such Issuing Bank, in each case, that are payable or paid by the Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority, and (B) indemnify the Borrower and the Agent against any and all Taxes and any and all related losses, claims, liabilities, penalties, interest and expenses (including the fees, charges and disbursements of any counsel for the Borrower or the Agent) incurred by or asserted against the Borrower or the Agent by any Governmental Authority as a result of the failure by such Lender or such Issuing Bank, as the case may be, to deliver, or as a result of the inaccuracy, inadequacy or deficiency of, any documentation required to be delivered by such Lender or such Issuing Bank, as the case may be, to the Borrower or the Agent pursuant to subsection (e). A certificate as to the amount of such payment or liability delivered to any Lender or any Issuing Bank by the Agent shall be conclusive absent manifest error. Each Lender and each Issuing Bank hereby authorizes the Agent to set off and apply any and all amounts at any time owing to such Lender or such Issuing Bank, as the case may be, under this Agreement or any other Loan Document or otherwise payable by the Agent to the Lender or the Issuing Bank from any other source against any amount due to the Agent under this clause (ii). The agreements in this clause (ii) shall survive the resignation and/or replacement of the Agent, any assignment of rights by, or the replacement of, a Lender or an Issuing Bank, the termination of the Commitments and the repayment, satisfaction or discharge of all other Obligations.
(d)Evidence of Payments. Upon request by the Borrower or the Agent, as the case may be, after any payment of Taxes by the Borrower or by the Agent to a Governmental Authority as provided in this Section 2.14, the Borrower shall deliver to the Agent or the Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by Laws to report such payment or other evidence of such payment reasonably satisfactory to the Borrower or the Agent, as the case may be.
(e)Status of Lenders; Tax Documentation.
(i)Each Lender shall deliver to the Borrower and to the Agent, at the time or times prescribed by applicable Laws or when reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by applicable Laws or by the taxing authorities of any jurisdiction and such other reasonably requested information as will permit the Borrower or the Agent, as the case may be, to determine (A) whether or not payments made hereunder or under any other Loan Document are subject to Taxes, (B) if applicable, the required rate of withholding or deduction, and (C) such Lender’s entitlement to any available exemption from, or reduction of, applicable Taxes in respect of all payments to be made to such Lender by the Borrower pursuant to this Agreement or otherwise to establish such Lender’s status for withholding tax purposes in the applicable jurisdiction.
(ii)Without limiting the generality of the foregoing, if the Borrower is resident for tax purposes in the United States of America,
51

(A)any Lender that is a “United States person” within the meaning of Section 7701(a)(30) of the Internal Revenue Code shall deliver to the Borrower and the Agent executed originals of Internal Revenue Service Form W-9 or such other documentation or information prescribed by applicable Laws or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent, as the case may be, to determine whether or not such Lender is subject to backup withholding or information reporting requirements; and
(B)each Foreign Lender that is entitled under the Internal Revenue Code or any applicable treaty to an exemption from or reduction of withholding tax with respect to payments hereunder or under any other Loan Document shall deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Agent, but only if such Foreign Lender is legally entitled to do so), whichever of the following is applicable:
(1)executed originals of Internal Revenue Service Form W8BEN or Form W-8BEN-E claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,
(2)executed originals of Internal Revenue Service Form W8ECI,
(3)executed originals of Internal Revenue Service Form W8IMY and all required supporting documentation,
(4)in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under section 881(c) of the Internal Revenue Code, (x) a certificate to the effect that such Foreign Lender is not (A) a “bank” within the meaning of section 881(c)(3)(A) of the Internal Revenue Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Internal Revenue Code, or (C) a “controlled foreign corporation” described in section 881(c)(3)(C) of the Internal Revenue Code and (y) executed originals of Internal Revenue Service Form W8BEN or Form W-8BEN-E, or
(5)executed originals of any other form prescribed by applicable Laws as a basis for claiming exemption from or a reduction in United States of America Federal withholding tax together with such supplementary documentation as may be prescribed by applicable Laws to permit the Borrower or the Agent to determine the withholding or deduction required to be made.
(iii)Each Lender shall promptly (A) notify the Borrower and the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (B) take such steps as shall not be materially disadvantageous to it, in the reasonable judgment of such Lender, and as may be reasonably necessary (including the re-designation of its Applicable Lending Office) to avoid any requirement of applicable Laws of any jurisdiction that the Borrower or the Agent make any withholding or deduction for taxes from amounts payable to such Lender.
52

(iv)If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Internal Revenue Code, as applicable), such Lender shall deliver to each of the Borrower and the Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Internal Revenue Code) and such additional documentation reasonably requested by the Borrower or the Agent as may be necessary for the Borrower and the Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (iv), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(f)Treatment of Certain Refunds. Unless required by applicable Laws, at no time shall the Agent have any obligation to file for or otherwise pursue on behalf of a Lender or an Issuing Bank, or have any obligation to pay to any Lender or any Issuing Bank, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or such Issuing Bank, as the case may be. If the Agent, any Lender or any Issuing Bank determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, it shall pay to the Borrower an amount equal to such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses incurred by the Agent, such Lender or such Issuing Bank, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund), provided that the Borrower, upon the request of the Agent, such Lender or such Issuing Bank, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent, such Lender or such Issuing Bank in the event the Agent, such Lender or such Issuing Bank is required to repay such refund to such Governmental Authority. This subsection shall not be construed to require the Agent, any Lender or any Issuing Bank to make available its tax returns (or any other information relating to its taxes that it deems confidential) to the Borrower or any other Person.
(g)Payments. Failure or delay on the part of the Agent, any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section 2.14 shall not constitute a waiver of the Agent’s, such Lender’s or such Issuing Bank’s right to demand such compensation, provided that the Borrower shall not be required to compensate the Agent, a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section 2.14 for any Indemnified Taxes or Other Taxes imposed or asserted by the relevant Governmental Authority more than three months prior to the date that the Agent, such Lender or such Issuing Bank, as the case may be, claims compensation with respect thereto (except that, if a Change in Law giving rise to such Indemnified Taxes or Other Taxes is retroactive, then the three-month period referred to above shall be extended to include the period of retroactive effect thereof).
(h)Each of the Agent, any Issuing Bank or any Lender agrees to cooperate with any reasonable request made by the Borrower in respect of a claim of a refund in respect of Indemnified Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section 2.14 if (i) the Borrower has agreed in writing to pay all of the Agent’s or such Issuing Bank’s or such Lender’s reasonable out-of-pocket costs and expenses
53

relating to such claim, (ii) the Agent or such Issuing Bank or such Lender determines, in its good faith judgment, that it would not be disadvantaged, unduly burdened or prejudiced as a result of such claim and (iii) the Borrower furnishes, upon request of the Agent, or such Issuing Bank or such Lender, an opinion of tax counsel (such opinion, which can be reasoned, and such counsel to be reasonably acceptable to such Lender, or such Issuing Bank or the Agent) that the Borrower is likely to receive a refund or credit.
Section 2.15Sharing of Payments, Etc. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Advances or L/C Advances owing to it (other than pursuant to Section 2.05(b), Section 2.11, Section 2.12, Section 2.14, Section 2.20 or Section 8.04(e) or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Advances or participations in Letters of Credit to any assignee or participant, other than to the Borrower or any Subsidiary thereof if permitted hereby (as to which the provisions of this Section 2.15 shall apply) in excess of its Ratable Share of payments on account of the Advances obtained by all the Lenders, such Lender shall forthwith purchase from the other Lenders (for cash at face value) such participations in the Advances owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender’s Ratable Share (according to the proportion of (i) the amount of such Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 2.15 may, to the fullest extent permitted by Law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
Section 2.16Evidence of Debt.
(a)Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Advance owing to such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder in respect of Advances. The Borrower agrees that upon notice by any Lender (including the Swingline Lender) to the Borrower (with a copy of such notice to the Agent) to the effect that a Note is required or appropriate in order for such Lender to evidence (whether for purposes of pledge, enforcement or otherwise) the Advances owing to, or to be made by, such Lender, the Borrower shall promptly execute and deliver to such Lender a Note payable to the order of such Lender in a principal amount up to the Revolving Credit Commitment of such Lender.
(b)The Register maintained by the Agent pursuant to Section 8.07(c) shall include a control account, and a subsidiary account for each Lender, in which accounts (taken together) shall be recorded (i) the date and amount of each Borrowing made hereunder, the Type of Advances comprising such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii) the terms of each Assumption Agreement and each Assignment and Assumption delivered to and accepted by it, (iii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iv) the amount of any sum received by the Agent from the Borrower hereunder and each Lender’s share thereof.
54

(c)Entries made in good faith by the Agent in the Register pursuant to subsection (b) above, and by each Lender in its account or accounts pursuant to subsection (a) above, shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement, absent manifest error; provided, however, that the failure of the Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement.
Section 2.17Use of Proceeds. The proceeds of the Advances and issuances of Letters of Credit shall be available (and the Borrower agrees that it shall use such proceeds) solely to refinance Indebtedness of the Borrower from time to time and for other general corporate purposes of the Borrower, subject to such restrictions that are imposed in the 2020 Order and/or any Subsequent Order.
Section 2.18Increase in the Aggregate Revolving Credit Commitments.
(a)The Borrower may, at any time prior to the Termination Date, by notice to the Agent, request that the aggregate amount of the Revolving Credit Commitments be increased by an amount of $10,000,000 or an integral multiple thereof (each a “Commitment Increase”) to be effective as of a date that is at least 90 days prior to the Termination Date (the “Increase Date”) as specified in the related notice to the Agent; provided, however that (i) in no event shall the aggregate amount of the Revolving Credit Commitments at any time exceed $700,000,000 or the aggregate amount of Commitment Increases exceed $200,000,000 and (ii) on the date of any request by the Borrower for a Commitment Increase and on the related Increase Date, the applicable conditions set forth in this Section 2.18 shall be satisfied.
(b)The Agent shall promptly notify the Lenders of a request by the Borrower for a Commitment Increase, which notice shall include (i) the proposed amount of such requested Commitment Increase, (ii) the proposed Increase Date and (iii) the date by which Lenders wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Revolving Credit Commitments (the “Commitment Date”). Each Lender that is willing to participate in such requested Commitment Increase (each an “Increasing Lender”) shall, in its sole discretion, give written notice to the Agent on or prior to the Commitment Date of the amount by which it is willing to increase its Revolving Credit Commitment. If the Lenders notify the Agent that they are willing to increase the amount of their respective Revolving Credit Commitments by an aggregate amount that exceeds the amount of the requested Commitment Increase, the requested Commitment Increase shall be allocated among the Lenders willing to participate therein in such amounts as are agreed between the Borrower and the Agent. Each Increasing Lender shall be subject to such applicable consents as may be required under Section 8.07(b)(iii) (including, but not limited to, the consent, not to be unreasonably withheld, of each Issuing Bank and the Swingline Lender).
(c)Promptly following each Commitment Date, the Agent shall notify the Borrower as to the amount, if any, by which the Lenders are willing to participate in the requested Commitment Increase. If the aggregate amount by which the Lenders are willing to participate in any requested Commitment Increase on any such Commitment Date is less than the requested Commitment Increase, then the Borrower may extend offers to one or more Eligible Assignees to participate in any portion of the requested Commitment Increase that has not been committed to by the Lenders as of the applicable Commitment Date; provided, however, that the Revolving Credit Commitment of each such Eligible Assignee shall be in an amount of not less than $10,000,000.
55

(d)On each Increase Date, each Eligible Assignee that accepts an offer to participate in a requested Commitment Increase in accordance with Section 2.18(c) (each such Eligible Assignee, an “Assuming Lender”) shall become a Lender party to this Agreement as of such Increase Date and the Revolving Credit Commitment of each Increasing Lender for such requested Commitment Increase shall be so increased by the amount by which the Increasing Lender agreed to increase its Revolving Credit Commitment (or by the amount allocated to such Lender pursuant to the next to last sentence of Section 2.18(b)) as of such Increase Date; provided, however, that the Agent shall have received on or before such Increase Date the following, each dated such date:
(i)(A) certified copies of resolutions of the Board of Directors of the Borrower approving the Commitment Increase and the corresponding modifications to this Agreement, (B) an opinion of counsel for the Borrower (which may be in-house counsel), in form and substance reasonably acceptable to the Required Lenders and (C) a certificate from a duly authorized officer of the Borrower, stating that the conditions set forth in Section 3.02(a) and Section 3.02(b) are satisfied;
(ii)an assumption agreement from each Assuming Lender, if any, in form and substance satisfactory to the Borrower and the Agent (each an “Assumption Agreement”), duly executed by such Assuming Lender, the Agent, the Borrower and each other Person required to consent thereto, as applicable under Section 8.07(b)(iii); and
(iii)confirmation from each Increasing Lender of the increase in the amount of its Revolving Credit Commitment in a writing satisfactory to the Borrower and the Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the immediately preceding sentence of this Section 2.18(d), the Agent shall notify the Lenders (including, without limitation, each Assuming Lender) and the Borrower, on or before 1:00 p.m., by telecopier, of the occurrence of the Commitment Increase to be effected on such Increase Date and shall record in the Register the relevant information with respect to each Increasing Lender and each Assuming Lender on such date. Each Increasing Lender and each Assuming Lender shall, before 2:00 p.m. on the Increase Date, make available for the account of its Applicable Lending Office to the Agent at the Agent’s Account, in same day funds, in the case of such Assuming Lender, an amount equal to such Assuming Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase) and, in the case of such Increasing Lender, an amount equal to the excess of (i) such Increasing Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase) over (ii) such Increasing Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment (without giving effect to the relevant Commitment Increase) as a percentage of the aggregate Revolving Credit Commitments (without giving effect to the relevant Commitment Increase). After the Agent’s receipt of such funds from each such Increasing Lender and each such Assuming Lender, the Agent will promptly thereafter cause to be distributed like funds to the other Lenders for the account of their respective Applicable Lending Offices in an amount to each other Lender such that the aggregate amount of the outstanding Advances owing to each Lender after giving effect to such distribution equals such Lender’s Ratable Share of the Borrowings then outstanding (calculated based on its Revolving Credit Commitment as a percentage of the aggregate Revolving Credit Commitments outstanding after giving effect to the relevant Commitment Increase).
56

Section 2.19Affected Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes an Affected Lender, then the following provisions shall apply for so long as such Lender is an Affected Lender:
(a)fees shall cease to accrue on the Unused Commitment of such Affected Lender pursuant to Section 2.04(a);
(b)the Revolving Credit Commitment and Advances of such Affected Lender shall not be included in determining whether the Required Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to Section 8.01), other than any waiver, amendment or modification requiring the consent of all Lenders or of each Lender affected;
(c)if (x) there shall be any Available Amount under any outstanding Letter of Credit or (y) any Swingline Exposure shall exist during any time a Lender is an Affected Lender, then:
(i)so long as no Default or Event of Default has occurred and is continuing, all or any part of the Available Amount of all such Letters of Credit and Swingline Exposure shall be reallocated among the non-Affected Lenders in accordance with their respective Ratable Shares (disregarding any Affected Lender’s Revolving Credit Commitment) but only to the extent that with respect to each non-Affected Lender the sum of (A) the aggregate principal amount of all Revolving Advances made by such non-Affected Lender (in its capacity as a Lender) and outstanding at such time plus (B) such non-Affected Lender’s Ratable Share (after giving effect to the reallocation contemplated in this Section 2.19(c)(i)) of the outstanding L/C Obligations plus (C) such non-Affected Lender’s Ratable Share (after giving effect to the reallocation contemplated in this Section 2.19(c)(i)) of the outstanding Swingline Exposure, does not exceed such non-Affected Lender’s Revolving Credit Commitment;
(ii)if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one (1) Business Day following notice by the Agent (x) first, prepay such unallocable Swingline Exposure and (y) second, Cash Collateralize for the benefit of the applicable Issuing Bank only the Borrower’s obligations corresponding to such Affected Lender’s Ratable Share of the Available Amount of outstanding Letters of Credit (after giving effect to any partial reallocation pursuant to clause (i) above) (the “Affected Lender Share”) in accordance with the procedures set forth in Section 2.03(h) for so long as such there shall be any Available Amount of outstanding Letters of Credit;
(iii)if the Ratable Share of the Available Amount of outstanding Letters of Credit and the Swingline Exposure of the non-Affected Lenders is reallocated pursuant to this Section 2.19(c), then the fees payable to the Lenders pursuant to Section 2.04(a) and Section 2.04(b) shall be adjusted in accordance with such non-Affected Lenders’ Ratable Shares;
(iv)if any Affected Lender Share is not reallocated pursuant to clause (i) above and if the Borrower fails to Cash Collateralize any portion of such Affected Lender Share pursuant to clause (ii) above, then, without prejudice to any rights or remedies of any Issuing Bank or any Lender hereunder, the fee payable under Section 2.04(b) with respect to such Affected Lender Share shall be payable to the Issuing Bank until such Affected Lender Share is reallocated; and
(v)if the Borrower Cash Collateralizes any portion of any Affected Lender Share pursuant to clause (ii) above, the Borrower shall not be required to pay any fees to such Affected Lender pursuant to Section 2.04(b)(i) or the applicable Issuing Bank pursuant to
57

Section 2.04(b)(ii) (solely with respect to any fronting fee) with respect to such Affected Lender’s Affected Lender Share during the period such Affected Lender’s Affected Lender Share is Cash Collateralized;
(d)to the extent the Agent receives any payments or other amounts for the account of an Affected Lender under this Agreement, such Affected Lender shall be deemed to have requested that the Agent use such payment or other amount to fulfill such Affected Lender’s previously unsatisfied obligations to fund a Revolving Advance under Section 2.03(c) or Section 2.03A(c) or L/C Advance or any other unfunded payment obligation of such Affected Lender under this Agreement; and
(e)subject to Section 8.18, for the avoidance of doubt, the Borrower, each Issuing Bank, the Swingline Lender, the Agent and each other Lender shall retain and reserve its other rights and remedies respecting each Affected Lender.
In the event that the Agent, the Borrower, the Swingline Lender and the Issuing Banks each agrees that an Affected Lender has adequately remedied all matters that caused such Lender to be an Affected Lender, then the Ratable Shares of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Revolving Credit Commitment and on such date such Lender shall purchase at par such of the Revolving Advances of the other Lenders as the Agent shall determine may be necessary in order for such Lender to hold such Revolving Advances in accordance with its Ratable Share. In addition, at such time as the Affected Lender is replaced by another Lender pursuant to Section 2.20, the Ratable Shares of the Lenders will be readjusted to reflect the inclusion of the replacing Lender’s Commitment in accordance with Section 2.20. In either such case, this Section 2.19 will no longer apply.
Section 2.20Replacement of Lenders. If any Lender requests compensation under Section 2.11, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, or if any Lender is an Affected Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 8.07), all of its interests, rights and obligations under this Agreement and the related Loan Documents to one or more assignees that shall assume such obligations (which any such assignee may be another Lender, if a Lender accepts such assignment), provided that:
(a)the Borrower shall have paid to the Agent the assignment fee specified in Section 8.07(b);
(b)such Lender shall have received payment of an amount equal to the outstanding principal of its Revolving Advances and L/C Advances, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 8.04(e)) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);
(c)in the case of any such assignment resulting from a claim for compensation under Section 2.11 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments thereafter; and
(d)such assignment does not conflict with applicable Laws.
58

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.
Section 2.21Extension of Termination Date.
(a)The Borrower may at any time from time to time not more than ninety (90) days and not less than thirty (30) days prior to any anniversary of the Effective Date, by notice to the Agent (who shall promptly notify the Lenders) not later than 10 Business Days prior to the date on which the Lenders are requested to respond thereto (each such date, a “Lender Notice Date”), request that each Lender extend (each such date on which such extension occurs, an “Extension Date”) such Lender’s Termination Date to the date that is one year after the Termination Date then in effect for such Lender (the “Existing Termination Date”).
(b)Each Lender, acting in its sole and individual discretion, shall, by notice to the Agent given not later than the applicable Lender Notice Date, advise the Agent whether or not such Lender agrees to such extension (each Lender that determines to so extend its Termination Date, an “Extending Lender”). Each Lender that determines not to so extend its Termination Date (a “Non-Extending Lender”) shall notify the Agent of such fact promptly after such determination (but in any event no later than the Lender Notice Date), and any Lender that does not so advise the Agent on or before the Lender Notice Date shall be deemed to be a Non-Extending Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree, and it is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by the Borrower for extension of the Termination Date.
(c)The Agent shall promptly notify the Borrower of each Lender’s determination under this Section.
(d)The Borrower shall have the right, but shall not be obligated, on or before the applicable Termination Date for any Non-Extending Lender to replace such Non-Extending Lender with, and add as “Lenders” under this Agreement in place thereof, one or more financial institutions that are Eligible Assignees (each, an “Additional Commitment Lender”) approved by the Agent, each Issuing Bank and the Swingline Lender in accordance with the procedures provided in Section 8.07, each of which Additional Commitment Lenders shall have entered into an Assignment and Assumption (in accordance with and subject to the restrictions contained in Section 8.07, with the Borrower obligated to pay any applicable processing or recordation fee) with such Non-Extending Lender, pursuant to which such Additional Commitment Lenders shall, effective on or before the Termination Date for such Non-Extending Lender, assume a Revolving Credit Commitment (and, if any such Additional Commitment Lender is already a Lender, its Revolving Credit Commitment shall be in addition to such Lender’s Revolving Credit Commitment hereunder on such date). The Agent may effect such amendments to this Agreement as are reasonably necessary to provide for any such extensions with the consent of the Borrower but without the consent of any other Lenders.
(e)If (and only if) the total of the Revolving Credit Commitments of the Lenders that have agreed to extend their Termination Date and the additional Revolving Credit Commitments of the Additional Commitment Lenders is more than 50% of the aggregate amount of the Revolving Credit Commitments in effect immediately prior to the applicable Extension Date, then, effective as of the applicable Extension Date, the Termination Date of each Extending Lender and of each Additional Commitment Lender shall be extended to the date that is one year after the Existing Termination Date
59

(except that, if such date is not a Business Day, such Termination Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender shall thereupon become a “Lender” for all purposes of this Agreement and shall be bound by the provisions of this Agreement as a Lender hereunder and shall have the obligations of a Lender hereunder.
(f)Notwithstanding the foregoing, (x) no more than two (2) extensions of the Termination Date shall be permitted hereunder and (y) any extension of any Termination Date pursuant to this Section 2.21 shall not be effective with respect to any Extending Lender unless as of the applicable Extension Date and immediately after giving effect thereto:
(i)there shall exist no Default;
(ii)the representations and warranties made by the Borrower contained herein shall be true and correct; and
(iii)the Agent shall have received a certificate from the Borrower signed by an Authorized Officer of the Borrower (A) certifying the accuracy of the foregoing clauses (i) and (ii) and (B) certifying and attaching the resolutions adopted by the Borrower approving or consenting to such extension.
(g)On the Termination Date of each Non-Extending Lender, (i) the Revolving Credit Commitment of each Non-Extending Lender shall automatically terminate and (ii) the Borrower shall repay such Non-Extending Lender in accordance with Section 2.06 (and shall pay to such Non-Extending Lender all of the other obligations owing to it under this Agreement) and after giving effect thereto shall prepay any Revolving Advances outstanding on such date (and pay any additional amounts required pursuant to Section 2.02) to the extent necessary to keep outstanding Revolving Advances ratable with any revised Ratable Share of the respective Lenders effective as of such date, and the Agent shall administer any necessary reallocation of the outstanding Advances (without regard to any minimum borrowing, pro rata borrowing and/or pro rata payment requirements contained elsewhere in this Agreement).
(h)This Section shall supersede any provisions in Section 2.02 or Section 8.01 to the contrary.
Article III

CONDITIONS PRECEDENT
Section3.01Conditions Precedent to Effectiveness. This Agreement shall become effective on and as of the first date (the “Effective Date”) on which the following conditions precedent have been satisfied:
(a)The Lenders shall have been given such access to the management, records, books of account, contracts and properties of the Borrower and its Subsidiaries as they shall have requested.
(b)The Borrower shall have paid all accrued fees and agreed expenses of the Agent, the Arrangers and the Lenders and the reasonable accrued fees and expenses of one law firm acting as counsel to the Agent that have been invoiced at least one Business Day prior to the Effective Date.
60

(c)On the Effective Date, the following statements shall be true and the Agent shall have received a certificate signed by a duly authorized officer of the Borrower, dated the Effective Date, stating that:
(i)The representations and warranties contained in Section 4.01 are true and correct on and as of the Effective Date, and
(ii)No event has occurred and is continuing that constitutes a Default.
(d)The Agent shall have received on or before the Effective Date the following, each dated such day, in form and substance satisfactory to the Agent and the Lenders:
(i)Receipt by the Agent of executed counterparts of this Agreement properly executed by a duly authorized officer of the Borrower and by each Lender.
(ii)The Notes, payable to the order of the Lenders to the extent requested by any Lender pursuant to Section 2.16.
(iii)The articles of incorporation of the Borrower certified to be true and complete as of a recent date by the appropriate governmental authority of the state or other jurisdiction of its incorporation and certified by a secretary, assistant secretary or associate secretary of the Borrower to be true and correct as of the Effective Date.
(iv)The bylaws of the Borrower certified by a secretary, assistant secretary or associate secretary of the Borrower to be true and correct as of the Effective Date.
(v)Certified copies of the resolutions of the Board of Directors of the Borrower approving this Agreement and the Notes, and of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the Notes.
(vi)A certificate of the secretary, assistant secretary or associate secretary of the Borrower certifying the names and true signatures of the officers of the Borrower authorized to sign this Agreement and the Notes and the other documents to be delivered hereunder.
(vii)A certificate as of a recent date from the Borrower’s state of incorporation evidencing that the Borrower is in good standing in such state.
(viii)A favorable opinion of counsel for the Borrower, in form and substance reasonably acceptable to the Lenders.
(ix)A favorable opinion of Sidley Austin LLP, counsel for the Agent, in form and substance reasonably acceptable to the Lenders.
(e)[Reserved].
(f)The Agent shall have received evidence satisfactory to it that that certain $500,000,000 Five-Year Credit Agreement dated as of June 29, 2017 by and among the Borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, shall have been terminated and cancelled and all indebtedness and other amounts due and unpaid thereunder shall have been (or shall
61

concurrently with the effectiveness of this Agreement be) fully repaid on terms and conditions reasonably acceptable to the Agent.
(g)The Agent shall have received reasonably satisfactory evidence that each of (i) that certain $200,000,000 Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021, by and among PWCC, as borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, and (ii) that certain $500,000,000 Amended and Restated Five-Year Credit Agreement, dated as of May 28, 2021, by and among Borrower, the lenders from time to time parties thereto and Barclays Bank PLC, as administrative agent, shall be effective prior to or substantially concurrently with the effectiveness of this Agreement.
(h)PATRIOT Act. At least five days prior to the Effective Date, the Borrower shall have provided to the Agent and the Lenders the documentation and other information reasonably requested by the Agent, and reasonably available to the Borrower, in order to comply with requirements of the PATRIOT Act.
(i)In the event that the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, the Borrower shall deliver, at least five days prior to the Effective Date, a Beneficial Ownership Certification in relation to the Borrower.
Section3.02Conditions Precedent to Each Credit Extension and Commitment Increase. The obligation of each Lender to make an Advance (other than an L/C Advance or an Advance made pursuant to Section 2.03(c) or Section 2.03A(c)) on the occasion of each Borrowing, the obligation of each Issuing Bank to issue a Letter of Credit, and each Commitment Increase shall be subject to the conditions precedent that the Effective Date shall have occurred and on the date of such Borrowing or such issuance (as the case may be), or the applicable Increase Date, the following statements shall be true (and each of the giving of the applicable Notice of Borrowing or request for issuance and the acceptance by the Borrower of the proceeds of such Borrowing shall constitute a representation and warranty by the Borrower that on the date of such Borrowing or date of such issuance such statements are true):
(a)the representations and warranties contained in Section 4.01 (other than Section 4.01(k)), and in the case of a Borrowing or issuance of a Letter of Credit, Section 4.01(e)(ii) and Section 4.01(f)(ii)) are correct on and as of such date, before and after giving effect to such Borrowing or issuance of a Letter of Credit, or such Commitment Increase and to the application of the proceeds therefrom, as though made on and as of such date;
(b)no event has occurred and is continuing, or would result from such Borrowing or issuance of a Letter of Credit, or such Commitment Increase or from the application of the proceeds therefrom, that constitutes a Default;
(c)all required regulatory authorizations including the 2020 Order and/or any Subsequent Order in respect of such Credit Extension have been obtained and are in full force and effect and, before and after giving effect to such Borrowing or such issuance of a Letter of Credit and to the application of the proceeds therefrom, the Borrower is in compliance with the provisions of the applicable order; and
(d)before and after giving effect to such Credit Extension and to the application of the proceeds therefrom, as though made on and as of such date, the Indebtedness of the Borrower does not exceed that permitted by (i) applicable resolutions of the Board of Directors of the Borrower, (ii) applicable Arizona Law, or (iii) the 2020 Order or any Subsequent Order, whichever is in force and effect at such time.
62

Each request for Credit Extension (which shall not include a Conversion or a continuation of Eurodollar Rate Advances) submitted by the Borrower shall be deemed to be a representation and warranty that the conditions specified in Sections 3.02(a) through (d) have been satisfied on and as of the date of the applicable Credit Extension.
Section3.03Determinations Under Section 3.01. For purposes of determining compliance with the conditions specified in Section 3.01 and the satisfaction of each Lender with respect to letters delivered to it from the Borrower as set forth in Section 4.01(a), Section 4.01(e) and Section 4.01(f), each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to the Lenders unless an officer of the Agent responsible for the transactions contemplated by this Agreement shall have received notice from such Lender prior to the date that the Borrower designates as the proposed Effective Date, specifying its objection thereto. The Agent shall promptly notify the Lenders and the Borrower of the occurrence of the Effective Date.
Article IV

REPRESENTATIONS AND WARRANTIES
Section4.01Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:
(a)Each of the Borrower and each Material Subsidiary: (i) is a corporation or other entity duly organized and validly existing under the Laws of the jurisdiction of its incorporation or organization; (ii) has all requisite corporate or if the Material Subsidiary is not a corporation, other comparable power necessary to own its assets and carry on its business as presently conducted; (iii) has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as presently conducted, if the failure to have any such license, authorization, consent or approval is reasonably likely to have a Material Adverse Effect and except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion) and except that (A) the Borrower from time to time may make minor extensions of its lines, plants, services or systems prior to the time a related franchise, certificate of convenience and necessity, license or permit is procured, (B) from time to time communities served by the Borrower may become incorporated and considerable time may elapse before such a franchise is procured, (C) certain such franchises may have expired prior to the renegotiation thereof, (D) certain minor defects and exceptions may exist which, individually and in the aggregate, are not material and (E) certain franchises, certificates, licenses and permits may not be specific as to their geographical scope); and (iv) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify is reasonably likely to have a Material Adverse Effect.
(b)The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, are within the Borrower’s corporate powers, have been duly authorized by all necessary corporate action, and do not or did not (i) contravene the Borrower’s articles of incorporation or by-laws, (ii) contravene any Law (including without limitation the 2020 Order and/or any Subsequent Order), decree, writ, injunction or determination of any Governmental Authority, in each case applicable to or binding upon the Borrower or any of its properties, (iii) contravene any contractual restriction binding on or affecting the Borrower or
63

(iv) cause the creation or imposition of any Lien upon the assets of the Borrower or any Material Subsidiary, except for Liens created under this Agreement and except where such contravention or creation or imposition of such Lien is not reasonably likely to have a Material Adverse Effect.
(c)No authorization or approval or other action by, and no notice to or filing with, any Governmental Authority is required for the due execution, delivery and performance by the Borrower of this Agreement or the Notes to be delivered by it, except for the 2020 Order or any Subsequent Order, which has been duly obtained and is in full force and effect, and any notices or compliance filings required therein.
(d)This Agreement has been, and each of the other Loan Documents upon execution and delivery will have been, duly executed and delivered by the Borrower. This Agreement is, and each of the other Loan Documents upon execution and delivery will be, the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with their respective terms, subject, however, to the application by a court of general principles of equity and to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally.
(e)(i) The Consolidated balance sheet of the Borrower as of December 31, 2020, and the related Consolidated statements of income and cash flows of the Borrower for the fiscal year then ended, accompanied by an opinion thereon of Deloitte & Touche LLP, independent registered public accountants and the condensed Consolidated balance sheets of the Borrower as of March 31, 2021, and the related condensed Consolidated statements of income and cash flows of the Borrower for the three months then ended, duly certified by the chief financial officer of the Borrower, copies of which have been furnished to the Agent, fairly present in all material respects, subject, in the case of said balance sheet at March 31, 2021, and said statements of income and cash flows for the three months then ended, to year-end audit adjustments, the Consolidated financial condition of the Borrower as at such dates and the Consolidated results of the operations of the Borrower for the periods ended on such dates, all in accordance with GAAP (except as disclosed therein), and (ii) except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion), since December 31, 2020, there has been no Material Adverse Effect.
(f)There is no pending or, to the knowledge of an Authorized Officer of the Borrower, threatened action, suit, investigation, litigation or proceeding, including, without limitation, any Environmental Action, affecting the Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator that (i) purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the consummation of the transactions contemplated hereby or (ii) would be reasonably likely to have a Material Adverse Effect (except as disclosed to the Agent in the SEC Reports or by means of a letter from the Borrower to the Lenders (such letter, if any, to be delivered to the Agent for prompt distribution to the Lenders) delivered prior to the execution and delivery of this Agreement (which, in each case, shall be satisfactory to each Lender in its sole discretion)) and there has been no adverse change in the status, or financial effect on the Borrower or any of its Subsidiaries, of such disclosed litigation that would be reasonably likely to have a Material Adverse Effect.
(g)No proceeds of any Advance will be used to acquire any equity security not issued by the Borrower of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934.
64

(h)The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System), and no proceeds of any Advance will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock, in any case in violation of Regulation U. After application of the proceeds of any Advance, not more than 25% of the value of the assets subject to any restriction under this Agreement on the right to sell, pledge, transfer, or otherwise dispose of such assets is represented by margin stock.
(i)The Borrower and its Subsidiaries have filed all United States of America Federal income Tax returns and all other material Tax returns which are required to be filed by them and have paid all Taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries, except to the extent that (i) such Taxes are being contested in good faith and by appropriate proceedings and that appropriate reserves for the payment thereof have been maintained by the Borrower and its Subsidiaries in accordance with GAAP or (ii) the failure to make such filings or such payments is not reasonably likely to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Material Subsidiaries as set forth in the most recent financial statements of the Borrower delivered to the Agent pursuant to Section 4.01(e) or Section 5.01(h)(i) or Section 5.01(h)(ii) hereof in respect of Taxes and other governmental charges are, in the opinion of the Borrower, adequate.
(j)Set forth on Schedule 4.01(j) hereto (as such schedule may be modified from time to time by the Borrower by written notice to the Agent) is a complete and accurate list of all the Subsidiaries of the Borrower and, as of the Effective Date, no such Subsidiary of the Borrower is a Material Subsidiary.
(k)Set forth on Schedule 4.01(k) hereto is a complete and accurate list identifying any Indebtedness of the Borrower outstanding in a principal amount equal to or exceeding $5,000,000 and which is not described in the financial statements referred to in Section 4.01(e).
(l)The Borrower is not an “investment company”, or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.
(m)No report, certificate or other written information furnished by the Borrower or any of its Subsidiaries to the Agent, any Arranger or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) at the time so furnished, when taken together as a whole with all such written information so furnished, contains an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except as would not reasonably be expected to result in a Material Adverse Effect; provided that with respect to any projected financial information, forecasts, estimates or forward-looking information, the Borrower represents only that such information and materials have been prepared in good faith on the basis of assumptions believed to be reasonable at the time of preparation of such forecasts, and no representation or warranty is made as to the actual attainability of any such projections, forecasts, estimates or forward-looking information.
(n)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower, any of their respective Affiliates over which any of the foregoing exercises management control (each, a “Controlled Affiliate”) or any director or officer of the Borrower, any of its Subsidiaries or any of their respective Controlled Affiliates (each, a “Manager”) is a Prohibited Person, and the Borrower, its Subsidiaries and, to the knowledge of the Borrower, such Controlled Affiliates are in compliance with all applicable orders, rules and regulations of OFAC.
65

(o)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower, any of their respective Controlled Affiliates or Managers: (i) is the target of Sanctions; (ii) is owned or controlled by, or acts on behalf of, any Person that is targeted by United States or multilateral economic or trade sanctions currently in force; (iii) is, or is owned or controlled by, a Person who is located, organized or resident in a country, region or territory that is, or whose government is, the subject of Sanctions, including, without limitation, Crimea, Cuba, Iran, North Korea and Syria, or (iv) is named, identified or described on any list of Persons with whom United States Persons may not conduct business, including any such blocked persons list, designated nationals list, denied persons list, entity list, debarred party list, unverified list, sanctions list or other such lists published or maintained by the United States, including OFAC, the United States Department of Commerce or the United States Department of State, or any other applicable Governmental Authority.
(p)None of the Borrower’s or its Subsidiaries’ assets constitute property of, or are beneficially owned, directly or indirectly, by any Person that is the target of Sanctions, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. (the “Trading With the Enemy Act”), any of the foreign assets control regulations of the Treasury (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign Assets Control Regulations”) or any enabling legislation or regulations promulgated thereunder or executive order relating thereto (which includes, without limitation, (i) Executive Order No. 13224, effective as of September 24, 2001, and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”) and (ii) the PATRIOT Act), if the result of such ownership would be that any Credit Extension made by any Lender would be in violation of law (“Embargoed Person”); (a) no Embargoed Person has any interest of any nature whatsoever in the Borrower if the result of such interest would be that any Credit Extension would be in violation of law; (b) the Borrower has not engaged in business with Embargoed Persons if the result of such business would be that any Credit Extension made by any Lender would be in violation of law; (c) the Borrower will not, directly or indirectly, use the proceeds of the Credit Extension, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (i) to fund any activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions or Anti-Corruption Laws by any Person (including any Person participating in the Credit Extensions, whether as a Lender or otherwise), and (d) neither the Borrower nor any Controlled Affiliate (i) is or will become a “blocked person” as described in the Executive Order, the Trading With the Enemy Act or the Foreign Assets Control Regulations or (ii) to the knowledge of the Borrower, engages in any dealings or transactions, or be otherwise associated, with any such “blocked person”. For purposes of determining whether or not a representation is true under this Section 4.01(p) with respect to the securities of the Borrower, the Borrower shall not be required to make any investigation into (x) the ownership of publicly traded stock or other publicly traded securities or (y) the beneficial ownership of any collective investment fund.
(q)Neither the Borrower nor any of its Subsidiaries or, to the knowledge of the Borrower and its Subsidiaries, any of their respective Managers, has failed to comply with the U.S. Foreign Corrupt Practices Act, as amended from time to time (the “FCPA”), or any other applicable Anti-Corruption Laws, and it and they have not made, offered, promised or authorized, and will not make, offer, promise or authorize, whether directly or indirectly, any payment, of anything of value to a Government Official while knowing or having a reasonable belief that all or some portion will be used for the purpose of: (a) influencing any act, decision or failure to act by a Government Official in his or her official capacity, (b) inducing a Government Official to use his or her influence with a government or instrumentality to affect
66

any act or decision of such  government or entity or (c) securing an improper advantage, in each case in order to obtain, retain or direct business.
(r)If Borrower is required to deliver a Beneficial Ownership Certification, as of the Effective Date, the information included in the Beneficial Ownership Certification, as updated from time to time in accordance with this Agreement, is accurate, complete and correct in all respects as of the Effective Date and as of the date any such update is delivered. The Borrower acknowledges and agrees that the Beneficial Ownership Certification is one of the Loan Documents.
(s)The Borrower is not an Affected Financial Institution.
(t)None of the Borrower or any of its Subsidiaries is an entity deemed to hold “plan assets” (within the meaning of the Plan Asset Regulations), and neither the execution, delivery nor performance of this Agreement and the other Loan Documents, and the consummation of the transactions contemplated hereby and thereby, including the making of any Advance and the issuing of any Letter of Credit, will give rise to a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.
Article V

COVENANTS OF THE BORROWER
Section5.01Affirmative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower shall:
(a)Compliance with Laws, Etc. (i) Comply, and cause each of its Material Subsidiaries to comply, in all material respects, with all applicable Laws of Governmental Authorities, such compliance to include, without limitation, compliance with ERISA and Environmental Laws, unless the failure to so comply is not reasonably likely to have a Material Adverse Effect and (ii) comply at all times with the 2020 Order, any Subsequent Order, Arizona Revised Statutes, Section 40-302 and all similar or comparable Laws, orders, decrees, writs, injunctions or determinations of any Governmental Authority relating to the incurrence or maintenance of Indebtedness by the Borrower, such compliance to include, without limitation, compliance with the PATRIOT Act, all applicable orders, rules and regulations of OFAC, the FCPA, the Racketeer Influenced and Corrupt Organizations Chapter of the Organized Crime Control Act of 1970 and other Anti-Corruption Laws, except (other than in the case of the PATRIOT Act, the applicable orders, rules and regulations of OFAC, or the FCPA, or any similar applicable laws) to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect.
(b)Payment of Taxes, Etc. Pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, all Taxes imposed upon it or upon its property; provided, however, that neither the Borrower nor any of its Subsidiaries shall be required to pay or discharge any such Tax (i) that is being contested in good faith and by proper proceedings and as to which appropriate reserves are being maintained in accordance with GAAP or (ii) if the failure to pay such Tax is not reasonably likely to have a Material Adverse Effect.
(c)Maintenance of Insurance. Maintain, and cause each of its Material Subsidiaries to maintain, insurance with responsible and reputable insurance companies or associations in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates; provided,
67

however, that the Borrower and its Subsidiaries may self-insure to the same extent as other companies engaged in similar businesses and owning similar properties in the same general areas in which the Borrower or such Subsidiary operates and to the extent consistent with prudent business practice.
(d)Preservation of Corporate Existence, Etc. Preserve and maintain, and cause each of its Material Subsidiaries to preserve and maintain, its corporate existence, rights (charter and statutory) and franchises (other than “franchises” as described in Arizona Revised Statutes, Section 40-283 or any successor provision) reasonably necessary in the normal conduct of its business, if the failure to maintain such rights or privileges is reasonably likely to have a Material Adverse Effect, and will use its commercially reasonable efforts to preserve and maintain such franchises reasonably necessary in the normal conduct of its business, except that (i) the Borrower from time to time may make minor extensions of its lines, plants, services or systems prior to the time a related franchise, certificate of convenience and necessity, license or permit is procured, (ii) from time to time communities served by the Borrower may become incorporated and considerable time may elapse before such a franchise is procured, (iii) certain such franchises may have expired prior to the renegotiation thereof, (iv) certain minor defects and exceptions may exist which, individually and in the aggregate, are not material and (v) certain franchises, certificates, licenses and permits may not be specific as to their geographical scope; provided, however, that the Borrower and its Subsidiaries may consummate any merger or consolidation permitted under Section 5.02(b).
(e)Visitation Rights. At any reasonable time and from time to time, permit and cause each of its Subsidiaries to permit the Agent or any of the Lenders or any agents or representatives thereof, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower and any of its Subsidiaries, and to discuss the affairs, finances and accounts of the Borrower and any of its Subsidiaries with any of their officers or directors; provided, however, that the Borrower and its Subsidiaries reserve the right to restrict access to any of its properties in accordance with reasonably adopted procedures relating to safety and security; and provided further that the costs and expenses incurred by such Lender or its agents or representatives in connection with any such examinations, copies, abstracts, visits or discussions shall be, upon the occurrence and during the continuation of a Default, for the account of the Borrower and, in all other circumstances, for the account of such Lender.
(f)Keeping of Books. Keep, and cause each of its Material Subsidiaries to keep, proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Borrower and each such Subsidiary in a manner that permits the preparation of financial statements in accordance with GAAP.
(g)Maintenance of Properties, Etc. Keep, and cause each Material Subsidiary to keep, all property useful and necessary in its business in good working order and condition (ordinary wear and tear excepted), if the failure to do so is reasonably likely to have a Material Adverse Effect, it being understood that this covenant relates only to the working order and condition of such properties and shall not be construed as a covenant not to dispose of properties.
(h)Reporting Requirements. Furnish to the Agent:
(i)as soon as available and in any event within 50 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, commencing with the fiscal quarter ending June 30, 2021, (A) for each such fiscal quarter of the Borrower, Consolidated statements of income and cash flows of the Borrower for such fiscal quarter and the related Consolidated
68

balance sheet of the Borrower as of the end of such fiscal quarter, setting forth in each case in comparative form the corresponding figures for the corresponding fiscal quarter in (or, in the case of the balance sheet, as of the end of) the preceding fiscal year and (B) for the period commencing at the end of the previous fiscal year and ending with the end of such fiscal quarter, Consolidated statements of income and cash flows of the Borrower for such period setting forth in each case in comparative form the corresponding figures for the corresponding period in the preceding fiscal year; provided that so long as the Borrower remains subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Borrower may provide, in satisfaction of the requirements of this first sentence of this Section 5.01(h)(i), its report on Form 10-Q for such fiscal quarter.  Each set of financial statements provided under this Section 5.01(h)(i) shall be accompanied by a certificate of an Authorized Officer, which certificate shall state that said Consolidated financial statements fairly present in all material respects the Consolidated financial condition and results of operations and cash flows of the Borrower in accordance with GAAP (except as disclosed therein), as at the end of, and for, such period (subject to normal year-end audit adjustments) and shall set forth reasonably detailed calculations demonstrating compliance with Section 5.03;
(ii)as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, commencing with the fiscal year ending December 31, 2021, audited Consolidated statements of income and cash flows of the Borrower for such year and the related Consolidated balance sheet of the Borrower as at the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year; provided that, so long as the Borrower remains subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Borrower may provide, in satisfaction of the requirements of this first sentence of this Section 5.01(h)(ii), its report on Form 10-K for such fiscal year. Each set of financial statements provided pursuant to this Section 5.01(h)(ii) shall be accompanied by (A) an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that said Consolidated financial statements fairly present in all material respects the Consolidated financial condition and results of operations of the Borrower as at the end of, and for, such fiscal year, in accordance with GAAP (except as disclosed therein) and (B) a certificate of an Authorized Officer, which certificate shall set forth reasonably detailed calculations demonstrating compliance with Section 5.03;
(iii)as soon as possible and in any event within five days after any Authorized Officer of the Borrower knows of the occurrence of each Default continuing on the date of such statement, a statement of an Authorized Officer of the Borrower setting forth details of such Default and the action that the Borrower has taken and proposes to take with respect thereto;
(iv)promptly after the sending or filing thereof, copies of all reports and registration statements (other than exhibits thereto and registration statements on Form S-8 or its equivalent) that the Borrower or any Subsidiary files with the Securities and Exchange Commission;
(v)promptly after an Authorized Officer becomes aware of the commencement thereof, notice of all actions and proceedings before any court, governmental agency or arbitrator affecting the Borrower or any of its Subsidiaries of the type described in Section 4.01(f), except, with respect to any matter referred to in Section 4.01(f)(ii), to the extent disclosed in a report on Form 8-K, Form 10-Q or Form 10-K of the Borrower;
69

(vi)promptly after (A) any amendment or modification of the 2020 Order, (B) any amendment or modification of Arizona Revised Statutes, Section 40-302, or the promulgation, amendment or modification of any successor or similar statute, or (C) the promulgation, amendment or modification of any Subsequent Order by the Arizona Corporation Commission or any successor thereto, in any case if such amendment, modification or promulgation could affect the validity or enforceability of the indebtedness of the Borrower pursuant to this Agreement, a copy thereof;
(vii)promptly after an Authorized Officer becomes aware of the occurrence thereof, notice of any change by Moody’s or S&P of its respective Public Debt Rating or of the cessation (or subsequent commencement) by Moody’s or S&P of publication of their respective Public Debt Rating;
(viii)promptly after the occurrence thereof, notice of the occurrence of any ERISA Event, together with (x) a written statement of an Authorized Officer of the Borrower specifying the details of such ERISA Event and the action that the Borrower has taken and proposes to take with respect thereto, (y) a copy of any notice with respect to such ERISA Event that may be required to be filed with the PBGC and (z) a copy of any notice delivered by the PBGC to the Borrower or an ERISA Affiliate with respect to such ERISA Event;
(ix)as soon as possible and in any event within five days after any Authorized Officer of the Borrower knows of the occurrence thereof, notice of any change in the information provided in the Beneficial Ownership Certification that would result in a change to the list of beneficial owners identified in parts (c) or (d) of such certification; and
(x)promptly following request therefor, (a) such information and documentation reasonably requested by the Agent or any Lender for purposes of compliance with applicable “know your customer” requirements under the PATRIOT Act or other applicable anti-money laundering laws; (b) confirmation of the accuracy of the information set forth in the most recent Beneficial Ownership Certification provided to the Agent and Lenders; or (c) such other information respecting the Borrower or any of its Subsidiaries as any Lender through the Agent may from time to time reasonably request.
Information required to be delivered pursuant to Section 5.01(h)(i), Section 5.01(h)(ii) and Section 5.01(h)(iv) above shall be deemed to have been delivered on the date on which the Borrower provides notice to the Agent that such information has been posted on PWCC’s website on the Internet at www.pinnaclewest.com, at sec.gov/edaux/searches.htm or at another website identified in such notice and accessible by the Lenders without charge; provided that (i) such notice may be included in a certificate delivered pursuant to Section 5.01(h)(i) or Section 5.01(h)(ii) and (ii) the Borrower shall deliver paper copies of the information referred to in Section 5.01(h)(i), Section 5.01(h)(ii), and Section 5.01(h)(iv) to any Lender which requests such delivery.
(i)Change in Nature of Business. Conduct the same general type of business conducted on the date hereof.
Section5.02Negative Covenants. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower shall not:
70

(a)Liens, Etc. Create or suffer to exist, or permit any of its Material Subsidiaries to create or suffer to exist, any Lien on or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its Material Subsidiaries to assign, any right to receive income, other than:
(i)Permitted Liens;
(ii)Liens upon or in, or conditional sales agreements or other title retention agreements with respect to, any real or personal property acquired or held by the Borrower or any Subsidiary in the ordinary course of business to secure the purchase price of such property, or the construction of or improvements to such property, or to secure Indebtedness incurred solely for the purpose of financing the acquisition, construction or improvement of such property to be subject to such Liens (including any Liens placed on such property within 180 days after the latest of the acquisition, completion of construction or improvement of such property), or Liens existing on such property at the time of its acquisition (other than any such Liens created in contemplation of such acquisition that were not incurred to finance the acquisition of such property) or extensions, renewals, refundings or replacements of any of the foregoing for the same or a lesser amount, provided, however, that no such Lien shall extend to or cover any properties of any character other than the property being acquired, constructed or improved and proceeds, improvements and replacements thereof and no such extension, renewal, refunding or replacement shall extend to or cover any properties not theretofore subject to the Lien being extended, renewed, refunded or replaced;
(iii)assignments of the right to receive income, and Liens on property, of a Person existing at the time such Person is merged into or consolidated with the Borrower or any Subsidiary of the Borrower or becomes a Subsidiary of the Borrower;
(iv)Liens with respect to the leases and related documents entered into by the Borrower in connection with PVNGS Unit 2 and Liens with respect to the leased interests and related rights if the Borrower reacquires ownership in any of those interests or acquires any of the equity or owner participants’ interests in the trusts that hold title to such leased interests, whether or not it also directly assumes the Sale Leaseback Obligation Bonds, and Liens on the Borrower’s interests in the trusts that hold title to such leased interests and related rights in the event that the Borrower acquires any of the equity or owner participants’ interests in such trusts pursuant to a “special transfer” under the Borrower’s existing PVNGS Unit 2 sale and leaseback transactions and any Liens resulting or deemed to have resulted if the PVNGS Unit 2 leases are required to be accounted for as capital leases in accordance with GAAP;
(v)other assignments of the right to receive income and Liens securing Indebtedness or claims in an aggregate principal amount not to exceed 20% of the Borrower’s total assets as stated on the most recent balance sheet of the Borrower provided pursuant to Section 4.01(e)(i) or 5.01(h)(ii) hereof at any time outstanding; and
(vi)the replacement, extension or renewal of any Lien permitted by clause (iii) or (iv) above upon or in the same property theretofore subject thereto or the replacement, extension or renewal (without increase in the amount or change in any direct or contingent obligor) of the Indebtedness secured thereby.
71

(b)Mergers, Etc. Merge or consolidate with or into any Person, or permit any of its Material Subsidiaries to do so, except that (i) any Material Subsidiary of the Borrower may merge or consolidate with or into any other Material Subsidiary of the Borrower, (ii) any Subsidiary of the Borrower may merge into the Borrower or any Material Subsidiary of the Borrower and (iii) the Borrower or any Material Subsidiary may merge with any other Person so long as the Borrower or such Material Subsidiary is the surviving corporation, provided, in each case, that no Default shall have occurred and be continuing at the time of such proposed transaction or would result therefrom.
(c)Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose of, or permit any of its Material Subsidiaries to sell, lease, transfer or otherwise dispose of, any assets, or grant any option or other right to purchase, lease or otherwise acquire any assets to any Person other than the Borrower or any Subsidiary of the Borrower, except (i) dispositions in the ordinary course of business, including, without limitation, sales or other dispositions of electricity and related and ancillary services, other commodities, emissions credits and similar mechanisms for reducing pollution, and damaged, obsolete, worn out or surplus property no longer required or useful in the business or operations of the Borrower or any of its Subsidiaries, (ii) sale or other disposition of patents, copyrights, trademarks or other intellectual property that are, in the Borrower’s reasonable judgment, no longer economically practicable to maintain or necessary in the conduct of the business of the Borrower or its Subsidiaries and any license or sublicense of intellectual property that does not interfere with the business of the Borrower or any Material Subsidiary, (iii) in a transaction authorized by subsection (b) of this Section, (iv) individual dispositions occurring in the ordinary course of business which involve assets with a book value not exceeding $5,000,000, (v) sales, leases, transfers or dispositions of assets during the term of this Agreement having an aggregate book value not to exceed 30% of the total of all assets properly appearing on the most recent balance sheet of the Borrower provided pursuant to Section 4.01(e)(i) or Section 5.01(h)(ii) hereof, (vi) at any time following the consummation of the Four Corners Acquisition, which occurred on December 30, 2013, and the closure by the Borrower of Units 1, 2 and 3 of the Four Corners Power Plant near Farmington, New Mexico, as described in the SEC Reports, disposition of all or any portion of the Borrower’s interests in such Units 1, 2 and 3, and (vii) any Lien permitted under Section 5.02(a).
Section5.03Financial Covenant. So long as any Advance shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment hereunder, the Borrower will maintain a ratio of (a) Consolidated Indebtedness to (b) the sum of Consolidated Indebtedness plus Consolidated Net Worth of not greater than 0.65 to 1.0.
Article VI

EVENTS OF DEFAULT
Section6.01Events of Default. If any of the following events (“Events of Default”) shall occur and be continuing:
(a)The Borrower shall fail to pay when due (i) any principal of any Advance, (ii) any drawing under any Letter of Credit, or (iii) any interest on any Advance or any other fees or other amounts payable under this Agreement or any other Loan Documents, and (in the case of this clause (iii) only), such failure shall continue for a period of three Business Days; or
(b)Any representation or warranty made by the Borrower herein or by the Borrower (or any of its officers) in any certificate or other document delivered in connection with this Agreement or any other Loan Document shall prove to have been incorrect in any material
72

respect when made or deemed made or furnished (other than, for the avoidance of doubt, any Pricing Certificate Inaccuracy; provided that the Borrower complies with Section 1.06(d) with respect to such Pricing Certificate Inaccuracy); or
(c)(i) The Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.17, Section 5.01(d) (as to the corporate existence of the Borrower), Section 5.01(h)(iii), Section 5.01(h)(vi), Section 5.02 or Section 5.03, or (ii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in Section 5.01(e) if such failure shall remain unremedied for 15 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender or (iii) the Borrower shall fail to perform or observe any other term, covenant or agreement contained in this Agreement or any other Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after written notice thereof shall have been given to the Borrower by the Agent or any Lender; or
(d)(i) The Borrower or any of its Material Subsidiaries shall fail to pay (A) any principal of or premium or interest on any Indebtedness that is outstanding in a principal amount of at least $35,000,000 in the aggregate (but excluding Indebtedness outstanding hereunder), or (B) an amount, or post collateral as contractually required in an amount, of at least $35,000,000 in respect of any Hedge Agreement, of the Borrower or such Material Subsidiary (as the case may be), in each case, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Indebtedness or Hedge Agreement; or (ii) any event of default shall exist under any agreement or instrument relating to any such Indebtedness and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or
(e)The Borrower or any of its Material Subsidiaries shall fail to pay any principal of or premium or interest in respect of any operating lease in respect of which the payment obligations of the Borrower have a present value of at least $35,000,000, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in such operating lease, if the effect of such failure is to terminate, or to permit the termination of, such operating lease; or
(f)The Borrower or any of its Material Subsidiaries shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower or any of its Material Subsidiaries seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any Debtor Relief Law, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Borrower or any of its Material Subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or
(g)Judgments or orders for the payment of money that exceeds any applicable insurance coverage (the insurer of which shall be rated at least “A” by A.M. Best Company) by more than
73

$35,000,000 in the aggregate shall be rendered against the Borrower or any Material Subsidiary and such judgments or orders shall continue unsatisfied or unstayed for a period of 45 days; or
(h)(i) Any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding any employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934), directly or indirectly, of 30% or more of the equity securities of PWCC entitled to vote for members of the board of directors of PWCC; or (ii) during any period of 24 consecutive months, a majority of the members of the board of directors of PWCC cease (other than due to death or disability) to be composed of individuals (A) who were members of that board on the first day of such period, (B) whose election or nomination to that board was approved by individuals referred to in clause (A) above constituting at the time of such election or nomination at least a majority of that board or (C) whose election or nomination to that board was approved by individuals referred to in clauses (A) and (B) above constituting at the time of such election or nomination at least a majority of that board; or (iii) PWCC shall cease for any reason to own, directly or indirectly, 80% of the Voting Stock of the Borrower; or
(i)(i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Borrower under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $35,000,000, or (ii) the Borrower or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $35,000,000;
then, and in any such event, the Agent shall at the request, or may with the consent, of the Required Lenders, by notice to the Borrower, (i) declare the obligation of each Lender to make Advances (other than L/C Advances) and of the Issuing Banks to issue Letters of Credit to be terminated, whereupon the same shall forthwith terminate, (ii) declare the Advances, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Advances, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States of America, (A) the obligation of each Lender to make Advances (other than L/C Advances) and of the Issuing Banks to issue Letters of Credit shall automatically be terminated and (B) the Advances, all such interest and all such amounts shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower and (iii) exercise all rights and remedies available to it under this Agreement, the other Loan Documents and applicable Law.
Section6.02Actions in Respect of Letters of Credit upon Default. If any Event of Default shall have occurred and be continuing, the Agent may with the consent, or shall at the request, of the Required Lenders, irrespective of whether it is taking any of the actions described in Section 6.01 or otherwise, (a) make demand upon the Borrower to, and forthwith upon such demand the Borrower will Cash Collateralize the aggregate Available Amount of all Letters of Credit then outstanding (whether or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder) or (b) make such other arrangements in respect of the outstanding Letters of Credit as shall be acceptable to the Required Lenders, provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Bankruptcy Code of the United States of
74

America, the Borrower will Cash Collateralize the aggregate Available Amount of all Letters of Credit then outstanding, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. If at any time the Agent determines that any funds held in the L/C Cash Deposit Account are subject to any right or interest of any Person other than the Agent, the Issuing Banks and the Lenders or that the total amount of such funds is less than the aggregate Available Amount of all Letters of Credit, the Borrower will, forthwith upon demand by the Agent, pay to the Agent, as additional funds to be deposited and held in the L/C Cash Deposit Account, an amount equal to the excess of (a) such aggregate Available Amount over (b) the total amount of funds, if any, then held in the L/C Cash Deposit Account that are free and clear of any such right and interest. Upon the drawing of any Letter of Credit, to the extent funds are on deposit in the L/C Cash Deposit Account, such funds shall be applied to reimburse the Issuing Banks to the extent permitted by applicable Law, or each Lender to the extent such Lender has funded a Revolving Advance in respect of such Letter of Credit. The Borrower hereby grants to the Agent, for the benefit of the Issuing Banks and the Lenders, a Lien upon and security interest in the L/C Cash Deposit Account and all amounts held therein from time to time as security for the L/C Obligations, and for application to the Borrower’s reimbursement obligations as and when the same shall arise. The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. After all such Letters of Credit shall have expired or been fully drawn upon and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such L/C Cash Deposit Account shall be promptly returned to the Borrower.
Article VII

THE AGENT
Section7.01Appointment and Authority. Each of the Lenders (for purposes of this Article, references to the Lenders shall also mean the Issuing Banks) hereby irrevocably appoints Barclays to act on its behalf as the Agent hereunder and under the other Loan Documents and authorizes the Agent to take such actions on its behalf and to exercise such powers as are delegated to the Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as set forth in Section 7.06, the provisions of this Article are solely for the benefit of the Agent and the Lenders, and neither the Borrower nor any of its Affiliates shall have rights as a third party beneficiary of any of such provisions.
Section7.02Rights as a Lender. The Person serving as the Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Agent hereunder and without any duty to account therefor to the Lenders.
Section7.03Exculpatory Provisions. The Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, the Agent:
(a)    shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
75

(b)    shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein), provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable Law; and
(c)    shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.
The Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Agent shall believe in good faith shall be necessary, under the circumstances as provided in Section 6.01 and Section 8.01) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a final, non-appealable judgment by a court of competent jurisdiction. The Agent shall be deemed not to have knowledge of any Default unless and until notice describing such Default is given to the Agent by the Borrower or a Lender.
The Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in Article III or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.
Section7.04Reliance by Agent. The Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of any Advance, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Agent may presume that such condition is satisfactory to such Lender or such Issuing Bank unless the Agent shall have received notice to the contrary from such Lender or such Issuing Bank prior to the making of such Advance or the issuance of such Letter of Credit. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in good faith in accordance with the advice of any such counsel, accountants or experts.
Section7.05Delegation of Duties. The Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Agent. The Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The
76

exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.
Section7.06Resignation of Agent. The Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, with the consent of the Borrower so long as no Event of Default has occurred and is continuing, to appoint a successor, which shall be a bank with an office in the United States of America, or an Affiliate of any such bank with an office in the United States of America. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 45 days after the retiring Agent gives notice of its resignation, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent meeting the qualifications set forth above; provided that if the Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless become effective in accordance with such notice and (1) the retiring Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Agent on behalf of the Lenders under any of the Loan Documents, the retiring Agent shall continue to hold such collateral security until such time as a successor Agent is appointed) and (2) all payments, communications and determinations provided to be made by, to or through the Agent shall instead be made by or to each Lender directly, until such time as the Required Lenders appoint a successor Agent as provided for above in this Section. Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents (if not already discharged therefrom as provided above in this Section). The fees payable by the Borrower to a successor Agent shall be as agreed between the Borrower and such successor. After the retiring Agent’s resignation hereunder and under the other Loan Documents, the provisions of this Article and Section 8.04 shall continue in effect for the benefit of such retiring Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was acting as Agent.
Section7.07Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender or any of their Related Parties and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.
Section7.08No Other Duties, Etc. Anything herein to the contrary notwithstanding, none of the Arrangers, Syndication Agent, Co-Sustainability Structuring Agents, Co-Documentation Agents or other agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Agent or a Lender hereunder.
Section7.09Issuing Banks. Each Issuing Bank shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each Issuing Bank shall have all of the benefits and immunities provided in this Article VII (other than Section 7.02) to the same extent as such provisions apply to the Agent.
77

Section7.10Certain ERISA Matters.
(a)Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower, that at least one of the following is and will be true:
(i)such Lender is not using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Advances, the Letters of Credit or the Commitments,
(ii)the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement,
(iii)(A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Advances, the Letters of Credit, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement, or
(iv)such other representation, warranty and covenant as may be agreed in writing between the Agent, in its sole discretion, and such Lender.
(b)In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Agent, the Arrangers and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Borrower, that none of the Agent or the Arrangers, or any of their respective Affiliates is a fiduciary with respect to the assets of such Lender involved in such Lender’s entrance into, participation in, administration of and performance of the Advances, the Letters of Credit, the Commitments and this Agreement (including in connection with the reservation or exercise of any rights by the Agent under this Agreement, any Loan Document or any documents related to hereto or thereto).
78

(c)The Agent and each Arranger hereby inform the Lenders that each such Person is not undertaking to provide investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Advances, the Letters of Credit, the Commitments and this Agreement, (ii) may recognize a gain if it extended the Advances, the Letters of Credit or the Commitments for an amount less than the amount being paid for an interest in the Advances, the Letters of Credit or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent or collateral agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.
Section7.11Erroneous Payments.
(a)Each Lender hereby agrees that (x) if the Agent notifies such Lender that the Agent has determined in its sole discretion that any funds received by such Lender from the Agent or any of its Affiliates (whether as a payment, prepayment or repayment of principal, interest, fees or otherwise; individually and collectively, a “Payment”) were erroneously transmitted to such Lender (whether or not known to such Lender), and demands the return of such Payment (or a portion thereof), such Lender shall promptly, but in no event later than one Business Day thereafter, return to the Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect, and (y) to the extent permitted by applicable law, such Lender shall not assert, and hereby waives, as to the Agent, any claim, counterclaim, defense or right of set-off or recoupment with respect to any demand, claim or counterclaim by the Agent for the return of any Payments received, including without limitation any defense based on “discharge for value” or any similar doctrine. A notice of the Agent to any Lender under this Section 7.11 shall be conclusive, absent manifest error.
(b)Each Lender hereby further agrees that if it receives a Payment from the Agent or any of its Affiliates (x) that is in a different amount than, or on a different date from, that specified in a notice of payment sent by the Agent (or any of its Affiliates) with respect to such Payment (a “Payment Notice”) or (y) that was not preceded or accompanied by a Payment Notice, it shall be on notice, in each such case, that an error has been made with respect to such Payment. Each Lender agrees that, in each such case, or if it otherwise becomes aware a Payment (or portion thereof) may have been sent in error, such Lender shall promptly notify the Agent of such occurrence and, upon demand from the Agent, it shall promptly, but in no event later than one Business Day thereafter, return to the Agent the amount of any such Payment (or portion thereof) as to which such a demand was made in same day funds, together with interest thereon in respect of each day from and including the date such Payment (or portion thereof) was received by such Lender to the date such amount is repaid to the Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation from time to time in effect.
(c)The Borrower hereby agrees that (x) in the event an erroneous Payment (or portion thereof) is not recovered from any Lender that has received such Payment (or portion thereof) for any
79

reason, the Agent shall be subrogated to all the rights of such Lender with respect to such amount and (y) an erroneous Payment shall not pay, prepay, repay, discharge or otherwise satisfy any Obligations owed by the Borrower, except, in each case of this clause (y), to the extent such erroneous Payment is, and solely with respect to the amount of such erroneous Payment that is, comprised of funds received by the Agent from the Borrower for the purpose of making such erroneous Payment.
(d)Each party’s obligations under this Section 7.11 shall survive the resignation or replacement of the Agent or any transfer of rights or obligations by, or the replacement of, a Lender, the termination of the Commitments or the repayment, satisfaction or discharge of all Obligations under any Loan Document.
(e)For purposes of this Section 7.11, the term “Lender” includes any Issuing Bank.
Article VIII

MISCELLANEOUS
Section8.01Amendments, Etc. Except as provided in Section 2.08(c) with respect to alternate rates of interest and Section 2.21 with respect to the extension of the then-existing Termination Date, no amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall
(a)unless agreed to by each Lender directly affected thereby, (i) reduce or forgive the principal amount of any Advance or the Borrower’s obligations to reimburse any drawing on a Letter of Credit, reduce the rate of or forgive any interest thereon (provided that only the consent of the Required Lenders shall be required to waive the applicability of any post-default increase in interest rates), or reduce or forgive any fees hereunder (other than fees payable to the Agent, the Arrangers, any Issuing Bank or the Swingline Lender, if any, for their own respective accounts), (ii) extend the final scheduled maturity date or any other scheduled date for the payment of any principal of or interest on any Advance, extend the time of payment of any obligation of the Borrower to reimburse any drawing on any Letter of Credit or any interest thereon, extend the expiry date of any Letter of Credit beyond the Letter of Credit Expiration Date, or extend the time of payment of any fees hereunder (other than fees payable to the Agent, the Arrangers, any Issuing Bank or the Swingline Lender, if any, for their own respective accounts), or (iii) reinstate or increase any Revolving Credit Commitment of any such Lender over the amount thereof in effect or extend the maturity thereof (it being understood that a waiver of any condition precedent set forth in Section 3.02 or of any Default, if agreed to by the Required Lenders or all Lenders (as may be required hereunder with respect to such waiver), shall not constitute such an increase);
(b)unless agreed to by all of the Lenders, (i) reduce the percentage of the aggregate Revolving Credit Commitments or of the aggregate unpaid principal amount of the Advances, or the number or percentage of Lenders, that shall be required for the Lenders or any of them to take or approve, or direct the Agent to take, any action hereunder or under any other Loan Document (including as set forth in the definition of “Required Lenders”), (ii) change any other provision of this Agreement or any of the other Loan Documents requiring, by its terms, the consent or approval of all the Lenders for such amendment, modification, waiver, discharge or termination thereof or any consent to any departure by the Borrower therefrom, or (iii) change or waive any provision of Section 2.15, any other provision of this
80

Agreement or any other Loan Document requiring pro rata treatment of any Lenders, or this Section 8.01 or Section 2.19(b); and
(c)unless agreed to by the Issuing Banks, the Swingline Lender, if any, or the Agent in addition to the Lenders required as provided hereinabove to take such action, affect the respective rights or obligations of the Issuing Banks, the Swingline Lender, if any, or the Agent, as applicable, hereunder or under any of the other Loan Documents.
(d)Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) pursuant to an increase in the Revolving Credit Commitment pursuant to Section 2.18 with only the consents prescribed by such Section.
(e)If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement, provided that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower, each Issuing Bank and the Agent shall agree, as of such date, to purchase for cash the Advances and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 8.07, and (ii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Section 2.11 and Section 2.14, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 8.04(e) had the Advances of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.
Section8.02Notices, Etc.
(a)All notices and other communications provided for hereunder shall be either (x) in writing (including facsimile communication) and mailed, faxed or delivered or (y) as and to the extent set forth in Sections 8.02(b) and (c) and in the proviso to this Section 8.02(a), if to the Borrower, at the address specified on Schedule 8.02; if to any Lender, at its Domestic Lending Office; if to the Agent, at the address specified on Schedule 8.02; if to the Swingline Lender, at the address specified by the Swingline Lender to the Borrower and the Agent, and if to any Issuing Bank, at the address specified on Schedule 8.02 or, as to the Borrower or the Agent, at such other address as shall be designated by such party in a written notice to the other parties and, as to each other party, at such other address as shall be designated by such party in a written notice to the Borrower and the Agent. All such notices and communications shall, when mailed or faxed, be effective when deposited in the mails or faxed, respectively, except that notices and communications to the Agent pursuant to Article II, Article III or Article VIII shall not be effective until received by the Agent. Delivery by facsimile of an executed counterpart of any amendment or waiver of any provision of this Agreement or the Notes or of any Exhibit hereto to be executed and delivered hereunder shall be effective as delivery of a manually executed counterpart thereof. Notices delivered through electronic communications to the extent provided in subsection (b) below, shall be effective as provided in such subsection (b). Upon request of
81

the Borrower, the Agent will provide to the Borrower (i) copies of each Administrative Questionnaire or (ii) the address of each Lender.
(b)Notices and other communications to the Lenders, the Agent and the Issuing Banks hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Agent and agreed to by the Borrower, provided that the foregoing shall not apply to notices to any Lender or the Issuing Banks pursuant to Article II if such Lender or the Issuing Banks, as applicable, has notified the Agent and the Borrower that it is incapable of receiving notices under such Article by electronic communication. The Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications. Unless the Agent and the Borrower otherwise agree, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.
(c)The Borrower agrees that the Agent may make materials delivered to the Agent pursuant to Section 5.01(h)(i), Section 5.01(h)(ii) and Section 5.01(h)(iv), as well as any other written information, documents, instruments and other material relating to the Borrower or any of its Subsidiaries and relating to this Agreement, the Notes or the transactions contemplated hereby, or any other materials or matters relating to this Agreement, the Notes or any of the transactions contemplated hereby (collectively, the “Communications”) available to the Lenders by posting such notices on Intralinks or a substantially similar electronic system (the “Platform”). The Borrower acknowledges that (i) the distribution of material through an electronic medium is not necessarily secure and that there are confidentiality and other risks associated with such distribution, (ii) the Platform is provided “as is” and “as available” and (iii) neither the Agent nor any of its Affiliates warrants the accuracy, adequacy or completeness of the Communications or the Platform and each expressly disclaims liability for errors or omissions in the Communications or the Platform. No warranty of any kind, express, implied or statutory, including, without limitation, any warranty of merchantability, fitness for a particular purpose, non-infringement of third party rights or freedom from viruses or other code defects, is made by the Agent or any of its Affiliates in connection with the Platform.
(d)Each Lender agrees that notice to it (as provided in the next sentence) (a “Notice”) specifying that any Communications have been posted to the Platform shall constitute effective delivery of such information, documents or other materials to such Lender for purposes of this Agreement; provided that if requested by any Lender the Agent shall deliver a copy of the Communications to such Lender by e-mail, facsimile or mail. Each Lender agrees (i) to notify the Agent in writing of such Lender’s e-mail address to which a Notice may be sent by electronic transmission (including by electronic communication) on or before the date such Lender becomes a party to this Agreement (and from time to time thereafter to ensure that the Agent has on record an effective e-mail address for such Lender) and (ii) that any Notice may be sent to such e-mail address.
82

(e)The Borrower hereby acknowledges that certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that (w) all Communications that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Communications “PUBLIC,” the Borrower shall be deemed to have authorized the Agent, the Arrangers and the Lenders to treat such Communications as not containing any material non-public information with respect to the Borrower or its securities for purposes of United States of America federal and state securities laws; (y) all Communications marked “PUBLIC” are permitted to be made available through a portion of the Platform designated as “Public Investor;” and (z) the Agent and the Arrangers shall be entitled to treat any Communications that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not marked as “Public Investor.” Notwithstanding the foregoing, the Borrower shall be under no obligation to mark any Communications “PUBLIC.” Notwithstanding anything to the contrary herein, the Borrower and the Agent need not provide to any Public Lender any information, notice, or other document hereunder that is not public information, including without limitation, the Notice of Borrowing and any notice of Default.
Section8.03No Waiver; Cumulative Remedies; Enforcement. No failure by any Lender, any Issuing Bank or the Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Borrower shall be vested exclusively in, and all actions and proceedings at Law in connection with such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with Article VI for the benefit of all the Lenders and the Issuing Banks; provided, however, that the foregoing shall not prohibit (a) the Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Loan Documents, (b) any Issuing Bank from exercising the rights and remedies that inure to its benefit (solely in its capacity as an Issuing Bank) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 8.05 (subject to the terms of Section 2.15), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower under any Debtor Relief Law; and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Loan Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agent pursuant to Article VI and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 2.15, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.
Section8.04Costs and Expenses; Indemnity; Damage Waiver.
(a)The Borrower agrees to pay on demand all costs and expenses of the Agent in connection with the administration, modification and amendment of this Agreement, the Notes and the other Loan Documents to be delivered hereunder, including, without limitation, the reasonable fees and expenses of one law firm acting as counsel for the Agent with respect thereto and with respect to advising the Agent
83

as to its rights and responsibilities under this Agreement. The Borrower further agrees to pay on demand all costs and expenses of the Agent and the Lenders, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the Notes and the other Loan Documents to be delivered hereunder, including, without limitation, reasonable fees and expenses of counsel for the Agent and each Lender in connection with the enforcement of rights under this Section 8.04(a).
(b)The Borrower agrees to indemnify and hold harmless the Agent (and any sub-agent thereof), each Lender, each Arranger, the Syndication Agent, the Co-Sustainability Structuring Agents, the Co-Documentation Agents and each Related Party of any of the foregoing (each, an “Indemnified Party”) from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or proceeding or preparation of a defense in connection therewith, whether based on contract, tort or any other theory), (i) the Notes, this Agreement, any of the transactions contemplated herein or the actual or proposed use of the proceeds of any Advance or Letter of Credit (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), in each case, whether or not the transactions contemplated herein or therein are consummated, or (ii) the actual or alleged presence of Hazardous Materials on any property of the Borrower or any of its Subsidiaries or any Environmental Action relating in any way to the Borrower or any of its Subsidiaries, provided that such indemnity shall not, as to any Indemnified Party, be available to the extent (a) such fees and expenses are expressly stated in this Agreement to be payable by the Indemnified Party, included expenses payable under Section 2.14, Section 5.01(e) and Section 8.07(b) or (b) such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence, willful misconduct or material breach of its obligations under this Agreement, in which case any fees and expenses previously paid or advanced by the Borrower to such Indemnified Party in respect of such indemnified obligation will be returned by such Indemnified Party. In the case of an investigation, litigation or other proceeding to which the indemnity in this Section 8.04(b) applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Borrower, its directors, equityholders or creditors or an Indemnified Party or any other Person, whether or not any Indemnified Party is otherwise a party thereto, and whether or not the transactions contemplated hereby are consummated, provided that if the Borrower and such Indemnified Party are adverse parties in any such litigation or proceeding, and the Borrower prevails in a final, non-appealable judgment by a court of competent jurisdiction, any amounts under this Section 8.04(b) previously paid or advanced by the Borrower to such Indemnified Party pursuant to this Section 8.04(b) will be returned by such Indemnified Party.
(c)To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under subsection (a) or (b) of this Section to be paid by it to the Agent (or any sub-agent thereof), any Issuing Bank or any Related Party of any of the foregoing (and without limiting its obligation to do so), each Lender severally agrees to pay to the Agent (or any such sub-agent), such Issuing Bank or such Related Party, as the case may be, such Lender’s Ratable Share (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount, provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Agent (or any such sub-agent) or such Issuing Bank in its capacity as such, or against any Related Party of any of the foregoing acting for the Agent (or any such sub-agent) or such Issuing Bank in connection with such capacity.
84

(d)Without limiting the rights of indemnification of the Indemnified Parties set forth in this Agreement with respect to liabilities asserted by third parties, each party hereto also agrees not to assert any claim for special, indirect, consequential or punitive damages against the other parties hereto, or any Related Party of any party hereto, on any theory of liability, arising out of or otherwise relating to the Notes, this Agreement, any other Loan Document, any of the transactions contemplated herein or the actual or proposed use of the proceeds of the Advances or the Letters of Credit. No Indemnified Party shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems (including Intralinks, SyndTrak or similar systems) in connection with this Agreement or the other Loan Documents, provided that such indemnity shall not, as to any Indemnified Party, be available to the extent such damages are found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence or willful misconduct.
(e)If any payment of principal of, or Conversion of, any Eurodollar Rate Advance is made by the Borrower to or for the account of a Lender other than on the last day of the Interest Period for such Revolving Advance, as a result of a payment or Conversion pursuant to Section 2.08(e) or (f), Section 2.10 or Section 2.12, acceleration of the maturity of the Revolving Advances pursuant to Section 6.01 or for any other reason, or by an Eligible Assignee to a Lender other than on the last day of the Interest Period for such Revolving Advance upon an assignment of rights and obligations under this Agreement pursuant to Section 8.07 as a result of a demand by the Borrower pursuant to Section 2.19, the Borrower shall, upon demand by such Lender (with a copy of such demand to the Agent), pay to the Agent for the account of such Lender any amounts required to compensate such Lender for any additional losses, costs or expenses that it may reasonably incur as a result of such payment or Conversion, including, without limitation, any loss (excluding loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by any Lender to fund or maintain such Revolving Advance.
(f)Without prejudice to the survival of any other agreement of the Borrower hereunder, the agreements and obligations of the Borrower contained in Section 2.02(c), Section 2.11, Section 2.14 and Section 8.04 shall survive the payment in full of principal, interest and all other amounts payable hereunder and under the Notes.
Section8.05Right of Set-off. Upon (i) the occurrence and during the continuance of any Event of Default and (ii) the making of the request or the granting of the consent specified by Section 6.01 to authorize the Agent to declare the Advances due and payable pursuant to the provisions of Section 6.01, each Lender, each Issuing Bank and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender, such Issuing Bank or any such Affiliate to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or Issuing Bank, whether or not such Lender or Issuing Bank shall have made any demand under this Agreement or such Note and although such obligations may be contingent or unmatured or are owed to a branch or office of such Lender or such Issuing Bank different from the branch or office holding such deposit or obligated on such indebtedness. Each Lender and each Issuing Bank agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and each Issuing Bank under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Lender may have.
85

Section8.06Effectiveness; Binding Effect. Except as provided in Section 3.01, this Agreement shall become effective when it shall have been executed by the Borrower and the Agent and when the Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto and thereafter shall be binding upon and inure to the benefit of the Borrower, the Agent and each Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders (and any purported assignment without such consent shall be null and void).
Section8.07Successors and Assigns.
(a)The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of the Agent and each Lender (and any purported assignment or transfer without such consent shall be null and void) and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an assignee in accordance with the provisions of subsection (b) of this Section, (ii) by way of participation in accordance with the provisions of subsection (d) of this Section, or (iii) by way of pledge or assignment of a security interest subject to the restrictions of subsection (f) of this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in subsection (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of the Agent, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
(b)Any Lender may at any time assign to one or more assignees (other than to an Ineligible Institution) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, Swingline Exposure and the Revolving Advances (including for purposes of this subsection (b), participations in L/C Obligations) at the time owing to it); provided that any such assignment shall be subject to the following conditions:
(i)Minimum Amounts.
(A)    in the case of an assignment of the entire remaining amount of the assigning Lender’s Revolving Credit Commitment and the Revolving Advances at the time owing to it or in the case of an assignment to a Lender, no minimum amount need be assigned; and
(B)    in any case not described in subsection (b)(i)(A) of this Section, the aggregate amount of the Revolving Credit Commitment (which for this purpose includes Revolving Advances outstanding thereunder) or, if the Revolving Credit Commitment is not then in effect, the principal outstanding balance of the Revolving Advances of the assigning Lender subject to each such assignment, determined as of the date the Assignment and Assumption with respect to which such assignment is delivered to the Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date, shall not be less than $5,000,000 unless each of the Agent and, so long as no Event of Default has occurred and is continuing, the Borrower otherwise consents (each such consent not to be unreasonably withheld or delayed).
86

(ii)Proportionate Amounts. Each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Revolving Advances, L/C Obligations, Swingline Exposure or the Revolving Credit Commitment assigned, and each such assignment shall be of a constant, and not a varying, percentage of all rights and obligations under this Agreement;
(iii)Required Consents. No consent shall be required for any assignment except to the extent required by subsection (b)(i)(B) of this Section and, in addition:
(A)    the consent of the Borrower (such consent not to be unreasonably withheld or delayed; provided that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Agent within ten (10) Business Days after having received written notice thereof) shall be required unless (1) an Event of Default has occurred and is continuing at the time of such assignment or (2) such assignment is to a Lender, an Affiliate of a Lender or an Approved Fund;
(B)    the consent of the Agent (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender;
(C)    the consent of each Issuing Bank (such consent not to be unreasonably withheld or delayed) shall be required if such assignment is to a Person that is not a Lender, an Affiliate of a Lender or an Approved Fund with respect to such Lender; and
(D)    the consent of the Swingline Lender, if any, (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under Swingline Advances (whether or not then outstanding).
(iv)Assignment and Assumption. The parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and recordation fee in the amount of $3,500; provided, however, that no such fee shall be payable in the case of an assignment made at the request of the Borrower to an existing Lender. The assignee, if it is not a Lender, shall deliver to the Agent an Administrative Questionnaire.
(v)No Assignment to Ineligible Institutions. No such assignment shall be made to any Ineligible Institution.
Subject to acceptance and recording thereof by the Agent pursuant to subsection (c) of this Section and notice thereof to the Borrower, from and after the effective date specified in each Assignment and Assumption, the assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Section 2.11, Section 2.14 and Section 8.04 with respect to facts and circumstances occurring prior to the effective date of such assignment. Upon request, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this
87

Agreement that does not comply with this subsection shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with subsection (d) of this Section.
(c)Register. The Agent shall maintain at the Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Revolving Credit Commitments of, and principal amounts of the Advances and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.
(d)Participations. Any Lender may at any time, without the consent of, or notice to, the Borrower or the Agent, sell participations to any Person (other than an Ineligible Institution) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment, Swingline Exposure and/or the Revolving Advances (including such Lender’s participations in L/C Obligations) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the Borrower, the Agent, the Lenders and the Issuing Banks shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (iv) no participant under any such participation shall have any right to approve any amendment or waiver of any provision of this Agreement or any Note, or any consent to any departure by the Borrower therefrom, except to the extent that such amendment, waiver or consent would reduce the principal of, or interest on, any Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation, or postpone any date fixed for any payment of principal of, or interest on, any Obligations or any fees or other amounts payable hereunder, in each case to the extent subject to such participation.
Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification addressing the matters set forth in clause (iv) above to the extent subject to such participation. Subject to subsection (e) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.11, Section 2.14 and Section 8.04(e) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (b) of this Section. To the extent permitted by Law, each Participant also shall be entitled to the benefits of Section 8.05 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Advances or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Advances or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Advance or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent
88

manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register.
(e)Limitations upon Participant Rights. A Participant shall not be entitled to receive any greater payment under Section 2.11 or Section 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.14(e) as though it were a Lender.
(f)Certain Pledges. Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank or other central banking authority; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
(g)Resignation as an Issuing Bank after Assignment. Notwithstanding anything to the contrary contained herein, if at any time any Issuing Bank assigns all of its Revolving Credit Commitment and Revolving Advances pursuant to subsection (b) above, such Issuing Bank may, upon 30 days’ notice to the Borrower and the Lenders, resign as an Issuing Bank. If any Issuing Bank resigns, it shall retain all the rights, powers, privileges and duties of an Issuing Bank hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an Issuing Bank and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Advances or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).
(h)The words “execution,” “signed,” “signature,” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent.
Section8.08Confidentiality. Neither the Agent nor any Lender may disclose to any Person any confidential, proprietary or non-public information of the Borrower furnished to the Agent or the Lenders by the Borrower (such information being referred to collectively herein as the “Borrower Information”), except that each of the Agent and each of the Lenders may disclose Borrower Information (i) to its and its Affiliates’ employees, officers, directors, agents and advisors having a need to know in connection with this Agreement (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Borrower Information and instructed to keep such Borrower Information confidential on substantially the same terms as provided herein), (ii) to the extent requested by any regulatory authority or self-regulatory body, (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) to any other party to this Agreement, (v) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (vi) subject to an agreement containing provisions
89

substantially the same as those of this Section 8.08, (A) to any assignee or participant or prospective assignee or participant, (B) to any direct, indirect, actual or prospective counterparty (and its advisor) to any swap, derivative or securitization transaction related to the obligations under this Agreement and (C) to any credit insurance provider relating to the Borrower and its Obligations, (vii) to the extent such Borrower Information (A) is or becomes generally available to the public on a non-confidential basis other than as a result of a breach of this Section 8.08 by the Agent or such Lender or their Related Parties, or (B) is or becomes available to the Agent or such Lender on a nonconfidential basis from a source other than the Borrower (provided that the source of such information was not known by the recipient after inquiry to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Borrower or any other Person with respect to such information) and (viii) with the consent of the Borrower. The obligations under this Section 8.08 shall survive for two calendar years after the date of the termination of this Agreement.
Section8.09Governing Law. This Agreement and the Notes shall be governed by, and construed in accordance with, the Laws of the State of New York.
Section8.10Counterparts; Integration. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic imaging means shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” and words of like import in this Agreement or in any Loan Documents shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state Laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require the Agent to accept electronic signatures in any form or format without its prior written consent. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof.
Section8.11Jurisdiction, Etc.
(a)Each of the parties hereto hereby submits to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in the Borough of Manhattan in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby agrees that all claims in respect of any such action or proceeding may be heard and determined in any such New York State court or, to the extent permitted by Law, in such federal court.
(b)Each of the parties hereto irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the Notes in any New York State court or federal court of the United States of America sitting in the Borough of Manhattan in New York City, and any appellate court from any thereof. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
90

Section8.12Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to the Agent, any Issuing Bank or any Lender, or the Agent, any Issuing Bank or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent, such Issuing Bank or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and each Issuing Bank severally agrees to pay to the Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect. The obligations of the Lenders and the Issuing Banks under clause (b) of the preceding sentence shall survive the payment in full of the Obligations and the termination of this Agreement.
Section8.13Patriot Act and Beneficial Ownership Regulation. The Agent and each Lender hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act and the Beneficial Ownership Regulation, it is required to obtain, verify and record information that identifies each borrower (including the Borrower), guarantor or grantor (the “Loan Parties”), which information includes the name and address of each Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the PATRIOT Act and the Beneficial Ownership Regulation. The Borrower shall provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Agent or any Lender in order to assist the Agent and such Lender in maintaining compliance with the PATRIOT Act and the Beneficial Ownership Regulation.
Section8.14Waiver of Jury Trial. EACH OF THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR ANY OTHER LOAN DOCUMENT OR THE ACTIONS OF THE BORROWER, THE AGENT OR ANY LENDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section8.15No Advisory or Fiduciary Responsibility. In connection with all aspects of each transaction contemplated hereby, the Borrower acknowledges and agrees that: (i) the credit facilities provided for hereunder and any related arranging or other services in connection therewith (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document) are an arm’s-length commercial transaction between the Borrower, on the one hand, and the Agent, each of the Lenders and each of the Arrangers, on the other hand, and the Borrower is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents (including any amendment, waiver or other modification hereof or thereof); (ii) in connection with the process leading to such transaction, each of the Agent, the Lenders and the Arrangers is and has been acting solely as a principal and is not the financial advisor, agent or fiduciary, for the Borrower or any of its Affiliates, stockholders, creditors or employees or any other Person; (iii) neither the Agent nor any Lender or Arranger has assumed or will assume an advisory, agency or fiduciary responsibility in favor of the Borrower with respect to any of the transactions contemplated hereby or the process leading thereto, including with respect to any amendment, waiver or other modification hereof or of any other Loan Document (irrespective of whether the Agent or any Lender or Arranger has advised or is currently advising the Borrower or any of its
91

Affiliates on other matters) and neither the Agent nor any Lender or Arranger has any obligation to the Borrower with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; (iv) the Agent, each of the Lenders and the Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Agent nor any Lender or Arranger has any obligation to disclose any of such interests by virtue of any advisory, agency or fiduciary relationship; and (v) the Agent and each Lender and Arranger have not provided and will not provide any legal, accounting, regulatory or tax advice with respect to any of the transactions contemplated hereby (including any amendment, waiver or other modification hereof or of any other Loan Document) and the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate. The Borrower hereby waives and releases, to the fullest extent permitted by Law, any claims that it may have against the Agent and each Lender and Arranger with respect to any breach or alleged breach of agency or fiduciary duty in connection with the Loan Documents.
Section8.16Survival of Representations and Warranties. All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon by the Agent and each Lender, regardless of any investigation made by the Agent or any Lender or on their behalf, and shall continue in full force and effect as long as any Advance or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
Section8.17Severability. If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal, invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal, invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section8.18Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:
(a)the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b)the effects of any Bail-In Action on any such liability, including, if applicable:
(i)a reduction in full or in part or cancellation of any such liability;
(ii)a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of
92

ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or
(iii)the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.
Section8.19Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Hedge Agreements or any other agreement or instrument that is a QFC (such support, “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):
(a)In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to an Affected Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.
(b)As used in this Section 8.19, the following terms have the following meanings:
“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.
“Covered Entity” means any of the following:
(i)a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b)
(ii)a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or
(iii)a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).
93

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

94

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.
ARIZONA PUBLIC SERVICE COMPANY
By    /s/ Andrew Cooper            
Name:    Andrew Cooper
Title:    Vice President and Treasurer

95

ADMINISTRATIVE AGENT:    BARCLAYS BANK PLC, as Agent, Co-Sustainability     Structuring Agent, Issuing Bank and Lender

By    /s/ Sam Yoo                
Name:     Sam Yoo            
Title:    Managing Director        

96

MIZUHO BANK, LTD., as Syndication Agent, Co-Sustainability
Structuring Agent, Issuing Bank and Lender

By    /s/ Edward Sacks            
Name:    /s/ Edward Sacks        
Title:    Executive Director        

97

LENDERS:    Bank of America, as a Lender and as an Issuing Bank

By    /s/ Michael Moulton            
Name:    Michael Moulton            
Title:    Vice President            

98

LENDERS:    BNP Paribas, as a Lender and as an Issuing Bank

By    /s/ Nicole Rodriquez            
Name:    Nicole Rodriguez            
Title:    Director            

By    /s/ Christopher Sked            
Name:    Christopher Sked            
Title:    Managing Director        

99

LENDERS:    JPMorgan Chase Bank, N.A as a Lender and as an
Issuing Bank

By    /s/ Nancy R. Barwig            
Name:    Nancy R. Barwig            
Title:    Executive Director        

100

LENDERS:    MUFG Bank, Ltd., as a Lender and as an Issuing Bank

By    /s/ Ricky Vargas            
Name:    Ricky Vargas            
Title:    Vice President            

101

LENDERS:    Truist Bank, as a Lender

By    /s/ Andrew Johnson            
Name:    Andrew Johnson            
Title:    Managing Director        
102

LENDERS:    Wells Fargo Bank, National Association, as a Lender
and as an Issuing Bank

By    /s/ Gregory R. Gredvig            
Name:    Gregory R. Gredvig            
Title:    Director            

103

LENDERS:    Bank of Montreal, Chicago Branch, as a Lender

By    /s/ Darren Thomas            
Name:    Darren Thomas                
Title:    Director            

104

LENDERS:    The Bank of New York Mellon, as a Lender

By    /s/ Molly H. Ross            
Name:    Molly H. Ross                
Title:    Vice President            

105

LENDERS:    The Bank of Nova Scotia, as a Lender

By    /s/ David Dewar            
Name:    David Dewar                
Title:    Director            
106

LENDERS:    CITIBANK, N.A., as a Lender

By    /s/ Hans Lin                
Name:    Hans Lin                
Title:    Director            

107

LENDERS:    KEYBANK NATIONAL ASSOCIATION, as a
Lender

By    /s/ Keven D. Smith            
Name:    Keven D. Smith                
Title:    Senior Vice President        

108

LENDERS:    PNC Bank, National Association, as a Lender

By    /s/ Richard G. Tutich            
Name:    Richard G. Tutich            
Title:    Vice President            

109

LENDERS:    Royal Bank of Canada, as a Lender

By    /s/ Martina Wellik            
Name:    Martina Wellik                
Title:    Authorized Signatory        

110

LENDERS:    TD Bank, N.A. as a Lender

By    /s/ Steve Levi                
Name:    Steve Levi                
Title:    Senior Vice President        

111

LENDERS:    U.S. Bank National Bank, as a Lender

By    /s/ Ryan Hutchins            
Name:    Ryan Hutchins                
Title:    Senior Vice President        
112

SCHEDULE 1.01(a)
COMMITMENTS AND RATABLE SHARES

Bank	Revolving Credit
Commitment	Ratable Share	
Barclays Bank PLC	$35,000,000.04	7.00%	
Mizuho Bank, Ltd.	$35,000,000.00	7.00%	
Bank of America, N.A.	$35,000,000.00	7.00%	
BNP Paribas	$35,000,000.00	7.00%	
JPMorgan Chase Bank, N.A.	$35,000,000.00	7.00%	
MUFG Union Bank, N.A.	$35,000,000.00	7.00%	
Truist Bank	$35,000,000.00	7.00%	
Wells Fargo Bank, National Association	$35,000,000.00	7.00%	
Bank of Montreal, Chicago Branch	$24,444,444.44	4.89%	
The Bank of New York Mellon	$24,444,444.44	4.89%	
The Bank of Nova Scotia	$24,444,444.44	4.89%	
Citibank, N.A.	$24,444,444.44	4.89%	
KeyBank National Association	$24,444,444.44	4.89%	
PNC Bank, National Association	$24,444,444.44	4.89%	
Royal Bank of Canada	$24,444,444.44	4.89%	
TD Bank, N.A.	$24,444,444.44	4.89%	
U.S. Bank National Association	$24,444,444.44	4.89%	
TOTAL	$500,000,000.00	100.000000000%	

SCHEDULE 1.01(b)
SUSTAINABILITY TABLE

KPI Metric	Annual Sustainability Targets:
Carbon Intensity Targets and OSHA Incident Targets	
Reference Year	2021	2022	2023	2024	2025		
Carbon Intensity Target (Minimum)	599	592	578	540	491		
Carbon Intensity Target (Maximum)	732	723	706	660	600		
OSHA Incident Target (Minimum)	31	31	31	31	31		
OSHA Incident Target (Maximum)	37	37	37	37	37		

The OSHA Incident Amount for the fiscal year ending December 31, 2019 is 41.
The OSHA Incident Amount for the fiscal year ending December 31, 2020 is 25, excluding COVID-19.

SCHEDULE 4.01(j)
SUBSIDIARIES1

Bixco, Inc.
Axiom Power Solutions, Inc.
PWE Newco, Inc.

1 The Borrower’s three nuclear decommissioning trusts relating to PVNGS may also be deemed to be subsidiaries under a literal reading of the definition.

SCHEDULE 4.01(k)
EXISTING INDEBTEDNESS

None.

SCHEDULE 8.02
CERTAIN ADDRESSES FOR NOTICES

BORROWER:
Arizona Public Service Company
400 North 5th Street
Mail Station 9040
Phoenix, AZ 85004
Attention: Treasurer
Telephone: (602) 250-3300
Telecopier: (602) 250-3920
Electronic: Andrew.Cooper@pinnaclewest.com
AGENT:
Agent’s Office
(for payments and Requests for Credit Extensions):
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attention: Philip Naber
Telephone: (212) 526-7375
Email: Philip.Naber@barclays.com

with copies to:

Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019
Attention: Bank Debt Management
Telephone: (212) 526-9531
Email: LTMNY@barclays.com

Agent’s Account/Barclays Bank Agency Service Wiring Information
Barclays Bank PLC
New York, New York
ABA: 026002574               
Account Number: 050-019104  
Account Name: Clad Control Account
Ref: Pinnacle West Capital Corporation

Other Notices as Agent:
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attention: Philip Naber
Telephone: (212) 526-7375
Email: Philip.Naber@barclays.com

with copies to:

Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019
Attention: Bank Debt Management
Telephone: (212) 526-9531
Email: LTMNY@barclays.com

ISSUING BANKS:
Barclays Bank PLC
Barclays Bank PLC
745 Seventh Avenue
New York, NY 10019 USA
Attn. US Letter of Credit Team
Email xraletterofcredit@barclays.com

Mizuho Bank, Ltd.

Mizuho Bank, Ltd.
1800 Plaza Ten
Harborside Financial Ctr.
Jersey City, NJ 07311
Attention: Hyunsook (Sophia) Hwang
Telephone: 201-626-9416
Facsimile: 201-626-9941
Email: LAU_USCORP3@MIZUHOCBUS.COM

Bank of America, N.A.

Bank of America, N.A.
100 N. Tryon Street
Charlotte, NC 28255-0001
Attention: William A. Merritt, III
Telephone: (980) 386-9762
Facsimile: (980) 683-6339
E-mail: william.merritt@baml.com

BNP Paribas

BNP Paribas
c/o BNP Paribas RCC, Inc.
Newport Tower – Suite 188
525 Washington Boulevard
Jersey City, New Jersey 07310
Attn: Letters of Credit
E-mail: nyls.agency.support@us.bnpparibas.com
With a cc to: NYTFStandby@us.bnpparibas.com

JPMorgan Chase Bank, N.A.

JPMorgan Chase Bank, N.A.

8181 Communications Pkwy
Plano, TX 75024
Attention: Nancy R. Barwig
Telephone: (972) 324-1721
Facsimile: (312) 732-1762
E-mail: nancy.r.barwig@jpmorgan.com
With a cc to: cb.lc.service.team@chase.com

MUFG Union Bank, N.A.

MUFG Union Bank, N.A.
1221 Avenue of the Americas
New York, NY 10020-1104
Facsimile: 201-521-2304; 201-521-2305        
E-Mail: 2015212304@njhr2163.btmna.com; irisuscb@us.mufg.jp

Truist Bank

Truist Securities, Inc.
Truist Bank
3333 Peachtree Road
Atlanta, GA 30326
Attention: Andrew Johnson
Telephone: (404) 439-7451
Facsimile: (404) 439-7470
E-mail: Andrew.johnson@truist.com

Wells Fargo Bank, National Association

Wells Fargo Bank, N.A.
Wholesale Loan Services
7711 Plantation Road
MAC R4058-010
Roanoke, VA  24019
Attention: Tammy Pentecost
Telephone: 540-759-3118 
Facsimile: 866-270-7214
E-mail: tammy.pentecost@wellsfargo.com
With a cc to: sheila.shaffer@wellsfargo.com

EXHIBIT A — FORM OF
PROMISSORY NOTE

______________, 20__

FOR VALUE RECEIVED, the undersigned, ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation (the “Borrower”), hereby promises to pay to the order of _______ or its registered assigns (the “Lender”), in accordance with the provisions of the Credit Agreement (as hereinafter defined), the principal amount of each Advance from time to time made by the Lender to the Borrower pursuant to the Five-Year Credit Agreement dated as of May 28, 2021 among the Borrower, the Lender and certain other lenders parties thereto, Barclays Bank PLC, as Agent for the Lender and such other lenders, and the issuing banks and other agents party thereto (as amended or modified from time to time, the “Credit Agreement”; the terms defined therein being used herein as therein defined) outstanding on such date.
The Borrower promises to pay interest on the unpaid principal amount of each Advance from the date of such Advance until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the United States of America to the Agent for the account of the Lender in same day funds at the address and account specified on Schedule 8.02. Each Advance owing to the Lender by the Borrower pursuant to the Credit Agreement, and all payments made on account of principal thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement. The Credit Agreement, among other things, (i) provides for the making of Advances by the Lender to the Borrower from time to time in an aggregate amount not to exceed at any time the Lender’s Unused Commitment, the indebtedness of the Borrower resulting from each such Advance being evidenced by this Promissory Note and (ii) contains provisions for acceleration of the maturity hereof upon the happening of certain stated events and also for prepayments on account of principal hereof prior to the maturity hereof upon the terms and conditions therein specified.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
ARIZONA PUBLIC SERVICE COMPANY

By                        
 Name:                    
 Title:                    
A-1

ADVANCES AND PAYMENTS OF PRINCIPAL

															
Date	Amount of Advance	Amount of Principal Paid or Prepaid	Unpaid Principal Balance	Notation
Made By	

A-2

EXHIBIT B — FORM OF NOTICE OF
BORROWING

Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below

Attention: Loan Operations

[Date]

Ladies and Gentlemen:

The undersigned, Arizona Public Service Company, refers to the Five-Year Credit Agreement, dated as of May 28, 2021 (as amended or modified from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the undersigned, certain Lenders parties thereto, Barclays Bank PLC, as Agent for said Lenders and the Issuing Banks and other agents party thereto, and hereby gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement that the undersigned hereby requests a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 2.02(a) of the Credit Agreement:
(i)    The Business Day of the Proposed Borrowing is ____________, 20___.
(ii)    The Type of Revolving Advances comprising the Proposed Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii)    The aggregate amount of the Proposed Borrowing is $_____________.
[(iv)    The initial Interest Period for each Eurodollar Rate Advance made as part of the Proposed Borrowing is ___month[s].
The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Borrowing:
(A)    the representations and warranties contained in Section 4.01 (other than Sections 4.01(k), 4.01(e)(ii) and 4.01(f)(ii)) of the Credit Agreement are correct, before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date;
(B)    no event has occurred and is continuing, or would result from such Proposed Borrowing or from the application of the proceeds therefrom, that constitutes a Default;
(C)    all required regulatory authorizations including the 2020 Order and/or any Subsequent Order in respect of the Proposed Borrowing have been obtained and are in full force and effect and, before and after giving effect to the Proposed Borrowing and to the application of
B-1

the proceeds therefrom, the Borrower is in compliance with the provisions of the applicable order; and
(D)    before and after giving effect to the Proposed Borrowing and to the application of the proceeds therefrom, as though made on and as of such date, the Indebtedness of the Borrower does not exceed that permitted by (i) applicable resolutions of the Board of Directors of the Borrower, (ii) applicable Arizona Laws, or (iii) the 2020 Order or any Subsequent Order, whichever is in force and effect at such time.
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY

By                        
 Name:                    
 Title:                    
B-2

EXHIBIT C — FORM OF
ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. Annex 1 attached hereto (the “Standard Terms and Conditions”) is hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.
For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date referred to below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including without limitation any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable Law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at Law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the “Assigned Interest”). Each such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor. Assignee shall deliver (if it is not already a Lender) to the Agent an Administrative Questionnaire.
1.Assignor: ________________________________
2.Assignee: ________________________________
[and is an Affiliate of [identify Bank]2]
3.Borrower: Arizona Public Service Company
4.Agent: Barclays Bank PLC, as the administrative agent under the Credit Agreement
5.Credit Agreement: The Five-Year Credit Agreement dated as of May 28, 2021, by and among the Borrower, the Lenders party thereto, the Agent and the Issuing Banks and other agents party thereto.
6.Assigned Interest:

2 Select as applicable.
C-1

												
Aggregate Amount
of Commitment for
all Lenders	Amount of Commitment Assigned	Percentage Assigned of Commitment3	CUSIP Number	
				
$____________	$____________	___________%		

[7. Trade Date: ]4
Effective Date: ___, 20___[TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR
[NAME OF ASSIGNOR]

By                        
 Name:                    
 Title:                    
ASSIGNEE
[NAME OF ASSIGNEE]

By                        
 Name:                    
 Title:                    
[Consented to and]5 Accepted:
BARCLAYS BANK PLC, as Agent

By ___________________________
Name:
Title:

[Consented to:]6
[BARCLAYS BANK PLC, as Issuing Bank]

By ___________________________
Name:
Title:

3 Set forth, to at least 9 decimals, as a percentage of the Commitment of all Banks thereunder.
4 To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.
5 To be added only if the consent of the Agent is required by the terms of the Credit Agreement.
6 To be added only if the consent of the Borrower and/or other parties (e.g. Issuing Bank) is required by the terms of the Credit Agreement.
C-2

[MIZUHO BANK, LTD., as Issuing Bank]

By ___________________________
Name:
Title:

[BANK OF AMERICA, N.A., as Issuing Bank]

By ___________________________
Name:
Title:

[BNP PARIBAS, as Issuing Bank]

By ___________________________
Name:
Title:

[JPMORGAN CHASE BANK, N.A., as Issuing Bank]

By ___________________________
Name:
Title:

[MUFG UNION BANK, N.A., as Issuing Bank]

By ___________________________
Name:
Title:

[TRUIST BANK, as Issuing Bank]

By ___________________________
Name:
Title:

[WELLS FARGO BANK, NATIONAL ASSOCIATION, as Issuing Bank]

By ___________________________
Name:
Title:

ARIZONA PUBLIC SERVICE COMPANY

By ___________________________
Name:
Title:

C-3

ANNEX 1 TO ASSIGNMENT AND ASSUMPTION
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1.    Representations and Warranties.
1.1    Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents, (iii) the financial condition of the Borrower, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrower of any of its obligations under any Loan Document.
1.2    Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Eligible Assignee under Section 8.07 of the Credit Agreement (subject to such consents, if any, as may be required under Section 8.07 of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements referred to in Section 4.01(e) or delivered pursuant to Section 5.01(h), as applicable, thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, (vi) it has, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, and (vii) if it is a foreign lender, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.
2.    Payments. From and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other
C-4

amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.
3.    General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by facsimile shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the Law of the State of New York.
C-5

EXHIBIT D — FORM OF PRICING CERTIFICATE

Barclays Bank PLC, as Agent
for the Lenders parties
to the Credit Agreement
referred to below

Attention: Loan Operations

[Date]

Ladies and Gentlemen:

Please refer to the Five-Year Credit Agreement, dated as of May 28, 2021 (as amended or modified from time to time, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among Arizona Public Service Company, as Borrower, certain Lenders party thereto, Barclays Bank PLC, as Agent for said Lenders and the Issuing Banks and other agents party thereto. This Pricing Certificate (this “Certificate”) is being delivered pursuant to Section 1.06 of the Credit Agreement.
The undersigned hereby certifies solely in [his/her] capacity as [insert title of officer] of the Borrower and not in an individual capacity (and without personal liability) that:
1.    I am the duly elected [insert title of officer] of the Borrower, and I am authorized to deliver this Certificate on behalf of the Borrower;
2.    The calculation of Carbon Intensity (including the Energy Efficiency and Distributed Generation Amounts), the OSHA Incident Amount and the Sustainability Margin Adjustment, in each case, for the 20[__] Reference Year, and attached hereto as Annex A, are true and correct as of the date hereof and evidences the Borrower’s qualification for a Sustainability Margin Adjustment (x) with respect to Eurodollar Rate Advances and Base Rate Advances, equal to [____]% per annum and (y) with respect to the Commitment Fee, equal to  [____]% per annum.
3.    The public reporting of the information set forth on Annex A for such Reference Year can be found at the following website of PWCC: [____________________].
Very truly yours,
ARIZONA PUBLIC SERVICE COMPANY

By    _________________            
 Name:    _________________        
 Title:    _________________        
D-1

ANNEX A

Carbon Intensity, OSHA Incident Amount and the Sustainability Margin Adjustment
D-2

KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the _____ day of ____________, 2021, by and between Pinnacle West Capital Corporation, an Arizona corporation (hereinafter referred to as the “Company”) and ___________ (hereinafter referred to as the “Executive”):
W I T N E S S E T H
WHEREAS, the Executive is employed by the Company, in an executive capacity, possesses intimate knowledge of the business and affairs of the Company, and has acquired certain confidential information and data with respect to the Company;
WHEREAS, the Company desires to insure, insofar as possible, that the Company will continue to have the benefit of the Executive’s services and to protect the confidential information and goodwill of the Company;
WHEREAS, the Company recognizes that circumstances may arise in which a change in the control of the Company or Arizona Public Service Company, a subsidiary of the Company, through acquisition or otherwise occurs thereby causing uncertainty of employment without regard to the Executive’s competence or past contributions which uncertainty may result in the loss of valuable services of the Executive to the detriment of the Company and its shareholders, and the Company and the Executive wish to provide reasonable security to the Executive against changes in the Executive’s relationship with the Company in the event of any such change in control;
WHEREAS, both the Company and the Executive are desirous that a proposal for any change of control or acquisition will be considered by the Executive objectively and with reference only to the business interests of the Company and its shareholders;
WHEREAS, the Executive will be in a better position to consider the best interests of the Company if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows:
1.Definitions.
(a)“Accrued Benefits” shall mean the benefits payable to the Executive as described in Section 6(a).
(b)“Act” shall mean the Securities Exchange Act of 1934.

(c)“Affiliate” shall mean (i) a corporation other than the Company that is a member of a “controlled group of corporations” (within the meaning of Section 414(b) of the Code as modified by Section 415(h) of the Code) or (ii) a group of trades or businesses under common control (within the meaning of Section 414(c) of the Code as modified by Section 415(h) of the Code) that also includes the Company as a member. For purposes of determining whether a transaction or event constitutes a Change of Control within the meaning of Section 1(g), “Affiliate” status shall be determined on the day immediately preceding the date of the transaction or event.
(d)“APS” shall mean Arizona Public Service Company, a subsidiary of the Company.
(e)“Beneficial Owner” shall have the same meaning as given to that term in Rule 13d-3 of the General Rules and Regulations of the Act, provided that any pledgee of the voting securities of the Company or APS shall not be deemed to be the Beneficial Owner thereof prior to its disposition of, or acquisition of voting rights with respect to, such securities.
(f)“Cause” shall be limited to (i) the engaging by the Executive in conduct which has caused demonstrable and serious injury to the Employer, monetary or otherwise, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action, suit or proceeding, brought by the Company or an Affiliate, the purpose of which is to establish “Cause” under this Agreement; (ii) conviction of a felony, as evidenced by a binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, which the Employer determines has a significant adverse impact on it in the conduct of its business; or (iii) unreasonable neglect or refusal by the Executive to perform the Executive’s duties or responsibilities (unless significantly changed without the Executive’s consent).
(g)“Change of Control” shall mean one (1) or more of the following events:
(i)Any Person, other than an Affiliate, through a transaction or series of transactions, is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company or APS representing twenty percent (20%) or more of the combined voting power of the then outstanding securities of the Company or APS, as the case may be; provided, however, that, for purposes of this Section 1(g), any acquisition directly from the Company shall not constitute a Change of Control;
(ii)A merger or consolidation of (A) the Company with any other corporation which would result in (1) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting
     -2-

securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an Affiliate, less than sixty percent (60%) of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation or (2) less than a majority of the members of the board of directors of the parent (or, if there is no parent, the surviving entity) following such merger or consolidation being members of the Company Incumbent Board (as defined below) at the time of such Company Incumbent Board’s approval of the execution of the initial agreement providing for such merger or consolidation or (B) APS with any other corporation which would result in (1) the voting securities of APS outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or an Affiliate, less than sixty percent (60%) of the combined voting power of the securities of APS or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation or (2) less than a majority of the members of the board of directors of the parent (or, if there is no parent, the surviving entity) following such merger or consolidation being members of the APS Incumbent Board (as defined below) at the time of such APS Incumbent Board’s approval of the execution of the initial agreement providing for such merger or consolidation; provided that, for purposes of this subparagraph (ii), a merger or consolidation effected to implement a recapitalization of the Company or of APS (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company or of APS representing twenty percent (20%) or more of the combined voting power of the then outstanding securities of the Company or of APS (excluding any securities acquired by that Person directly from the Company or an Affiliate) shall not result in a Change of Control;
(iii)The sale, transfer or other disposition of all or substantially all of the assets of either the Company or APS to a Person other than the Company or an Affiliate; or
(iv)Individuals who, as of June 23, 2021, constitute the Board of Directors of the Company (the “Company Incumbent Board”) or of APS (the “APS Incumbent Board”) cease for any reason to constitute at least two-thirds (2/3) of the members of the Company or APS Board of Directors, as the case may be; provided, however, that for purposes of this subparagraph (iv), (A)(1) any person becoming a member of the Company Board of Directors after June 23, 2021 whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds (2/3) of the members then comprising the Company Incumbent Board will be considered as though such person were a member of the Company Incumbent Board and (2) the Company
     -3-

Incumbent Board shall not include a director whose initial assumption of office as a director was in connection with an actual or threatened election contest relating to the election of directors; and (B)(1) any person becoming a member of the APS Board of Directors after June 23, 2021 whose election, or nomination for election by APS’ shareholder(s), was approved by a vote of at least two-thirds (2/3) of the members then comprising the APS Incumbent Board or by the Company, as a majority shareholder of APS, will be considered as though such person were a member of the APS Incumbent Board and (2) the APS Incumbent Board shall not include a director whose initial assumption of office as a director was in connection with an actual or threatened election contest relating to the election of directors.
(h)“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(i)“Disability” shall have the same meaning as given to that term in the applicable long-term disability plan maintained by the Company or the Employer for employees.
(j)“Employer” shall mean the Company, and upon the transfer of the Executive to an Affiliate, “Employer” shall mean such Affiliate.
(k)“Employment Period” shall mean the period commencing on the date of a Change of Control and ending on the second anniversary of such date.
(l)“Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.
(m)“Good Reason” shall mean:
(i)A material diminution in Executive’s compensation;
(ii)A material diminution in Executive’s authority, duties, or responsibilities;
(iii)A material diminution in the authority, duties, or responsibilities of the supervisor to whom Executive is required to report, including a requirement that Executive report to a corporate officer or employee instead of reporting directly to the Board;
(iv)A material diminution in the budget over which Executive retains authority;
(v)A material change in the geographic location at which Executive must perform the service; or
     -4-

(vi)Any other action or inaction that constitutes a material breach by the Company of this Agreement.
(n)“Parachute Value” of a Payment shall mean the Value of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2), as determined by the Accounting Firm (as defined in Section 26 of this Agreement) for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.
(o)A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, whether paid or payable pursuant to this Agreement or otherwise.
(p)“Person” shall mean any individual, partnership, joint venture, association, trust, corporation or other entity (including a “group” as defined in Section 13(d)(3) of the Act), other than an employee benefit plan of the Company or an Affiliate or an entity organized, appointed or established pursuant to the terms of any such benefit plan.
(q)“Safe Harbor Amount” means 2.99 times the Executive’s “base amount,” within the meaning of Section 280G(b)(3) of the Code.

(r)“Termination Date” shall mean, except as otherwise provided in Section 12, (i) the Executive’s date of death; (ii) the date of the Executive’s voluntary early retirement as agreed upon in writing by the Employer and the Executive; (iii) sixty (60) days after the delivery of the Notice of Termination terminating the Executive’s employment on account of Disability pursuant to Section 9, unless the Executive returns full-time to the performance of his or her duties prior to the expiration of such period; (iv) the date of the Notice of Termination if the Executive’s employment is terminated by the Executive voluntarily other than for Good Reason; and (v) sixty (60) days after the delivery of the Notice of Termination if the Executive’s employment is terminated by the Employer (other than by reason of Disability) or by the Executive for Good Reason.
(s)“Termination Payment” shall mean the amount described in Section 6(b).
(t)“Value” of a Payment shall mean the economic present value of a Payment as of the date of the Change of Control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.
2.Impact on Employment. The Employer and the Executive shall retain the right to terminate the employment of the Executive at any time and for any reason prior to a Change of Control. If a Change of Control occurs when the Executive is employed by the Employer, the Employer will continue thereafter to employ the Executive during the Employment Period.
     -5-

3.Duties. During the Employment Period, the Executive shall, in the same capacities and positions held by the Executive at the time of such Change of Control or in such other capacities and positions as may be agreed to by the Employer and the Executive in writing, devote the Executive’s reasonable best efforts, attention and skill to the business and affairs of the Company, as such business and affairs now exist and as they may hereafter be conducted. The services which are to be performed by the Executive hereunder are to be rendered at an employment location which is not more than seventy-five (75) miles from the Executive’s employment location on the date of the Change of Control, or in such other place or places as shall be mutually agreed upon in writing by the Executive and the Employer from time to time. The Executive shall not be required to be absent from such employment location for more than forty-five (45) consecutive days in any fiscal year without the Executive’s consent.
4.Compensation. During the Employment Period, the Executive shall be compensated as follows:
(a)The Executive shall receive, at such intervals and in accordance with such standard policies as may be in effect on the date of the Change of Control, an annual salary not less than the Executive’s annual salary as in effect as of the date of the Change of Control, subject to adjustment as provided in Section 5;
(b)The Executive shall be reimbursed, at such intervals and in accordance with such standard policies as may be in effect on the date of the Change of Control, for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive on behalf of the Employer, including travel expenses;
(c)The Executive shall be included to the extent eligible thereunder in any and all plans providing general benefits for the Employer’s employees, including but not limited to, group life insurance, disability, medical, dental, pension, profit sharing, savings and stock bonus plans and be provided any and all other benefits and perquisites made available to other employees of comparable status and position, on the same terms and conditions as generally provided to employees of comparable status and position;
(d)The Executive shall receive annually not less than the amount of paid vacation and not fewer than the number of paid holidays received annually immediately prior to the Change of Control or such greater amount of paid vacation and number of paid holidays as may be made available annually to other employees of comparable status and position with the Employer; and
(e)The Executive shall be included in all plans providing special benefits to corporate officers, including but not limited to bonus, deferred compensation, incentive compensation, supplemental pension, stock option, stock appreciation, stock bonus and similar or comparable plans extended by the Company or the Employer from time to time to corporate officers, key employees and other employees of comparable status.
     -6-

5.Annual Compensation Adjustments. During the Employment Period, the Board of Directors of the Employer, an appropriate committee of the Board or the Chief Executive Officer of the Employer, whichever is appropriate, shall consider and appraise, at least annually, the Executive’s compensation. In determining such compensation, the Board of Directors, the appropriate committee thereof or the Chief Executive Officer, whichever is appropriate, shall consider the commensurate increases given to other corporate officers and key employees generally, the scope and success of the Employer’s operations, the expansion of Executive’s duties and the Executive’s performance of his duties.
6.Payments Upon Termination.
(a)Accrued Benefits. For purposes of this Agreement, the Executive’s Accrued Benefits shall include the following amounts: (i) all salary earned or accrued through the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive’s employment for reasonable and necessary expenses incurred by the Executive through the Termination Date; (iii) a lump sum payment of the bonus or incentive compensation otherwise payable to the Executive under the terms of any bonus or incentive compensation plan or plans for the year in which termination occurs; and (iv) all other payments and benefits to which the Executive may be entitled under the terms of any benefit plan of the Company or the Employer. Payment of Accrued Benefits shall be made promptly in accordance with the Employer’s prevailing practice and the terms of any applicable benefit plans, contracts or arrangements.
(b)Termination Payment. For purposes of this Agreement and subject to the limits set forth in Section 26 hereof, the Executive’s Termination Payment shall be an amount equal to (i) plus (ii), multiplied by (iii), where
(i)Equals the Executive’s rate of annual salary, as in effect on the date of the Change of Control and as increased thereafter from time to time pursuant to Section 5;
(ii)Equals the amount of the average annual dollar award paid (or payable but deferred by the Executive) to the Executive pursuant to the Employer’s regular annual bonus plan or arrangement with respect to the four (4) years (or for such lesser number of years prior for which the Executive was eligible to earn such a bonus, and annualized in the case of any bonus earned and payable for a partial fiscal year) preceding the Termination Date which shall be determined by dividing the total dollar amount paid (or payable but deferred by the Executive) to the Executive under such plan or arrangement with respect to such number of years by four (4) (or for such lesser number of years prior to which the Executive was eligible to earn such a bonus, and annualized in the case of any bonus earned and payable for a partial fiscal year); and
(iii)Equals 2.99.
     -7-

The Termination Payment shall be payable in a lump sum on the Executive’s Termination Date. Such lump sum payment shall not be reduced by any present value or similar factor. The Executive shall not be required to mitigate the amount of such payment by securing other employment or otherwise and such payment shall not be reduced by reason of the Executive securing other employment or for any other reason, except as expressly provided in Section 16.
7.Death. If the Executive shall die during the Employment Period, but after delivery of a Notice of Termination by the Company (for reasons other than Cause or Disability) or by the Executive for Good Reason, the Executive’s employment shall terminate on his or her date of death and the Executive’s estate shall be entitled to receive the Executive’s Accrued Benefits as of the Termination Date and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive survived. All benefits payable on account of the Executive’s employment or death under the Company’s or Employer’s employee benefits plans, programs or arrangements shall be paid or distributed in accordance with the terms of such plans, programs or arrangements. The Executive’s death following delivery of the Notice of Termination shall not affect his or her Termination Date which shall be determined without regard to the Executive’s death, subject to the provisions of Section 12.
If the Executive shall die during the Employment Period, but prior to the delivery of a Notice of Termination, the Executive’s employment shall terminate and the Executive’s estate, heirs and beneficiaries shall receive all the Executive’s Accrued Benefits through the Termination Date and all benefits available to them under the Company’s benefit plans as in effect on the Termination Date on account of the Executive’s death.
8.Retirement. If, during the Employment Period, the Executive and the Employer shall execute an agreement providing for the voluntary retirement of the Executive from the Employer, the Executive shall receive only his or her Accrued Benefits through the Termination Date. Without limiting the generality of the foregoing, the Executive’s resignation under this Agreement with or without Good Reason, shall in no way affect the Executive’s ability to terminate employment by reason of the Executive’s “retirement” under any of the Company’s retirement or pension plans or to be eligible to receive benefits under any retirement or pension plan of the Company and its affiliates or substitute plans adopted by the Company or its successors, and any termination which otherwise qualifies as Good Reason shall be treated as such even if it is also a “retirement” for purposes of any such plan.
9.Termination for Disability. If the Executive has been absent from his or her duties hereunder on a full-time basis for five (5) consecutive months during the Employment Period on account of a Disability, the Employer may provide a Notice of Termination, which satisfies the requirements of Section 12, and the Executive’s employment shall, for purposes of this Agreement, terminate sixty (60) days thereafter, unless the Executive returns to the performance of his or her duties on a full-time basis prior to the end of the sixty (60) day period. During the term of the Executive’s Disability prior to his or her Termination Date, the Executive shall continue to participate in all compensation and benefit plans, programs and arrangements in
     -8-

which the Executive was entitled to participate immediately prior to his or her Disability in accordance with the terms and provisions of such plans, programs and arrangements. If the Executive’s employment is terminated on account of the Executive’s Disability, the Executive shall receive his or her Accrued Benefits in accordance with Section 6(a) hereof, provided that the Executive’s termination for purposes of this Agreement under this Section 9 shall not affect his or her entitlement to benefits on account of his or her Disability under any long-term disability programs of the Company or the Employer in effect at the time of such termination and in which the Executive participated immediately prior to his or her Disability.
10.Termination Not Giving Rise to a Termination Payment. If, during the Employment Period, the Executive’s employment is terminated for Cause, or if the Executive voluntarily terminates his or her employment other than for Good Reason, subject to the procedures set forth in Section 12, the Executive shall be entitled to receive only his or her Accrued Benefits in accordance with Section 6(a).
11.Termination Giving Rise to a Termination Payment. If, during the Employment Period, the Executive’s employment is terminated by the Executive for Good Reason within two years following the event giving rise to Good Reason or by the Employer other than by reason of death, Disability pursuant to Section 9 or Cause, subject to the procedures set forth in Section 12,
(a)the Executive shall be entitled to receive and the Company or the Employer, as applicable, shall pay the Executive’s Accrued Benefits in accordance with Section 6(a) (provided that the bonus under Section 6(a)(iii) shall be calculated based on target performance and pro-rated for the time the Executive was employed by the Company during such year) and, in lieu of further salary payments for periods following the Termination Date, as severance pay, a Termination Payment;
(b)the Executive and his eligible dependents shall continue to be covered until the end of the second calendar year following the year in which the Termination Date occurs, under the same terms and conditions, by the medical plan, dental plan and/or group life insurance plan maintained by the Company or the Employer which covered that Executive and his eligible dependents prior to the Executive’s Termination Date. Notwithstanding the foregoing, if the Company’s or Employer’s medical plan, dental plan and/or group life insurance plan covering the Executive on his or her Termination Date was amended, replaced or terminated on or after the Change of Control and such action would constitute Good Reason within the meaning of Section 1(m), the Executive and his or her eligible dependents shall be entitled to continued coverage for purposes of this Section 11(b) under the terms of the medical plan, dental plan and/or group life insurance plan which they participated in immediately prior to the Change of Control. If the affected plan is no longer available, the Company shall make arrangements to provide equivalent coverage to the Executive and his or her eligible dependents. For this purpose, “equivalent coverage” shall mean medical, dental and/or life insurance coverage, which, when added to the coverage provided to the Executive and his or her eligible dependents under the Company’s or Employer’s medical plan, dental plan and/or group life insurance
     -9-

plan in effect on the Executive’s Termination Date, equals or exceeds the level of benefits provided under the medical plan, dental plan and/or group life insurance plan to the Executive and his or her eligible dependents on the day immediately preceding the Change of Control. The Executive and the Employer shall share the cost of the continued coverage under this Section 11(b) in the same proportions as the Employer and similarly situated active employees shared the cost of such coverage on the day preceding the Executive’s Termination Date. For purposes of satisfying the Company’s or Employer’s obligation under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) to continue group health care coverage to the Executive and his eligible dependents as a result of the Executive’s termination of employment, the period during which the Executive is permitted to continue to participate in the Company’s or Employer’s medical plans and/or dental plans under this Section 11(b) shall not be taken into account and treated as part of the period during which the Executive and his eligible dependents are entitled to continued coverage under the Company’s or Employer’s group health plans under COBRA. Following the end of the continuation period specified in this Section 11(b), the Executive and his eligible dependents shall be covered under such plans and arrangements only as required under the provisions of COBRA;
(c)the Executive shall be entitled to the acceleration of benefits, if any, as may be set forth in or contemplated by the Pinnacle West Capital Corporation Stock Option and Incentive Plan, as amended from time to time, the Pinnacle West Capital Corporation 2007 Long-Term Incentive Plan, the Pinnacle West Capital Corporation 2012 Long-Term Incentive Plan, the Pinnacle West Capital Corporation 2021 Long-Term Incentive Plan or any successor or additional long-term incentive plan of the Company or any related award agreement, as applicable; and
(d)“out-placement” services will be provided by the Company to the Executive for a period beginning on the Executive’s Termination Date. Such services shall be provided for a period beginning on the Executive’s Termination Date and ending on the earlier of the date on which the Executive becomes employed in a position commensurate with his or her current salary and responsibilities or the last day of the twelve (12) month period which began on the Executive’s Termination Date. The “out-placement” services shall be provided by an out-placement company selected by the Company.
(e)If the Executive’s employment is terminated by the Employer other than by reason of death, Disability or Cause within the six (6) month period prior to a Change of Control, and the Executive reasonably demonstrates that such termination was at the request or suggestion of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change of Control (a “Third Party”) and a Change of Control involving such Third Party occurs, then for all purposes of this Agreement, the date of a Change of Control shall mean the date immediately prior to the date of such termination of employment and the Executive shall be entitled to the benefits in this Section 11.
     -10-

12.Termination Notice and Procedure. Any termination by the Employer or the Executive of the Executive’s employment during the Employment Period shall be communicated by written Notice of Termination to the Executive if such Notice is delivered by the Company and to the Company if such Notice is delivered by the Executive, all in accordance with the following procedures:
(a)The Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances alleged to provide a basis for termination.
(b)Any Notice of Termination by the Company shall be approved by a resolution duly adopted by a majority of the members of the Company’s Board of Directors then in office.
(c)If the Company shall give a Notice of Termination for Cause or by reason of Disability and the Executive in good faith notifies the Company that a dispute exists concerning such termination within the fifteen (15) day period following the Executive’s receipt of such notice, the Executive may elect to continue his or her employment during such dispute. If it is thereafter determined that (i) the reason given by the Company for termination did exist, the Executive’s Termination Date shall be the earlier of (A) the date on which the dispute is finally determined, either by mutual written agreement of the parties or pursuant to Section 14, (B) the date of the Company’s Notice of Termination for Cause, (C) the date of the Executive’s death, or (D) one day prior to the end of the Employment Period, and the Executive shall not be entitled to a Termination Payment based on events occurring after the Company delivered its Notice of Termination; or (ii) the reason given by the Company for termination did not exist, the employment of the Executive shall continue as if the Company had not delivered its Notice of Termination and there shall be no Termination Date arising out of such notice.
(d)Executive must provide the Company with written notice of Good Reason within a period not to exceed 90 days of the initial existence of the condition alleged to give rise to Good Reason, upon the notice of which the Company shall have a period of thirty (30) days during which it may remedy the condition. If the Executive shall in good faith give a Notice of Termination for Good Reason and the Company notifies the Executive that a dispute exists concerning the termination within the fifteen (15) day period following the Company’s receipt of such notice, the Executive may elect to continue his or her employment during such dispute. If it is thereafter determined that (i) Good Reason did exist, the Executive’s Termination Date shall be the earlier of (A) the date on which the dispute is finally determined, either by mutual written agreement of the parties or pursuant to Section 14, (B) the date of the Executive’s death, or (C) one day prior to the end of the Employment Period, and the Executive’s Termination Payment shall reflect events occurring after the Executive delivered his or her Notice of Termination; or (ii) Good Reason did not exist, the employment of the Executive shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason.
     -11-

(e)If the Executive does not elect to continue employment pending resolution of a dispute regarding a Notice of Termination under Sections 12(c) and (d), and it is finally determined that the reason for termination set forth in such Notice of Termination did not exist, if such notice was delivered by the Executive, the Executive will be deemed to have voluntarily terminated his or her employment and if delivered by the Company, the Company will be deemed to have terminated the Executive other than by reason of death, Disability or Cause.
13.Obligations of the Executive. The Executive covenants and agrees, during the Executive’s employment with the Employer and following his or her Termination Date, to hold in strict confidence any and all information in the Executive’s possession as a result of the Executive’s employment with the Employer; provided that nothing in this Agreement shall be construed as prohibiting the Executive from reporting any suspected instance of illegal activity of any nature, any nuclear safety concern, any workplace safety concern or any public safety concern to the United States Nuclear Regulatory Commission, United States Department of Labor or any federal or state governmental agency or prohibiting the Executive from participating in any way in any state or federal administrative, judicial or legislative proceeding or investigation with respect to any such claims and matters.
14.Arbitration. All claims, disputes and other matters in question between the parties arising under this Agreement, other than Section 13, shall be decided by arbitration in accordance with the commercial arbitration rules of the American Arbitration Association, unless the parties mutually agree otherwise. Any arbitration required under this Agreement shall be held in Phoenix, Arizona, unless the parties mutually agree otherwise. The Company shall pay the costs of any such arbitration. The award by the arbitrator shall be final, and judgment may be entered upon it in accordance with applicable law in any state or Federal court having jurisdiction thereof.
The Company shall not be required to arbitrate claims arising under Section 13. The Company shall have the right to judicial enforcement of its rights under Section 13, including, but not limited to, injunctive relief.
15.Expenses and Interest. If, after a Change of Control a good faith dispute arises with respect to the enforcement of the Executive’s rights under this Agreement or if any arbitration or legal proceeding shall be brought in good faith to enforce or interpret any provision contained herein, or to recover damages for breach hereof, the Company shall advance any reasonable attorney’s fees and necessary costs and disbursements incurred by the Executive as a result of such dispute or legal proceeding, and prejudgment interest on any money judgment obtained by the Executive calculated at the rate of interest announced by JP Morgan Chase Bank N.A. (or any successor thereto) from time to time as its prime rate from the date that payments to the Executive should have been made under this Agreement; provided, however, the Executive shall be required to repay any such advanced amounts to the Company to the extent that a court or arbitration panel issues a final and non-appealable order setting forth the determination that the position taken by the Executive was frivolous or advanced by the Executive in bad faith.
     -12-

Any payment due under this section will be made on the fifth business day following the date the dispute is final.
16.Payment Obligations Absolute. The Company’s obligation during and after the Employment Period to insure that the compensation and arrangements provided herein are provided to the Executive shall be absolute and unconditional and shall not be affected by any circumstances, provided that the Company may apply amounts payable under this Agreement to any loan or other debts then owed to the Company or an Affiliate by the Executive, the terms of which are reflected in a written document signed by the Executive. Nothing in this Agreement shall prevent or limit the Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company or its Affiliates and for which the Executive may qualify, nor shall anything herein limit or otherwise affect such rights as the Executive may have under any other contract or agreement with the Company or its Affiliates. Amounts that are vested benefits or that the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any other contract or agreement with the Company or its Affiliates at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or contract or agreement, except as explicitly modified by this Agreement. Notwithstanding the foregoing, the amounts payable under this Agreement shall be in lieu of any amounts payable to the Executive under a separate severance plan, agreement or arrangement established by the Company. All amounts payable by the Company under this Agreement shall be paid without notice or demand. Each and every payment made under this Agreement by the Company shall be final. Notwithstanding the foregoing, in the event that the Company has paid an Executive more than the amount to which the Executive is entitled under this Agreement, the Company shall have the right to recover all or any part of such overpayment from the Executive or from whomsoever has received such amount.
17.Successors.
(a)If all or substantially all of the Company’s business and assets are sold, assigned or transferred to any Person, or if the Company merges into or consolidates or otherwise combines with any Person which is a continuing or successor entity, then the Company shall assign all of its right, title and interest in this Agreement as of the date of such event to the Person which is either the acquiring or successor corporation, and such Person shall assume and perform from and after the date of such assignment the terms, conditions and, provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such assignment shall be a breach of this Agreement. In case of such assignment by the Company and of assumption and agreement by such Person, all further rights as well as all other obligations of the Company under this Agreement thenceforth shall cease and terminate and thereafter the expression “the Company” wherever used herein shall be deemed to mean such Person(s).
(b)This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, estates, executors, administrators, heirs and beneficiaries. In the event of the Executive’s death,
     -13-

all amounts payable to the Executive under this Agreement shall be paid to the Executive’s estate. This Agreement shall inure to the benefit of, be binding upon and be enforceable by, any successor, surviving or resulting corporation or other entity to which all or substantially all of the Company’s business and assets shall be transferred whether by merger, consolidation, transfer or sale. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company.
18.Enforcement. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby.
19.Amendment or Termination. The term of this Agreement shall run until December 31, 2021, and shall continue for additional one (1) year periods thereafter, unless the Company notifies the Executive in writing six (6) months prior to December 31, 2021 (or the anniversary of that date in the event the Agreement continues beyond that date pursuant to the provisions of this Section 19) that it does not intend to continue the Agreement. Notwithstanding the foregoing, (i) if a Change of Control has occurred on or before the date on which the Agreement would be terminated by the Company in accordance with this Section 19, the Agreement shall not terminate with respect to that Change of Control until the end of the Employment Period, and (ii) this Agreement shall terminate if, prior to a Change of Control, the Executive ceases to be employed by the Employer as a corporate officer.
This Agreement sets forth the entire agreement between the Executive and the Company and its Affiliates with respect to the subject matter hereof, and supersedes all prior oral or written negotiations, commitments, understandings and writings with respect thereto.
This Agreement may not be terminated, amended or modified during its term as specified above except by written instrument executed by the Company and the Executive.
20.Withholding. The Company and the Employer shall be entitled to withhold from amounts to be paid to the Executive under this Agreement any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold. The Company and the Employer shall be entitled to rely on an opinion of counsel if any question as to the amount or requirement of any such withholding shall arise.
21.Venue; Governing Law. This Agreement and the Executive’s and Company’s respective rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Arizona. Any action concerning this Agreement shall be brought in the Federal or state courts located in the County of Maricopa, Arizona, and each party consents to the venue and jurisdiction of such courts.
22.Notice. Notices given pursuant to this Agreement shall be in writing and (a) if hand delivered, shall be deemed given when delivered, (b) if mailed, shall be deemed delivered when placed in the United States mail, postage prepaid, addressed, and (c) if sent by
     -14-

email, shall be deemed given when confirmed by telephone or in writing by the recipient thereof (excluding out-of-office replies or other automatically generated responses),
if to the Company, to
Board of Directors
Pinnacle West Capital Corporation
400 North Fifth Street
Phoenix, Arizona 85004
Attention: Law Department
Email:

or if to the Executive, to
_______________
_______________
_______________

or to such other addresses as the parties may provide written notice of to each other, from time to time, in accordance with this Section 22.
23.Funding. Benefits payable under this Agreement shall constitute an unfunded general obligation of the Company payable from its general assets, and the Company shall not be required to establish any special fund or trust for purposes of paying benefits under this Agreement. The Executive shall not have any vested right to any particular assets of the Company as a result of execution of this Agreement and shall be a general creditor of the Company.
24.No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.
25.Headings. The headings contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement.
26.Section 280G of the Code.
(a)Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any Payment would cause the Executive to be subject to an Excise Tax, then the amounts payable to the Executive shall be reduced to the extent necessary so that no portion of the Payments is subject to the Excise Tax but only if (i) the net amount of such Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Payments) is greater than or equal to (ii) the net amount of such Payments
     -15-

without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Payments). If a reduction in the Payments is necessary so that the Payments do not trigger an Excise Tax and none of the Payments is nonqualified deferred compensation under Code Section 409A, then the reduction shall occur in the manner the Executive elects in writing prior to the date of payment. If any Payment constitutes nonqualified deferred compensation under Code Section 409A or if the Executive fails to elect an order, then the Payments to be reduced will be determined in a manner which has the least economic cost to the Executive and, to the extent the economic cost is equivalent, will be reduced in the inverse order of when payment would have been made to the Executive, until the reduction is achieved.
(b)All determinations required to be made under this Section 26, shall be made by a nationally recognized accounting firm appointed by the Company prior to a Change of Control (the “Accounting Firm”). In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. All determinations made by the Accounting Firm under this Section 26 shall be binding upon the Company and the Executive and shall be made within sixty (60) days of termination of employment of the Executive. Within five (5) days following receipt of the Accounting Firm’s determination, the Company shall pay to or distribute for the benefit of the Executive such Payments as are then due to the Executive under this Agreement and shall promptly pay to or distribute for the benefit of the Executive in the future such Payments as become due to the Executive under this Agreement.
(c)As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Executive pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Safe Harbor Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or the Executive which the Accounting Firm believes has a high probability of success determines that an Overpayment has been made, any such Overpayment paid or distributed by the Company to or for the benefit of the Executive shall be treated for all purposes as a loan to the Executive which the Executive shall repay to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no such loan shall be
     -16-

deemed to have been made and no amount shall be payable by the Executive to the Company if and to the extent such deemed loan and payment would neither reduce the amount on which the Executive is subject to tax under Section 1 and Section 4999 of the Code nor generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
27.Application of Code Section 409A. The amounts payable pursuant to the Agreement are intended to comply with the short-term deferral exception and/or separation pay exception to Code Section 409A to the maximum extent permitted under Code Section 409A. To the extent that the Executive is a “specified employee” within the meaning of Treasury Regulations issued pursuant to Code Section 409A (“Section 409A Regulations”) as of the Termination Date, no amount that constitutes a deferral of compensation which is payable on account of the Executive’s separation from service shall be paid to the Executive before the date (the “Delayed Payment Date”) which is the first day of the seventh month after the Termination Date, or, if earlier, the date of the Executive’s death following such date. All such amounts that would, but for this Section 27, become payable prior to the Delayed Payment Date will be accumulated and paid on the Delayed Payment Date. For purposes of Code Section 409A, each payment or amount due under this Agreement shall be considered a separate payment, and the Executive’s entitlement to a series of payments under this Agreement is to be treated as an entitlement to a series of separate payments. In the event the Executive is party to an employment agreement or other similar agreement with the Company (regardless of form) and any other plan, policy or arrangement with the Company (each, an “Other Company Agreement”) that provides for severance that constitutes “deferred compensation” subject to the Section 409A Regulations, any payments under this Agreement shall be made in accordance with the applicable payment schedule in such Other Company Agreement or otherwise in a manner that complies with the Section 409A Regulations.
[Remainder of page intentionally blank]

     -17-

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and the Executive has executed this Agreement, on the date and year first above written.
PINNACLE WEST CAPITAL CORPORATION

By                        
Its                        

                        
        Executive

     -18-

UNOFFICIAL CONFORMED COPY
FOUR CORNERS PROJECT
CO-TENANCY AGREEMENT

Including Amendment No. 13
Dated

June 25, 2021

BETWEEN

ARIZONA PUBLIC SERVICE COMPANY
NAVAJO TRANSITIONAL ENERGY COMPANY, LLC
PUBLIC SERVICE COMPANY OF NEW MEXICO
SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT
AND POWER DISTRICT
TUCSON ELECTRIC POWER COMPANY

(Includes 3 Bills of Sale)

i

INDEX

Section             
1    PARTIES         
2    RECITALS        
3    AGREEMENT    
4    EFFECTIVE DATE    
5DEFINITIONS:    
    5.0(a)    ACCOUNTING PRACTICE    
    5.1    ADDITIONAL FUEL AGREEMENT    
    5.2    AMENDED ORIGINAL LEASE    
    5.3    ARIZONA §323 GRANT    
    5.4    CAPITAL ADDITIONS    
    5.5    CAPITAL BETTERMENTS    
    5.5(a)    CAPITAL IMPROVEMENTS    
    5.5(b)    CAPITAL ITEMS    
    5.6    CAPITAL REPLACEMENTS    
    5.7    COAL LEASE    
    5.8    COMMON FACILITIES    
    5.9    CONDITIONAL PARTIAL ASSIGNMENT    
    5.9(a)    CONNECTION TO 345 kV SWITCHYARD
        FACILITIES    

    5.10    CONSTRUCTION AGREEMENT    
    5.11    CONTINGENT SALE AGREEMENT    
    5.11(a)    COTENANCY AGREEMENT    
    5.12    DATE OF FIRM OPERATION    
    5.13    ENLARGED FOUR CORNERS GENERATING
        STATION    
    5.14    EXCHANGE AGREEMENT    
    5.14(a) EXISTING NEW FACILITIES    

i

Section                
    5.14(b) EXISTING RELATED FACILITIES    
    5.15    FOUR CORNERS    
    5.16    FOUR CORNERS PROJECT    
    5.16(a) FUTURE NEW FACILITIES    
    5.16(b) FUTURE RELATED FACILITIES    
    5.17    GRANTED LANDS    
    5.18    INITIAL FOUR CORNERS PLANT
    5.18(a) INITIAL GENERATION DATE    
    5.19    LEASED LANDS9
    5.20    MINIMUM COAL STORAGE PILE    
    5.21    NET EFFECTIVE GENERATING CAPACITY    
    5.22    NEW FACILITIES    
    5.23    NEW LEASE    
    5.24    OPERATING AGREEMENT    
    5.25    ORIGINAL FUEL AGREEMENT    
    5.26    ORIGINAL LEASE    
    5.27    PARTICIPANT(S)    
    5.28    PROJECT AGREEMENTS    
    5.28(a) RECORDED MEMORANDUM    
    5.29    RELATED FACILITIES    
    5.30    RESERVATION LANDS    
    5.30(a) RESERVE AUXILIARY POWER SOURCE    
    5.31    §323 GRANT    
    5.32    SUPPLEMENTAL LEASE    
    5.33    SWITCHYARD FACILITIES    
    5.34    TRIBE        
    5.35    UNIT 4    
    5.36    UNIT 5    
    5.36(a) UNITS OF PROPERTY    

ii

Section            
    5.37    UTAH MINING    
    5.38    UTAH MINING LEASED LANDS    
6    OWNERSHIPS AND TITLES    
7    OWNERSHIP OF SWITCHYARD FACILITIES    
8    ENTITLEMENT TO PLANT CAPACITY AND ENERGY     
9    COORDINATION COMMITTEE    
10    USE OF COMMON FACILITIES AND RELATED
    FACILITIES DURING CURTAILMENTS    
11    WAIVER OF RIGHT TO PARTITION
12    MORTGAGE AND TRANSFER OF PARTICIPANTS’ INTERESTS    
13    RIGHT OF FIRST REFUSAL    
14    SEVERANCE OF IMPROVEMENTS FROM LEASEHOLD
15    CAPITAL ADDITIONS, CAPITAL BETTERMENTS,
    CAPITAL REPLACEMENTS AND RETIREMENTS
    OF FOUR CORNERS PROJECT    
16     DESTRUCTION, DAMAGE OR CONDEMNATION OF THE
    FOUR CORNERS PROJECT    
17    RIGHTS OF PARTICIPANTS UPON TERMINATION    
18    RIGHTS OF PARTICIPANTS IN WATER AND COAL     
19    ARBITRATION    
20    DEFAULTS AND COVENANTS REGARDING OTHER
    AGREEMENTS    
21    TERM        
22    RELATIONSHIP OF PARTIES    
23    NOTICES    
24    COVENANTS RUNNING WITH THE LAND    
25    MISCELLANEOUS PROVISIONS    
    SIGNATURES    
    NOTARY PAGES    

iii

    EXHIBIT I
    EXHIBIT 2
    EXHIBIT 3
    EXHIBIT 4
    EXHIBIT 5
    EXHIBIT 6
    EXHIBIT 7
    EXHIBIT 8
    ATTACHMENT A
    ATTACHMENT B
    ATTACHMENT C

iv

v

CO-TENANCY AGREEMENT
1.PARTIES:
The parties to this agreement are: ARIZONA PUBLIC SERVICE COMPANY, an Arizona corporation (hereinafter referred to as “Arizona”); PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation (hereinafter referred to as “New Mexico”); SALT RIVER PROJECT AGRICULTURAL IMPROVEMENT AND POWER DISTRICT, an agricultural improvement district, organized and existing under the laws of the State of Arizona (hereinafter referred to as “Salt River Project”); TUCSON ELECTRIC POWER COMPANY, an Arizona corporation currently known as Tucson Electric Power Company (hereinafter referred to as “Tucson”); and Navajo Transitional Energy Company, a limited liability company wholly owned by the Navajo Nation (hereinafter referred to as “NTEC”).
2. RECITALS:
This agreement is made with reference to the following facts, among others:
2.1.Arizona is an Arizona corporation engaged in the generation of electric power and energy in the State of New Mexico and the generation, transmission and distribution of electric power and energy as an electric utility in part of the State of Arizona.
2.2.4CA is limited liability company in the business of directly and indirectly constructing, investing in, acquiring and holding interests in electric generation facilities.
2.3.On May 15, 2015, the Participants and El Paso Electric Company (“El Paso”) entered into Amendment No. 8 of this Agreement, which reflected the sale of El Paso’s interest in the Four Corners Project and Facilities Switchyard (the
1

“Interest”) to Arizona under that certain Purchase and Sale Agreement, dated as of February 17, 2015 (the “Purchase Agreement”). On May 15, 2015, the Participants entered into Amendment No. 9 of this Agreement. At the time Amendment No. 8 and No. 9 were executed Arizona intended that it or one of its affiliates would be the party to the Purchase Agreement. Prior to or contemporaneously with the Effective date of Amendment No. 10 of this Agreement, Arizona assigned the Purchase Agreement to 4C Acquisition, LLC. (“4CA”), an Arizona affiliate, and El Paso sold the Interest to 4CA. Among other things, Amendment No. 10 replaces Arizona with 4CA as the owner of the Interest.
2.4.El Paso Electric Company (hereinafter referred to as “El Paso”) is an electric utility engaged in the generation, transmission and distribution of electric power and energy in parts of the States of Texas and New Mexico. Amendment No. 8 to this Agreement (“Amendment No. 8”) provides, among other things, for updated ownership percentages as they existed following the consummation of the transfer to Arizona by El Paso of El Paso’s interests in the Four Corners Project pursuant to that certain Purchase and Sale Agreement, dated as of February 17, 2015. As of the effective date of Amendment No. 8, El Paso is no longer a party to this Agreement, and all references to El Paso, as well as El Paso’s designation as a Participant, as that term is defined in Section 5.27 herein, are limited to facts or matters occurring or agreements entered into prior to the effective date of Amendment No. 8.
2.5.NTEC is a limited liability company in the business of directly and indirectly constructing, investing in, acquiring and holding interests in electric generation
2

facilities. Amendment No. 11 to this Agreement (“Amendment No. 11”) provides, among other things, for updated ownership percentages as they exist following the consummation of the transfer to NTEC by 4CA of 4CA’s interests in the Four Corners Project pursuant to that certain Purchase and Sale Agreement, the form of which was filed by 4CA in FERC Docket No. EC15-159 in May 2018. Amendment No. 13 to this Agreement (“Amendment No. 13”) addresses, among other things, certain updated ownership percentages as they will exist following the transfer to NTEC by New Mexico of New Mexico’s interests in the Four Corners Project pursuant to that certain Purchase and Sale Agreement, dated as of November 1, 2020 (the “New Mexico –
3

NTEC PSA”). 1 2 3 As of the effective date of Amendment No. 11, 4CA is no

1 The Recitals to Amendment No. 13 note that “Contemporaneously to executing [Amendment No. 13], the Parties will execute Amendment No. 21 that certain Four Corners Project Operating Agreement, by and between the Parties (or their respective predecessors in interest), effective as of March 1, 1967, as amended from time to time in accordance with its terms (such amendment, the “Operating Agreement Amendment”).”

2 Amendment No. 13 is subject to certain conditions precedent set forth in Section 2 of Article I thereof, as follows:

Section 2.    Conditions Precedent to Amended Provisions.

(a)    It shall be a condition precedent to Article II of this Amendment (the “Amended Provisions”) being effective, binding, and in force that the Approval Date shall have occurred.  “Approval Date” means the date on which Arizona shall have obtained final orders no longer subject to appeal from the Federal Energy Regulatory Commission (“FERC”) providing the necessary section 205 approvals, in form and substance reasonably satisfactory to Arizona, and without materially adverse condition or modifications to the Amendment or any qualification in such orders that are not reasonably acceptable to each of the Parties (the “Regulatory Approvals”), required for the performance of the Parties’ respective obligations under the Amendment and the Operating Agreement Amendment. Until the Approval Date, the Amended Provisions shall have no force or effect, and the Parties shall remain bound by all obligations under the Agreement as it exists prior to the terms provided for in the Amended Provisions.

(b)    Arizona shall use commercially reasonable efforts to file the application for Regulatory Approvals no later than July 30, 2021, unless a later date is mutually agreed to by the Parties, such agreement not to be unreasonably withheld. Arizona shall use commercially reasonable efforts to: (i) diligently prosecute all applications, including, for the avoidance of doubt, through the prosecution of appeals or refiling amended or modified applications as may be necessary and after reasonably consulting with each of the Parties; (ii) coordinate with the other Parties; and (iii) afford the other Parties the opportunity to review all filings, including without limitation any appeals or amended or modified filings in response to any decision or order of FERC. In accordance with section 1, the other Parties will use commercially reasonable efforts to support the application filings of Arizona and all Parties shall otherwise cooperate with each other with respect to causing the occurrence of the Approval Date. Each Party will provide the other Parties with copies of all material written communications from FERC or other governmental authorities relating to the approval or disapproval of the transactions contemplated by this Agreement.

3 Amendment No. 13 is subject to certain conditions subsequent set forth in Section 3 of Article I thereof, as follows:

Section 3.    Conditions Subsequent to Amendments.

(a)    Subject to the Regulatory Extension, the Parties recognize and agree that the continued effectiveness of this Amendment shall be subject to the closing of the New Mexico – NTEC PSA on or before December 31, 2024, which shall be a condition subsequent to the effectiveness of this Amendment. In the event that (a) the New Mexico – NTEC PSA terminates pursuant to its terms prior to the closing thereof, or (b) the closing does not occur on or before December 31, 2024, then such condition subsequent shall not be satisfied and otherwise deemed failed (“Condition Subsequent Event”). On the 120th day following the occurrence of the Condition Subsequent Event and without any further procedures, notice or action by the Parties (subject to the Regulatory Extension and filings described in Section 3(c) below): (i) this Amendment shall automatically terminate and be of no further force and effect; (ii) the Agreement through Amendment No. 12 shall automatically be reinstated as the agreement of the Parties with respect to the subject matter therein; and (iii) the waivers and agreements in section 2 of that certain Waiver of Right of First Refusal, dated as of the date hereof, by and among the Parties, shall, in accordance with its terms, be null and void, and all rights, claims and defenses of the Parties with respect to the ROFR (as defined therein) shall be restored and otherwise preserved; provided, however, to the extent Regulatory Approvals, if any, are required to effectuate the terms of Section 3(a) subsentence (i) or 3(a) subsentence (ii) of Article I hereof, then such termination of the Amendment and reinstatement of the Agreement shall not occur until such Regulatory Approvals are obtained (the “Regulatory Extension”).

(b)    Upon the occurrence of the Condition Subsequent Event and for so long as this Amendment is in effect, the Parties shall reasonably cooperate and engage in good faith negotiations with one another regarding further amendment or modification of the Agreement to account for such changed circumstances and developments.

(c)    From and after the 30th day following the occurrence of the Condition Subsequent Event and for so long as this Amendment is in effect, the Parties consent and authorize Arizona to make any filings with any governmental or regulatory authority in furtherance of Section 3(a) above, and each Party shall use commercially reasonable efforts to support any such filings, including without limitation the filing of certificates of concurrence at the reasonable request of Arizona. Arizona will make such filings as soon as reasonably practicable to: (i) terminate any existing effective rate schedules of its applicable tariffs on file with FERC reflecting this Amendment; and (ii) cause new rate schedules to its applicable tariffs on file with FERC to become effective reflecting the Agreement through Amendment No. 12 as if this Amendment were no longer in full force and effect; provided that such filings shall request an effective date that is the 120th day following the occurrence of the Condition Subsequent Event. Arizona shall use commercially reasonable efforts to: (1) take all necessary actions to obtain the same; (2) diligently prosecute all applications; (3) coordinate with the other Parties; and (4) afford the other Parties the opportunity to review all filings. Upon the effectiveness of the FERC filings made by Arizona described herein, this Amendment shall terminate and be of no further force and effect.
4

longer a party to this Agreement, and all references to 4CA, as well as 4CA’s designation as a Participant, as that term is defined in Section 5.27 herein, are limited to facts or matters occurring or agreements entered into prior to the effective date of Amendment No. 11.
2.6.New Mexico is an electric utility engaged in the generation, transmission and distribution of electric power and energy in a part of the State of New Mexico. Following the transfer to NTEC by New Mexico of New Mexico’s interests in the Four Corners Project (other than the Retained Interests), pursuant to the New Mexico – NTEC PSA, New Mexico will no longer be a party to this agreement (except solely with respect to Retained Interests and Decommissioning obligations), and all references to New Mexico, as well as New Mexico’s designation as a Participant, as that term is defined in Section 5.27 herein, will thereafter be limited to (a) facts or matters occurring or agreements entered into prior to the closing of the New Mexico – NTEC PSA and (b) facts or matters occurring or agreements entered into regarding the Retained Interests and Decommissioning obligations of New Mexico. For the avoidance of doubt, following the closing of the New Mexico – NTEC PSA, New Mexico shall have no rights or obligations (other than with respect to Retained Interests and Decommissioning obligations) in any portion of Unit 4 or Unit 5, including any rights to Net Effective Generating Capacity.
2.7.Salt River Project is an agricultural improvement district organized and existing under the laws of the State of Arizona and is engaged in the generation, transmission and distribution of electric power and energy in part of the State of Arizona.
5

2.8.Southern California Edison Company, a California corporation (hereinafter referred to as “Edison”) is an electric utility engaged in the generation of electric power and energy in the States of California and Arizona and in the transmission and distribution of electric power and energy in parts of the States of California and Nevada. Amendment No. 7 to this Agreement (“Amendment No. 7”) provides, among other things, for updated ownership percentages as they existed following the consummation of the transfer to Arizona by Edison of Edison’s interests in the Four Corners Project pursuant to that certain Purchase and Sale Agreement, dated as of November 8, 2010 (the “Purchase Agreement”). As of the effective date of Amendment No. 7, Edison is no longer a party to this Agreement, and all references to Edison as well as Edison’s designation as a Participant, as that term is defined in Section 5.27 herein, are limited to facts or matters occurring or agreements entered into prior to the effective date of Amendment No. 7.
2.9.Tucson is an electric utility engaged in the generation, transmission and distribution of electric power and energy in part of the State of Arizona.
2.10.On the 27th day of May, 1966, the Participants executed and delivered an application and form of grant of rights-of-way and easements pursuant to which the Secretary of Interior will grant to the Participants rights-of-way and easements pursuant to the §323 Grant for the construction, reconstruction, use, operation, maintenance, relocation and removal of the Four Corners Project in, over, under, on, along and across the Granted Lands.
2.11.On the 27th day of May, 1966, Arizona executed and delivered an application and form of grant of rights-of-way and easements pursuant to which the
6

Secretary of Interior will grant to Arizona rights-of-way and easements pursuant to the Arizona §323 Grant pursuant to which it will reconstruct, use, operate, maintain, relocate and remove the Initial Four Corners Plant.
2.12.On the 27th day of May, 1966, the Navajo Tribe of Indians, as Lessor, and Arizona, El Paso, New Mexico, Salt River Project, Edison and Tucson, all as Lessees, entered into the Supplemental Lease wherein the Participants are leased certain rights in and to certain real property located within the Navajo Reservation, including the Leased Lands, for the construction, reconstruction, use, operation, maintenance, relocation and removal of the Four Corners Project, and which amends, supplements and revises the Original Lease.
2.13.On the 6th day of July, 1966, the Secretary of Interior approved the application for and form of the §323 Grant and the Arizona §323 Grant subject to the Participants’ acceptance of modifications in certain of the terms and conditions therein contained, which such modifications were accepted by the Participants on the 19th day of July, 1966.
2.14.The §323 Grant, the Arizona §323 Grant, the Supplemental Lease and this Co- Tenancy Agreement will be recorded concurrently in the office of the County Clerk of San Juan County, New Mexico.
2.15.The parties hereto desire by this Co-Tenancy Agreement to establish certain terms and conditions relating to their ownership and operation of the Four Corners Project, and relating to the rights afforded them under the Project Agreements.
3.AGREEMENT:
7

The parties, for and in consideration of the mutual covenants to be by them kept and performed, agree as follows:
4.EFFECTIVE DATE:
This Co-Tenancy Agreement as amended through Amendment No. 13 shall become effective when:
4.1.Amendment No. 13 has (i) been duly executed and delivered on behalf of all of the Participants and (ii) become effective in accordance with its terms.
4.2.The §323 Grant becomes effective; provided, however, that the effective date and time of this Co-Tenancy Agreement shall be contemporaneous with the effective date and time of said §323 Grant.
5.DEFINITIONS:
The following terms, when used herein, shall have the meaning specified:
5.0(a).    Accounting Practice: Generally accepted accounting principles, in accordance with FERC Accounts, applicable to electric utility operations.
5.1.Additional Fuel Agreement: Four Corners Fuel Agreement No. 2 between the Participants and Utah Mining relating to fuel for Units 4 and 5.
5.2.Amended Original Lease: The Original Lease, as amended, supplemented and revised by the Supplemental Lease.
5.3.Arizona §323 Grant: Grant of rights-of-way and easements under the Act of February 5, 1948 (62 Stat. 17, 18, 25 U.S.C. §323-328), the Act of March 3, 1879 (20 Stat. 394, 5 U.S.C. §485), as amended, and the Acts of July 9, 1832 and July 27, 1868 (4 Stat. 564, 15 Stat. 228, 25 U.S.C. §2), and such regulations promulgated thereunder as are applicable, including 25 CFR §12
8

and Part 161, to Arizona, pursuant to which it will reconstruct, use, operate, maintain, relocate and remove the Initial Four Corners Plant.
5.4.Capital Additions: Any Units of Property which are added to the Four Corners Project, to the Common Facilities or to the Related Facilities which serve in connection with the Initial Four Corners Plant, which do not substitute for any existing Units of Property constituting a part of the Four Corners Project, or for the Common Facilities or the Related Facilities which serve in connection with the Initial Four Corners Plant, and any land or land rights which are added to the Four Corners Project, or to the Common Facilities or to the Related Facilities which serve in connection with the Initial Four Corners Plant, which do not substitute for any existing land or land rights constituting a part of the Four Corners Project, or for the Common Facilities or for the Related Facilities which serve in connection with the Initial Four Corners Plant, and which, in accordance with Accounting Practice, would be capitalized.
5.5.Capital Betterments: The improvement of land or land rights or the enlargement or improvement of any structures, facilities or equipment constituting a part of the Four Corners Project or of the Common Facilities or the Related Facilities which serve in connection with the Initial Four Corners Plant, or the substitution of other structures, facilities or equipment constituting a part of the Four Corners Project, or of the Common Facilities or the Related Facilities which serve in connection with the Initial Four Corners Plant, where the substitution constitutes an enlargement or improvement as compared with that for which it is substituted, and which, in accordance with Accounting Practice would be capitalized.
9

5.5(a).    Capital Improvements: Those additions, betterments and replacements of the Initial Four Corners Plant or the Four Corners Project.
5.5(b).    Capital Items: Any, some, or all of Capital Additions, Capital Betterments, Capital Improvements and Capital Replacements.
5.6.Capital Replacements: The substitution of any Units of Property, land or land rights constituting a part of the Four Corners Project, or of the Common Facilities or the Related Facilities which serve in connection with the Initial Four Corners Plant, for other Units of Property or land or land rights, where the substitution does not constitute an enlargement or improvement of the thing for which it is substituted, and which, in accordance with Accounting Practice, would be capitalized.
5.7.Coal Lease: The lease between the Tribe and Utah Mining dated as of July 26, 1957, and recorded in Book 480, page 74, in the office of the County Clerk of San Juan County, New Mexico, and amended by amendment dated October 18, 1957, and recorded in Book 480, page 75-V, and amended by amendment dated October 24, 1961, and recorded in Book 663, page 276, and amended by amendment dated March 29, 1965, and recorded in Book 663, page 277, all in the office of the County Clerk of San Juan County, New Mexico.
5.8.Common Facilities: Those existing facilities, more particularly described in Exhibit 1 hereto, which are located on the real property described in Exhibit 5 of the Co-Tenancy Agreement, and which will serve in connection with the operation and maintenance both of Units 4 and 5 and of the existing three units of the Initial Four Corners Plant.
10

5.9.Conditional Partial Assignment: An assignment dated September 2, 1966 between Utah Mining, as Assignor, and the Participants, as Assignees, whereby Utah Mining conditionally transfers and assigns to the Participants its rights, title and interest in, to and under the Coal Lease, insofar as it pertains to the coal lands dedicated pursuant to the Original Fuel Agreement and the Additional Fuel Agreement, and its right, title and interest in and to that portion of the Utah Mining Leased Lands dedicated pursuant to said agreements; which assignment was recorded on March 2, 1967 in Book 650, page 2, of Official Records in the office of the County Clerk of San Juan County, New Mexico.
5.9(a).    Connection to 345 kV Switchyard Facilities: Connection to positions No. 1 and No. 3 of the 345 kV switchyard from the existing 345 kV bushings of the Reserve Auxiliary Power Source.
5.10.Construction Agreement: The Four Corners Project Construction Agreement between the Participants, which provides for the construction of the Four Corners Project, with the exception of the Common Facilities allocated thereto.
5.11.Contingent Sale Agreement: Contingent Sale Agreement between Arizona, as First Party, and El Paso, New Mexico, Salt River Project, Edison and Tucson, as Second Parties, wherein Arizona has agreed to sell on a contingent basis an undivided interest in the Common Facilities to Second Parties.
5.11(a). Co-Tenancy Agreement: The Co-Tenancy Agreement among the Participants which was recorded on July 21, 1966, in Book 636, page 1, of official records, in the office of the County Clerk of San Juan County, New Mexico; as amended by Amendment No. 1 to Co-Tenancy Agreement dated March 28,
11

1967, which was recorded on June 8, 1967, in Book 652, page 493, of official records, in the office of said County Clerk; and as amended from time to time. References in the Co-Tenancy Agreement to the effective date thereof or of a particular provision or instrument shall mean the effective date of the original Co-Tenancy Agreement or of the particular provision or instrument when first referenced in the original Co-Tenancy Agreement as then amended.
5.11(b). Coordination Committee: As defined in the Operating Agreement.
5.12.Date of Firm Operation: The date established in accordance with the Project Agreements in each case for Units 4 and 5 which will follow the start-up period of a generating Unit during which any necessary adjustments and/or alterations will be made to provide for the Unit’s safe and dependable operation, and which is the date on which the Unit is determined to be reliable as a source of generation and upon which the Unit can be reasonably expected to operate continuously at its rated capacity.
5.12(a). Decommissioning: The decommissioning of the Four Corners Plant, including without limitation the dismantling and removal of remaining Units 1, 2, 3 obligations as well as the dismantling and removal of Unit 4 and Unit 5, the associated Switchyard Facilities and the associated Common Facilities, Related Facilities, and other facilities or equipment constituting a part of the Four Corners Project, and the restoration and remediation of the associated Granted Lands and Leased Lands under applicable law and any other legally
12

binding obligations. For the avoidance of doubt, Decommissioning includes any related planning, administrative activities, reporting, and monitoring.
5.12(b). Decommissioning Participant: As defined in Section 5.24B of the Operating Agreement.
5.13.Enlarged Four Corners Generating Station: The Initial Four Corners Plant and the Four Corners Project.
5.14.Exchange Agreement: Exchange Agreement (to be recorded contemporaneously herewith in the offices of the County Clerks of San Juan County and McKinley County, New Mexico), dated March 28, 1967, between Arizona, as First Party, and El Paso, New Mexico, Salt River Project, Edison and Tucson, as Second Parties, wherein Arizona conditionally agreed to exchange an undivided interest in the Common Facilities for an undivided interest in the New Facilities; as amended by letter of agreement among the Participants dated March 28, 1967, a copy of which is attached as Exhibit 6 hereto.
5.14(a). Existing New Facilities: Those facilities, or portions thereof, described in Exhibit 4 hereto and which are located on the real property described in Exhibit 5 of the Co-Tenancy Agreement on the effective date of this instrument.
5.14(b). Existing Related Facilities: Those facilities, or portions thereof, described in Exhibit 3 hereto, which are located on the real property described in Exhibit 5 of the Co-Tenancy Agreement on the effective date of this instrument. Such facilities will serve in connection with the operation and maintenance both of Units 4 and 5 and of the existing three units of the Initial Four Corners Plant.
13

5.15.Four Corners: The site of the Enlarged Four Corners Generating Station located on the Navajo Reservation near Shiprock, New Mexico.
5.16.Four Corners Project: Unit 4 and Unit 5, each to be 755 MW (nameplate), all facilities and structures used therewith or related thereto, the Switchyard Facilities therefor, and the respective undivided interests in the Common Facilities and the Related Facilities allocated thereto (all as described in Exhibits 1, 2 and 3 attached to the Co-Tenancy Agreement as amended), to be constructed and acquired at Four Corners by the Participants on the Granted Lands and the Leased Lands.
5.16(a). Future New Facilities: Those facilities, or portions thereof described in Exhibit 4 hereto and which become located on the real property described in Exhibit 5 of the Co-Tenancy Agreement after the effective date of this instrument.
5.16(b). Future Related Facilities: Those facilities, or portions thereof, described in Exhibit 3 hereto, which become located on the real property described in Exhibit 5 of the Co-Tenancy Agreement after the effective date of this instrument. Such facilities will serve in connection with the operation and maintenance both of Units 4 and 5 and the existing three units of the Initial Four Corners Plant.
5.17.Granted Lands: The Amended Original Plant Site, New Plant Site, Pumping Plant Site, Dam Site, Common and Related Facilities Area, Ash Disposal Area, and the Reservation Lands located within the rights-of-way and easements described in the §323 Grant as such terms are defined in the §323 Grant, which said defined areas are described in Exhibit 5 hereto attached.
14

5.18.Initial Four Corners Plant: The existing generating station of Arizona, located on the Navajo Reservation near Shiprock, New Mexico, on lands leased by Arizona pursuant to the Amended Original Lease, consisting of Units 1 and 2, each 175 MW (nameplate), and Unit 3, 225 MW (nameplate), all facilities and structures used therewith or related thereto, the related switchyard and substation facilities therefor, and the respective undivided interests in the Common Facilities and the Related Facilities allocated thereto, which are located on the real property more particularly described in the Amended Original Lease.
5.18(a). Initial Generation Date: The date upon which Unit 4 or Unit 5, respectively, is synchronized and electrical generation is first available from that unit for transmission to any Participant.
5.19.Leased Lands: The Amended Original Plant Site, New Plant Site, Pumping Plant Site, Dam Site, Common and Related Facilities Area and Ash Disposal Area, as such terms are defined in the Supplemental Lease, and which said defined areas are described in Exhibit 5 hereto attached.
5.20.Minimum Coal Storage Pile: The Minimum Coal Storage Pile, as determined by the Participants, for Units 4 and 5, to be drawn upon when fuel deliveries from Utah Mining may be interrupted.
5.21.Net Effective Generating Capacity: The maximum continuous ability of each Unit of the Enlarged Four Corners Generating Station to produce power, which shall be determined for each Unit of the Enlarged Four Corners Generating Station in accordance with the Operating Agreement.
5.22.New Facilities: Existing New Facilities and Future New Facilities.
15

5.23.New Lease: The provisions of the Supplemental Lease which are applicable to the Four Corners Project and under which the Participants will acquire leasehold rights to construct, reconstruct, use, operate, maintain, relocate and remove the Four Corners Project.
5.23(a). New Mexico – NTEC PSA: As defined in Section 2.5.
5.24.Operating Agreement: Operating Agreement between the Participants providing for the operation and maintenance of the Four Corners Project.
5.25.Original Fuel Agreement: Fuel Agreement dated August 18, 1960, as amended and supplemented by five supplements, including the Fifth Supplement, between Utah Mining and Arizona, relating to fuel for the Initial Four Corners Plant.
5.26.Original Lease: Indenture of Lease dated December 1, 1960, between the Tribe and Arizona, leasing to Arizona certain leasehold rights pursuant to which it has constructed the Initial Four Corners Plant, said Original Lease being of record in Book 474, page 187, in the office of the County Clerk of San Juan County, New Mexico, and supplemental exhibits to said Original Lease recorded in Book 511, page 65, in the office of the County Clerk of San Juan County, New Mexico.
5.27.Participant(s): One or more entities, including Arizona, NTEC, New Mexico, Salt River Project and Tucson, with an ownership interest in the Four Corners Project, and, when referring specifically to facts or matters occurring or agreements entered into prior to the effective date of Amendment No. 8, El Paso. The term “Original Participants” shall refer to “Arizona, El Paso, New Mexico, Salt River Project, Edison and Tucson”. Except with respect to any
16

rights, benefits, duties, or obligations expressly provided for in any Project Agreement, a Participant’s rights, benefits, duties, and obligations under this Agreement are expressly limited to those rights, benefits, duties, and obligations involving that portion of the Four Corners Project in which the Participant has an ownership interest. Following the transfer to NTEC by New Mexico of New Mexico’s interests in the Four Corners Project, pursuant to the New Mexico – NTEC PSA, New Mexico will no longer be a party to this agreement (except solely with respect to Retained Interests and Decommissioning obligations) and thereafter references to New Mexico will be limited to (a) facts or matters occurring or agreements entered into prior to the closing of the New Mexico – NTEC PSA and (b) facts or matters occurring or agreements entered into regarding the Retained Interests and Decommissioning obligations of New Mexico; and New Mexico will only be a tenant in common with respect to the Retained Interests and Decommissioning obligations of New Mexico for purposes of this Agreement.
5.28.Project Agreements: The §323 Grant, the New Lease, the Co-Tenancy Agreement, the Construction Agreement, the Operating Agreement, the Additional Fuel Agreement, the Conditional Partial Assignment, the Recorded Memorandum, the Exchange Agreement and the Contingent Sale Agreement.
5.28(a). Recorded Memorandum: The Memorandum dated September 2, 1966, between Utah Mining and the Participants pursuant to Sections 13 and 17.14 of the Additional Fuel Agreement evidencing the principal obligations of Utah Mining and providing also for the imposition of an equitable servitude and covenant running with the land with respect to Utah Mining’s interest in that
17

portion of Utah Mining Leased Lands which have been dedicated or designated as a supply of fuel for the Four Corners Project; which was recorded on March 2, 1967, in Book 650, page 1, of Official Records, in the office of the County Clerk of San Juan County, New Mexico.
5.29.Related Facilities: Existing Related Facilities and Future Related Facilities.
5.30.Reservation Lands: The lands of the Tribe located within the Navajo Reservation.
5.30(a). Reserve Auxiliary Power Source: The No. 1 and No. 2 230 kV/345 kV bus-tie transformers as described in Exhibit 2 attached hereto.
5.30(b). Retained Interests: The interests in the Four Corners Project retained by New Mexico after the closing of the New Mexico – NTEC PSA, as specified in Article 7 of the Co-Tenancy Agreement and Article 17 of the Operating Agreement.
5.31.§323 Grant: Grant of rights-of-way and easements under the Act of February 5, 1948 (62 Stat. 17, 18, 25 U.S.C. §323-328), the Act of March 3, 1879 (20 Stat. 394, 5 U.S.C. §485), as amended, and the Acts of July 9, 1832 and July 27, 1868 (4 Stat. 564, 15 Stat. 228, 25 U.S.C. §2), and such regulations promulgated thereunder as are applicable, including 25 CFR §1.2 and Part 161, to Arizona, Edison, New Mexico, El Paso, Tucson and Salt River Project, pursuant to which they will construct, reconstruct, use, operate, maintain, relocate and remove the Four Corners Project.
5.32.Supplemental Lease: The Supplemental and Additional Indenture of Lease dated the 27th day of May 1966, which combines the amendments and supplements to and the revisions of the Original Lease, and the New Lease.
18

5.33.Switchyard Facilities: The 345 kV and 500 kV switchyards and facilities related thereto to be utilized by Units 4 and 5, described in Exhibit 2 hereto attached.
5.33(a). Switchyard Participant: As defined in Section 8A.3 of the Operating Agreement.
5.34.Tribe: The Navajo Tribe of Indians.
5.35.Unit 4: Steam Electric Generating Unit with a nameplate rating of 755 MW described in Exhibit 2 hereto attached.
5.36.Unit 5: Steam Electric Generating Unit with a nameplate rating of 755 MW described in Exhibit 2 hereto attached.
5.36(a). Units of Property: Units of property as described in the Federal Energy Regulatory Commissions “List of Units of Property for use in Connection with the Uniform System of Accounts Prescribed for Public Utilities and Licensees,” in effect as of the date of this Amendment No. 3 to the Co-Tenancy Agreement and as such list may be amended from time to time.
5.37.Utah Mining: Utah Construction & Mining Co., a Delaware corporation.
1.38.Utah Mining Leased Lands: The lands leased to Utah Mining under the terms of the Coal Lease.
6.OWNERSHIPS AND TITLES:
6.1.The Participants shall construct the Four Corners Project in accordance with the Project Agreements and their rights, titles and interests therein shall be as provided in this Co-Tenancy Agreement, the §323 Grant and the New Lease.
6.1.1.For those Participants in the Enlarged Four Corners Generating Station who have made or are committed to make, as of December 31, 1981,
19

those Capital Items shown on Exhibit 7 or Exhibit 8 hereto on any of the Leased Lands, such Participants are hereby granted an easement or easements for such uses of the occupied Leased Lands on which such Capital Items are located or are to be located, for the term of the Co-Tenancy Agreement. The ownership of each Participant in such Capital Items and the right of such Participant to occupy a portion of such Leased Lands shall be equal to the percentage cost of investment in such Capital Items paid by such Participant. At the request of a Participant, approved easements will be evidenced by separate easement documents in recordable form setting forth the approved uses and approved locations.
6.1.2.Any of the Participants in the Enlarged Four Corners Generating Station shall have the right, at its own expense, to add any Capital Item on the Leased Lands and to use the portion of the Leased Lands occupied by such Capital Item for the term of this Co-Tenancy Agreement; provided that approval has been obtained pursuant to Section 8.6 of the Four Corners Project Operating Agreement.
6.1.3.Any Participant owning an interest in a Capital Item shall have the right to affix its name to such Capital Item in a manner and at a location to be approved pursuant to Section 8.6 of the Operating Agreement.
6.1.4.If any Capital Item is severed or removed from such Leased Lands, at the request of the grantor Participant of such Leased Lands, such severance or removal shall be evidenced by bills of sale from the grantee Participant to the grantor Participant.
20

6.2.The Participants shall hold title to and own as tenants in common all the facilities forming part of the Four Corners Project (excluding the Common Facilities, the Switchyard Facilities, the New Facilities, the Related Facilities not included in the New Facilities, and the Reserve Auxiliary Power Source) as follows:
6.2.1.Arizona shall own an undivided 63% interest therein.
6.2.2.NTEC shall own an undivided 7% interest therein.
6.2.3.New Mexico shall own an undivided 13% interest therein.
6.2.4.Salt River Project shall own an undivided 10% interest therein.
6.2.5.Tucson shall own an undivided 7% interest therein.
6.2(a).    The Participants shall hold title to and own as tenants in common the Related Facilities not included in the New Facilities existing on the effective date of Amendment No. 8 as follows:
6.2(a)1.     Arizona shall own an undivided 73.20% interest therein.
6.2(a)2.    NTEC shall own an undivided 5.07% interest therein.
6.2(a)3.    New Mexico shall own an undivided 9.42% interest therein.
6.2(a)4.    Salt River Project shall own an undivided 7.24% interest therein.
6.2(a)5.    Tucson shall own an undivided 5.07% interest therein.
The Participants shall hold title to and own as tenants in common all Related Facilities, including improvements thereto, acquired or constructed after the effective date of Amendment No. 8 as follows:
6.2(a)6.    Arizona shall own an undivided 63% interest therein.
6.2(a)7.    NTEC shall own an undivided 7% interest therein.
6.2(a)8.    New Mexico shall own an undivided 13% interest therein.
21

6.2(a)9.    Salt River Project shall own an undivided 10% interest therein.
6.2(a)10. Tucson shall own an undivided 7% interest therein.
6.3.The Participants shall hold title to and own as tenants in common the Existing New Facilities (excluding Existing Related Facilities) as follows:
6.3.1.Arizona shall own an undivided 63% interest therein.
6.3.2.NTEC shall own an undivided 7% interest therein.
6.3.3.[Reserved]
6.3.4.New Mexico shall own an undivided 13% interest therein.
6.3.5.Salt River Project shall own an undivided 10% interest therein.
6.3.6.Tucson shall own an undivided 7% interest therein.
6.3(a).    Until such time as the exchange of the Future New Facilities provided for in the last sentence of Section 3 of the Exchange Agreement shall have occurred, the following Participants shall receive title to and own as tenants in common the Future New Facilities, as follows:
6.3(a)1.    Arizona shall own an undivided 56.47% interest therein.
6.3(a)2.    NTEC shall own an undivided 8.24% interest therein.
6.3(a)3.    New Mexico shall own an undivided 15.29% interest therein.
6.3(a)4.    Salt River Project shall own an undivided 11.76% interest therein.
6.3(a)5.    Tucson shall own an undivided 8.24% interest therein.
6.4.From and after the date upon which the exchange or sale shall have occurred, pursuant to the terms and conditions of the Exchange Agreement or the Contingent Sale Agreement, as the case may be, the Participants shall hold title to and own as tenants in common the New Facilities, excluding the Related Facilities, as follows:
22

6.4.1.Arizona shall own an undivided 63% interest therein.
6.4.2.NTEC shall own an undivided 7% interest therein.
6.4.3.[Reserved]
6.4.4.New Mexico shall own an undivided 13% interest therein.
6.4.5.Salt River Project shall own an undivided 10% interest therein.
6.4.6.Tucson shall own an undivided 7% interest therein.
6.5.The Participants shall hold title to and own as tenants in common the Common Facilities and the Existing Related Facilities included in the New Facilities, in both cases, existing on the effective date of Amendment No. 8 as follows:
6.5.1.Arizona shall own an undivided 73.20% interest therein.
6.5.2.NTEC shall own an undivided 5.07% interest therein.
6.5.3.New Mexico shall own an undivided 9.42% interest therein.
6.5.4.Salt River Project shall own an undivided 7.24% interest therein.
6.5.5.Tucson shall own an undivided 5.07% interest therein.
The Participants shall hold title to and own as tenants in common all Future Related Facilities, including improvements thereto, acquired or constructed after the effective date of Amendment No. 7 as follows:
6.5.6.Arizona shall own an undivided 63% interest therein.
6.5.7.NTEC shall own an undivided 7% interest therein.
6.5.8.New Mexico shall own an undivided 13% interest therein.
Salt River Project shall own an undivided 10% interest therein.
6.5.9.Tucson shall own an undivided 7% interest therein.
6.6.The Participants shall receive title to and own as tenants in common the Minimum Coal Storage Pile for the Four Corners Project as follows:
23

6.6.1.Arizona shall own an undivided 63% interest therein.
6.6.2.NTEC shall own an undivided 7% interest therein.
6.6.3.[Reserved]
6.6.4.New Mexico shall own an undivided 13% interest therein.
6.6.5.Salt River Project shall own an undivided 10% interest therein.
6.6.6.Tucson shall own an undivided 7% interest therein.
6.7.The ownerships and titles described in Sections 6.2 and 6.6 shall vest simultaneously in Arizona, NTEC, New Mexico, Salt River Project and Tucson so that the estate of each is concurrent as to time, right and priority.
6.8.The ownerships and titles described in Section 6.3 shall vest simultaneously in NTEC, New Mexico, Salt River Project and Tucson so that the estate of each is concurrent as to time, right and priority, subject to the terms and conditions of the Exchange Agreement and the Contingent Sale Agreement.
6.9.From and after the date upon which the exchange or sale shall have occurred, pursuant to the terms and conditions of the Exchange Agreement or the Contingent Sale Agreement, as the case may be, the estates of NTEC, Arizona, New Mexico, Salt River Project and Tucson in and to the Common Facilities and the New Facilities shall be deemed to be concurrent as to time, right and priority.
6.10.Within eighteen (18) months following the Date of Firm Operation of Unit 5, the Participants shall jointly make, execute and deliver a supplement to this Co-Tenancy Agreement in recordable form, which shall describe with particularity and detail the facilities, equipment and other property then constituting the Four Corners Project not specifically described in the exhibits
24

hereto or deleted therefrom, and such supplement, when prepared, shall be and become a part of this Co-Tenancy Agreement. The percentage undivided ownership interests of the Participants in and to the various facilities described in such supplement shall be as provided in this Co-Tenancy Agreement.
6.11.In the event that any Participant transfers or assigns any of its right, title or interest (collectively, “interest”) in and to the Four Corners Project in accordance with the terms and conditions of this Co-Tenancy Agreement, the Participant assigning or transferring such interest shall, upon completion of such transfer or assignment, provide written notice to the other Participants and the Operating Agent, as defined in the Operating Agreement, of any changes in the interests of that Participant in the Four Corners Project. Upon receipt of such notice, the Operating Agent shall prepare for signature by the Participants an amendment to the Co-Tenancy Agreement reflecting such changes.
1.12.After the closing of the New Mexico – NTEC PSA, NTEC shall own the undivided interests set forth in this Section 6 (except for the switchyard facilities as otherwise provided) for both NTEC and New Mexico (and New Mexico shall own no interests except switchyard facilities as provided elsewhere).
7.OWNERSHIP OF SWITCHYARD FACILITIES:
7.1.The Participants shall receive title to and own as tenants in common the 500 kV Switchyard Bus Facilities described in Exhibit 2 hereto attached, as follows:
7.1.1.Arizona shall own an undivided 81.50% interest therein.
7.1.2.NTEC shall own an undivided 3.50% interest therein.
25

7.1.3.[Reserved]
7.1.4.New Mexico shall own an undivided 6.50% interest therein.
7.1.5.Salt River Project shall own an undivided 5.00% interest therein.
7.1.6.Tucson shall own an undivided 3.50% interest therein.
7.1.7.    After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall receive title to and own as tenants in common the 500kV Switchyard Facilities described in Exhibit 2 hereto attached, as follows:
7.1.7.1.    NTEC shall own an undivided 10.00% interest therein.
7.1.7.2.    New Mexico shall have no, or a 0.00% interest therein.
7.2.The Participants shall receive title to and own as tenants in common the 345 kV Switchyard Bus Facilities described in Exhibit 2 hereto attached, as follows:
7.2.1.Arizona shall own an undivided 66.72% interest therein.
7.2.2.NTEC shall own an undivided 2.36% interest therein.
7.2.3.[Reserved]
7.2.4.New Mexico shall own an undivided 20.63% interest therein.
7.2.5.Salt River Project shall own an undivided 3.38% interest therein.
7.2.6.Tucson shall own an undivided 6.91% interest therein.
1.12.7.After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall receive title to and own as tenants in common the 345 kV Switchyard Facilities described in Exhibit 2 hereto attached, as follows:
7.2.7.1.    NTEC shall own an undivided 6.73% interest therein.
7.2.7.2.    New Mexico shall own an undivided 16.26% interest therein.
26

7.3.The Participants shall receive title to and own as tenants in common the 345 kV/500 kV Switchyard Common Facilities described in Exhibit 2 hereto attached, as follows:
7.3.1.Arizona shall own an undivided 70.66% interest therein.
7.3.2.NTEC shall own an undivided 2.66% interest therein.
7.3.3.New Mexico shall own an undivided 16.87% interest therein.
7.3.4.Salt River Project shall own an undivided 3.81% interest therein.
7.3.5.Tucson shall own an undivided 6.00% interest therein.
1.12.6.After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall receive title to and own as tenants in common the 345 kV/500 kV Switchyard Common Facilities described in Exhibit 2hereto attached, as follows:
7.12.6.1.NTEC shall own an undivided 7.60% interest therein.
7.12.6.2.New Mexico shall own an undivided 11.93% interest therein.
7.4.The Participants shall receive title to and own as tenants in common that portion of the Switchyard Facilities described in Exhibit 2 hereto attached as the 345 kV/500 kV transformer (1AA) and the Connection to Reserve Auxiliary Power Source, as follows:
7.4.1.Arizona shall own an undivided 63.00% interest therein.
7.4.2.NTEC shall own an undivided 7.00% interest therein.
7.4.3.[Reserved]
7.4.4.New Mexico shall own an undivided 13.00% interest therein.
7.4.5.Salt River Project shall own an undivided 10.00% interest therein.
27

7.4.6.Tucson shall own an undivided 7.00% interest therein.
7.4.7.After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall receive title to and own as tenants in common the 345 kV/500 kV transformer (1AA) and the Connection to Reserve Auxiliary Power Source, as follows:
7.12.7.1.NTEC shall own an undivided 20.00% interest therein.
7.12.7.2.New Mexico shall have no, or a 0.00%, interest therein.
7.5.APS shall have title and own the second 345 kV/500 kV (2AA) transformer.
7.6.The Participants shall receive title to and own as tenants in common the Reserve Auxiliary Power Source, as follows:
7.6.1.Arizona shall own an undivided 63.00% interest therein.
7.6.2.NTEC shall own an undivided 7.00% interest therein.
7.6.3.[Reserved]
7.6.4.New Mexico shall own an undivided 13.00% interest therein.
7.6.5.Salt River Project shall own an undivided 10.00% interest therein.
7.6.6.Tucson shall own an undivided 7.00% interest therein.
7.6.7.After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall receive title to and own as tenants in common the Reserve Auxiliary Power Source, as follows:
7.12.7.1.NTEC shall own an undivided 20.00% interest therein.
7.12.7.2.New Mexico shall have no, or a 0.00%, interest therein.
7.7.The Participants shall receive title to and own as tenants in common the Connection to 345 kV Switchyard Facilities, as follows:
7.7.1.Arizona shall own an undivided 53.95% interest therein.
28

7.7.2.NTEC shall own an undivided 6.00% interest therein.
7.7.3.[Reserved]
7.7.4.New Mexico shall own an undivided 25.49% interest therein.
7.7.5.Salt River Project shall own an undivided 8.56% interest therein.
7.7.6.Tucson shall own an undivided 6.00% interest therein.
7.7.7.After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall receive title to and own as tenants in common the Connection to 345 kV Switchyard Facilities as follows:
7.7.7.1.    NTEC shall own an undivided 17.13% interest therein.
7.7.7.2.    New Mexico shall own an undivided 14.36% interest therein.
7.7A    The Participants shall have capital cost responsibility as tenants in common for the Connection to 345 kV Switchyard Facilities, as follows:
7.7A.1.    Arizona shall have cost responsibility of 44.91% therein.
7.7A.2.    NTEC shall have cost responsibility of 4.99% therein.
7.7A.3.    New Mexico shall have cost responsibility of 37.98% therein.
7.7A.4.    Salt River Project shall have cost responsibility of 7.13% therein.
7.7A.5.    Tucson shall have cost responsibility of 4.99% therein.
7.7A.6.    After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall have capital cost responsibility as tenants in common for the Connection to 345 kV Switchyard Facilities, as follows:
7.7A.6.1.    NTEC shall have cost responsibility of 14.26% therein.
7.7A.6.2.    New Mexico shall have cost responsibility of 28.71% therein.
29

7.8.The Participants shall receive title to and own as tenants in common the Four Corners 230 kV Switchyard Facilities (Figure 1), as follows:
7.8.1.Arizona shall own an undivided 75.33% interest therein.
7.8.2.NTEC shall own an undivided 2.33% interest therein.
7.8.3.New Mexico shall own an undivided 12.68% interest therein.
7.8.4.Salt River Project shall own an undivided 7.33% interest therein.
7.8.5.Tucson shall own an undivided 2.33% interest therein.
7.8.6.After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall receive title to and own as tenants in common the Four Corners 230 kV Switchyard Facilities (Figure 1) as follows:
7.1.NTEC shall own an undivided 6.68% interest therein.
7.2.New Mexico shall own an undivided 8.33% interest therein.
7.9.The Participants shall have capital cost responsibility as tenants in common for the Four Corners 230 kV Switchyard Facilities (Figure 2), as follows:
7.9.1.Arizona shall have cost responsibility of 55.13% therein.
7.9.2.NTEC shall have cost responsibility of 6.12% therein.
7.9.3.New Mexico shall have cost responsibility of 23.87% therein.
7.9.4.Salt River Project shall have cost responsibility of 8.75% therein.
7.9.5.Tucson shall have cost responsibility of 6.13% therein.
7.9.6.After the closing of the New Mexico – NTEC PSA, NTEC and New Mexico shall have capital cost responsibility as tenants in common for the Four Corners 230 kV Switchyard Facilities (Figure 2) as follows:
7.9.6.1.NTEC shall have cost responsibility of 17.49% therein.
30

7.9.6.2.New Mexico shall have cost responsibility of 12.50% therein.
7.10.The ownerships and titles described in Sections 7.1, 7.2, 7.3, 7.4, 7.6, 7.7, 7.7A, 7.8, and 7.9 hereof shall vest simultaneously in Arizona, NTEC, New Mexico, Salt River Project and Tucson so that the estate of each is concurrent as to time, right and priority.
8.ENTITLEMENT TO PLANT CAPACITY AND ENERGY:
8.1.Subject to the provisions of Section 20.2, the Participants shall own and be entitled to the following percentages of the Net Effective Generating Capacity of Units 4 and 5, as follows:
8.1.1.Arizona shall own an undivided 63% interest therein.
8.1.2.NTEC shall own an undivided 7% interest therein.
8.1.3.[Reserved]
8.1.4.New Mexico shall own an undivided 13% interest therein.
8.1.5.Salt River Project shall own an undivided 10% interest therein.
8.1.6.Tucson shall own an undivided 7% interest therein.
8.1.7.After the closing of the New Mexico – NTEC PSA, NTEC shall own the undivided interests of the Net Effective Generating Capacity of Units 4 and 5 set forth in this Section 8.1 for both NTEC and New Mexico (and New Mexico shall own no interests in the Net Effective Generating Capacity of Units 4 and 5).
Nothing in this Co-Tenancy Agreement shall prevent the Participants from mutually agreeing in the Operating Agreement to alternative allocations of the Net Effective Generating Capacity between Units, for
31

operating purposes, and such alternative allocations shall be enforceable in accordance with their terms, to the same extent as if set forth herein; provided that no such reallocation will result in: (a) a Participant having a reduction in its combined Unit 4 and Unit 5 NEGC, pursuant to this Section 8.1 or (b) a Participant having a greater NEGC in a Unit than its combined NEGC in Unit 4 and Unit, 5 pursuant to this Section 8.1.
8.2.The electrical capacity in the Switchyard Facilities shall be made available to the Participants in the manner and in the amounts as set forth in the Operating Agreement.
8.3.Arizona shall retain the entire capacity and shall receive the entire output of the Initial Four Corners Plant, except to the extent that it has agreed to provide the requirements for the operation of the Four Corners Project from the output of the Initial Four Corners Plant in accordance with the terms and conditions of the Operating Agreement.
8.4.Use of the 230 kV Switchyard Facilities Capacity:
8.4.1.The primary purpose of the 230 kV Switchyard Facilities is to provide support for Four Corners Units 4 and 5 (including the emission abatement and 69 kV auxiliaries) and the PNM Pillar line.
9.COORDINATION COMMITTEE:
9.1.As a means of securing effective cooperation and interchange of information and of providing consultation on a prompt and orderly basis among the Participants in connection with various administrative and technical problems, which may arise from time to time in connection with the terms and, conditions
32

of this Co-Tenancy Agreement, the parties hereto hereby establish a Coordination Committee.
9.2.The Coordination Committee shall consist of one representative from each Participant, who shall be an officer of the Participant, except in the case of Salt River Project, in which case the representative shall be either the General Manager or the General Manager’s designee. It shall be the function and responsibility of the Coordination Committee to consider such matters as are herein specifically provided and as may be provided from time to time by amendment of or supplement to this Co-Tenancy Agreement
9.3.The Coordination Committee shall have no authority to modify any of the provisions of this Co-Tenancy Agreement.
9.4.Each Participant shall notify the other Participants promptly of the designation of its representative or representatives on the Coordination Committee and of any subsequent change in such designation. Any of the Participants may, by written notice to the other Participants, designate an alternate or substitute to act as its representative on the Coordination Committee in the absence of the regular member of the Coordination Committee or to act on specified occasions or with respect to specified matters.
9.5.Any action or determination of the Coordination Committee shall require the following vote:
(a)With respect to actions or determinations that do not pertain to the Switchyard Facilities or Decommissioning:
(i)    The affirmative vote of the Participants owning at least 75% of the Net Effective Generating Capacity; and
33

(ii)    the affirmative vote of at least 60% of the individual Participants. For purposes of this Section 9.5(a)(ii) (or Sections 9.5(b)(i)(B) or 9.5(b)(ii)(B)) and any other provisions requiring the vote of a committee, for any two or more Participants where: (i) one of the Participants directly or indirectly controls the other Participant(s) or (ii) the Participants are under common control (e.g., subsidiaries or affiliates), such two or more Participants shall be deemed one individual Participant and represent one individual vote.
(b)With respect to actions or determinations that pertain to the Switchyard Facilities or Decommissioning:
(i)    For a matter pertaining to the Switchyard Facilities, the right to vote on a particular action or determination shall be based on a Participant’s ownership interest in that portion of the Switchyard Facilities that is the subject of the particular action or determination, and shall require (A) the affirmative vote of the Participants owning at least 75% of the ownership interest in such portion of the Switchyard Facilities and (B) the affirmative vote of at least 60% of such individual Participants; and
(ii)    For a matter pertaining to Decommissioning, the right to vote on a particular action or determination shall be based on a Participant’s Decommissioning obligation as a Decommissioning Participant in that portion of the Decommissiong obligation that is the subject of the particular
34

action or determination, and shall require (A) the affirmative vote of the Participants having at least 75% of Decommissioning obligation and (B) the affirmative vote of at least 60% of such individual Participants.
9.6.Notwithstanding Section 9.5, any actions or determinations of the Coordination Committee related to the matters set forth below shall require the unanimous vote of the Participants:
(a)Any change in a Participant’s share of Net Effective Generating Capacity or energy, or ancillary services therefrom, except as provided in Section 20.2, or increase of a Participant’s share of the operating expenses or capital expenditures of the Four Corners Project;
(b)Except as set forth in Section 9.9, approval of a Capital Improvement with an estimated cost, at the time of consideration by the Coordination Committee, in excess of $200,000,000, as adjusted for increases or decreases in the Consumer Price Index occurring after July 16, 2016; or
(c)A decision to rebuild Unit 4 or Unit 5 of the Four Corners Project if all or substantially all of Unit 4 or Unit 5 is destroyed or damaged.
9.7.For purposes of Section 9, a “Capital Improvement” shall have the meaning set forth in Section 5.5(a), but also mean a singular project for which the total aggregate cost, which may include multiple purchase orders and multiple contractors, exceeds $200,000,000.00. In the event a Capital Project involves Unit 4 or Unit 5, each unit shall be treated separately and the $200,000,000 amount shall apply per unit and not be aggregated.
35

9.8.In no event may the Operating Agent, as that term is defined in the Operating Agreement, claim that a Capital Improvement meeting the definitions set forth in Section 5.5(a) and Section 9.7, is necessary to operate the Four Corners Project in accordance with Prudent Utility Practice, as provided for in Section 14.4 of the Operating Agreement.
9.9.Beginning on July 6, 2016, Section 9.6(b) shall not apply to the installation of selective catalytic reduction equipment on either Unit 4 or Unit 5, as required by federal law (“SCR Projects”) and SCR Projects shall be subject to the voting requirements of Section 9.5.
9.10.In the event that the Coordination Committee does not approve a Capital Project subject to the voting requirements of Section 9.6(b), the Participant(s) that voted against the Capital Project shall work in good faith with the Participants that voted in favor of the Capital Project, in order to assure the continued operation of the Four Corners Project, including commercially reasonable efforts by the Participants that voted against the Capital Improvements Project to sell their interests in the Four Corners Project. If the Participants cannot agree on a sale or transfer of their respective rights, titles and interests to the Four Corners Project, pursuant to Section 13, the Participants agree that each of them shall have the right to seek equitable relief, without being subject to the dispute resolution requirements of Section 19.
9.11.In the event one or more Participants abstains from a vote governed by Section 9.5, does not participate in consideration of a particular matter, notwithstanding the opportunity to do so, or is not entitled to vote pursuant to Section 20.2 of
36

this Co-Tenancy Agreement, actions or determinations brought before the Coordination Committee shall require the affirmative vote of:
(a)the Participants owning at least 75% of the remaining Net Effective Generating Capacity (after subtracting the percentage of Net Effective Generating Capacity owned by the abstaining, non-participating, or defaulting Participant(s) and except as provided in (c) below);
(b)at least 60% of the individual Participants that are voting; and
(c)with respect to actions or determination that pertain to the Switchyard Facilities or Decommissioning.
(i)    For a matter pertaining to the Switchyard Facilities, the right to vote on a particular action or determination shall be based on a Participant’s ownership interest in that portion of the Switchyard Facilities that is the subject of the particular action or determination, and shall require (A) the affirmative vote of the Participants owning at least 75%. of the remaining ownership interest in such portion of the Switchyard Facilities and (B) the affirmative vote of at least 60% of such individual Participants that are voting.
(ii)    For a matter pertaining to Decommissioning, the right to vote on a particular action or determination shall be based on a Participant’s Decommissioning obligation as a Decommissioning Participant in that portion of the Decommissiong obligation that is the subject of the particular action or determination, and shall require (A) the affirmative vote of the Participants having at least 75% of the remaining
37

Decommissioning obligation and (B) the affirmative vote of at least 60% of such individual Participants that are voting.
9.12.In the event one or more Participants abstains from or does not participate in a vote governed by Section 9.6, or cannot vote as a result of a default, actions or determinations brought before the Coordination Committee shall require the unanimous affirmative vote of the voting Participants.
9.13.A Participant shall abstain from voting on any matter if the Participant has a conflict of interest with respect to that matter.
9.14.Each Participant shall advise the Coordination Committee if the Participant has a conflict of interest with respect to any matter being considered by the Coordination Committee, provided that the failure of a Participant to advise the Coordination Committee of a conflict of interest shall not relieve that Participant of its obligation to abstain from voting on the matter. A conflict of interest shall include matters relating to the new uses of land or other property rights for the Four Corners Project and contracts or other agreements to provide goods or services (other than the services provided by the Operating Agent), including fuel, to the Four Corners Project, where such Participant or such Participant’s parent or an affiliate of such Participant is the counterparty to such contract or agreement. The determination of whether a conflict of interest exists shall be made by the Coordination Committee.
9.15.For the avoidance of doubt, in the event of matters involving directly or indirectly the permanent shutdown of the operations of the Four Corners Project and/or the termination of the 2016 Four Corners Coal Supply Agreement, as amended and including the 2025 Four Corners Coal Supply
38

Agreement (the “CSA”), NTEC affirmatively agrees and acknowledges that it will or may have a conflict of interest in such matter(s), and expressly agrees that neither NTEC, nor any successor in interest or assignee (whether pursuant to Section 12 or otherwise): (i) shall oppose or object to such matter(s) or (ii) shall have any vote as to such matter(s). This provision overrides and supersedes anything contrary to, or directly or indirectly inconsistent with, this provision in the Project Agreements, the CSA, or any other related documents.
10.USE OF COMMON FACILITIES AND RELATED FACILITIES DURING CURTAILMENTS:
10.1.If, because of emergency or planned shutdowns of Common Facilities or Related Facilities or the curtailment for any cause in the use thereof, Units 1, 2, 3 (prior to their respective retirements), 4 and 5 are not all operable simultaneously and continuously at their Net Effective Generating Capacity, then the reduced capacity entitlement of each Participant, because of the inability to operate said Units simultaneously and continuously at their Net Effective Generating Capacity, shall be determined as follows:
Reduced Capacity Entitlement of
Initial Four Corners Plant

C =     N x NEGC1
NEGC2

Reduced Capacity Entitlement of
Four Corners Project

CD1U = N x (NEGC2 – NEGC1) x P
NEGC2

Where:
C = Reduced capacity entitlement of Arizona in Initial Four Corners Plant.
39

CD1U = With respect to each Participant, the reduced capacity entitlement of such Participant in the Four Corners Project.

N = Reduced Net Effective Generating Capacity of the Enlarged Four Corners Generating Station.

NEGC1 = The Net Effective Generating Capacity of the Initial Four Corners Plant at the time of such emergency or planned shutdown or curtailment.

NEGC2 = The Net Effective Generating Capacity of the Enlarged Four Corners Generating Station at the time of such emergency or planned shutdown or curtailment.

P = With respect to each Participant, such Participant’s percentage of Net Effective Generation under Section 8.1.

10.2.Curtailments in capacity entitlements necessitated by reason of shortages in the supply of fuel, water or other supplies or services affecting all of the five Units of the Enlarged Four Corners Generating Station commonly shall be treated in the same manner as curtailments necessitated because of emergency or planned shutdowns of Common Facilities or Related Facilities; provided, however, that nothing contained in this Section 10 shall be construed to diminish the respective rights of the Participants in the Minimum Coal Storage Pile.
10.3.Except as otherwise provided in Section 10, no Participant shall exercise its rights relating to the Common Facilities or Related Facilities so as to endanger or unreasonably interfere with the operation of the Initial Four Corners Plant (prior to the retirement of each of Units 1, 2 and 3 of the Initial Four Corners Plant) or the Four Corners Project.
11.WAIVER OF RIGHT TO PARTITION:
40

11.1.The Participants, and each of them, accept title to the Four Corners Project and title in the Granted Lands and Leased Lands as tenants in common, and agree that their interests therein shall be held in such tenancy in common for the duration of the term of this Co-Tenancy Agreement, including any extension thereof. Notwithstanding the above, as elsewhere provided herein New Mexico is a tenant in common only for Retained Interest and Decommissioning obligations of New Mexico. During the term of this Co-Tenancy Agreement, each Participant agrees as follows:
11.1.1.That it hereby waives the right to partition the Four Corners Project or the Granted Lands and Leased Lands (whether by partitionment in kind or by sale and division of the proceeds thereof); and
11.1.2.That it will not resort to any action at law or in equity to partition (in either such manner) the Four Corners Project or the Granted Lands and Leased Lands, and waives the benefits of all laws that may now or hereafter authorize such partition.
11.2.During the term of this Co-Tenancy Agreement, Arizona waives the right to partition (whether by partitionment in kind or by sale and division of the proceeds thereof) and agrees that it will not resort to any action at law or in equity to partition (in either such manner) and waives the benefits of all laws that may now or hereafter authorize such partition of the Common Facilities and the Related Facilities allocated to the Initial Four Corners Plant from the Common Facilities and the Related Facilities allocated to the Four Corners Project.
41

11.3.During the term of this Co-Tenancy Agreement, the Participants waive the right to partition (whether by partitionment in kind or by sale and division of the proceeds thereof) and agree that they will not resort to any action at law or in equity to partition (in either such manner) and waive the benefits of all laws that may now or hereafter authorize such partition of the Common Facilities and the Related Facilities allocated to the Four Corners Project from the Common Facilities and the Related Facilities allocated to the Initial Four Corners Plant.
12.MORTGAGE AND TRANSFER OF PARTICIPANTS’ INTERESTS:
12.1.The Participants, and each of them, shall have the right at any time and from time to time to mortgage, create or provide for a security interest in or convey in trust their respective rights, titles and interests in the Four Corners Project, their respective rights, titles and interests in, to and under the Project Agreements and/or their rights, titles and interests in the Granted Lands and Leased Lands, to a trustee or trustees under deeds of trust, mortgages or indentures, or to secured parties under a security agreement, as security for their present or future bonds or other obligations or securities, and to any successors or assigns thereof, without need for the prior written consent of any other Participants, and without such mortgagee, trustee or secured party assuming or becoming in any respect obligated to perform any of the obligations of the Participants.
12.2.Any mortgagee, trustee or secured party under present or future deeds of trust, mortgages, indentures or security agreements of any of the Participants and any successor or assign thereof, and any receiver, referee, or trustee in bankruptcy
42

or reorganization of any on the Participants, and any successor by action of law or otherwise, and any purchaser, transferee or assignee of any thereof may, without need for the prior written consent of the other Participants, succeed to and acquire all the rights, titles and interests of such Participant in the Four Corners Project, in, to and under the Project Agreements and/or the rights, titles and interests of such Participant in the Granted Lands and Leased Lands, and may take over possession of or foreclose upon said property, rights, titles and interests of such Participant.
12.3.Each Participant shall have the right to transfer or assign all or any portion of its respective rights, undivided titles and interests in the Four Corners Project, in, to and under the Project Agreements and/or in the Granted Lands and Leased Lands, without the need for prior written consent of any other Participant, at any time to any of the following:
12.3.1.To any corporation or other entity acquiring all or substantially all of the property of such Participant; or
12.3.2.To any corporation or entity into which or with which such Participant may be merged or consolidated; or
12.3.3.To any corporation or entity the stock or ownership of which is wholly owned by a Participant; or
12.3.4.To any third party transferee in connection with a financing by such Participant involving or relating to such Participant’s rights, titles and interests in the Four Corners Project, in, to and under the Project Agreements and/or in the Granted Lands and Leased Lands, without such third party transferee assuming or becoming obligated in any
43

respect to perform any of the obligations of such Participant pursuant to this Co-Tenancy Agreement, provided that any and all such rights, titles and interests transferred to such third party transferee are immediately re-purchased by such Participant and are thereupon subject to all of the provisions of this Co-Tenancy Agreement, including, but not limited to, the “right of first refusal” provisions of Section 13 hereof; or
12.3.5.To the Salt River Valley Water Users’ Association, an Arizona corporation, in the case of a transfer by Salt River Project; or
12.3.6.To any corporation which owns all of the outstanding common stock of a Participant, or in the case of a Participant which has no common stock, to an entity which owns all of the ownership interest of the Participant (the corporation or entity shall be referred to herein as the “Parent”); or
12.3.7.To any corporation or entity the common stock or other ownership interest of which is wholly owned by the Parent of such Participant.
12.4.Except as otherwise provided in Sections 12.1, 12.2, 12.3.4 and 24.4 hereof, any successor to the rights, titles and interests of a Participant in the Four Corners Project, to the rights, titles and interests of a Participant in, to and under the Project Agreements and/or in the Granted Lands and Leased Lands shall assume and agree to fully perform and discharge all of the obligations hereunder of such Participant, and such successor shall notify each of the other Participants in writing of such transfer, assignment or merger. Any such successor shall specifically agree in writing with the remaining Participants at
44

the time of such transfer, assignment or merger that it will not transfer or assign any rights, titles and interests acquired from a Participant without complying with the terms and conditions of Section 13 hereof.
12.5.No Participant shall be relieved of any of its obligations and duties under the Project Agreements by an assignment under this Section 12 without the express prior written consent of all of the remaining Participants.
12.6.Except as otherwise provided in Section 12.4 hereof, any transfer, assignment or merger made pursuant to the provisions of this Section 12 shall not be subject to the terms and conditions set forth and contained in Section 13 hereof.
12.7.Without implying that any provision other than Article 6 and Article 7 herein allows a Participant to own an undivided ownership interest in any component of the Four Corners Project which is not the same as the undivided ownership interest such Participant owns in every other component, each Participant shall own the same undivided percentage interest in Unit 4 as in Unit 5.
13.RIGHT OF FIRST REFUSAL:
13.1.Except as provided in Section 12 hereof should any Participant desire to assign, transfer, convey or otherwise dispose of (hereinafter collectively referred to as “Assign”) its rights, titles and interests in the Four Corners Project, or its rights, titles and interests, in, to and under the Project Agreements, or its rights, titles and interests in the Granted Lands or Leased Lands, or any part thereof or interest therein (hereinafter referred to as “Transfer Interest”), to any person, company, corporation, governmental agency or sovereign entity, or any other Participant (hereinafter referred to as “Outside Party”), the remaining Participants with ownership in Net Effective Generating Capacity, or any one
45

or more of them, shall have the right of first refusal, as hereinafter described, to purchase such Transfer Interest on the basis of the greater of the following amounts:
13.1.1.The amount of a bona fide written offer from a buyer ready, willing and able to purchase the Transfer Interest after the expiration of the periods for giving notices specified in Sections 13.3 to 13.7 inclusive hereof; or
13.1.2.The fair market value of the Transfer Interest. As used herein, the term “fair market value” is defined as the amount of money which a purchaser, willing but not obligated to buy the property, will pay to an owner, willing but not obligated to sell it, taking into consideration all of the uses to which the Transfer Interest is adapted and might in reason be applied. Such value need not be computed upon the basis of a cash sale, but may be computed on the basis of the terms offered in Section 13.1.1.
13.2.Such right of first refusal shall exist as of the effective date of this Co-Tenancy Agreement and shall continue for the term of this Co-Tenancy Agreement.
13.3.At least one hundred eighty (180) days prior to its intended date to Assign, and after its receipt of a bona fide written offer of the type described in Section 13.1 above, the Participant desiring to Assign its Transfer Interest shall serve written notice of its intention to do so upon the remaining Participants who have an interest in that portion of the Four Corners Project that is the subject of the Transfer Interest in accordance with Section 23 of this Co-Tenancy Agreement. Such notice to the remaining Participants shall contain the
46

approximate proposed date to Assign, the terms and conditions of said bona fide written offer received by such Participant, and the terms and conditions of the proposed assignment. The terms and conditions contained in such notice shall be at least as favorable to the remaining Participants as the terms and conditions of said bona fide written offer, or may be the same terms and conditions as set forth in said offer.
13.4.Each remaining Participant having an ownership interest in the portion of Four Corners Project that is the subject of the Transfer Interest, including the Outside Party if such Outside Party is a Participant, shall signify its desire to purchase the entire Transfer Interest, or any percentage interest therein, or not to purchase all or any percentage interest therein, by serving written notice of its intention upon the Participant desiring to Assign and upon the remaining Participants pursuant to Section 23 hereof within one hundred twenty (120) days after such service pursuant to Section 13.3 of the written notice of intention to Assign. Failure by a Participant to serve notice as provided hereunder within the time period specified shall be conclusively deemed to be notice of its intention not to purchase any portion of the Transfer Interest.
13.5.If all or some of the remaining Participants should signify their intention under Section 13.4 to purchase in aggregate more than the entire Transfer Interest, the percentage ownership of the Transfer Interest to be acquired by each such remaining Participant shall be limited to the percentage determined by the formula set forth in Section 13.10.1 hereof.
13.6.If the remaining Participants, or any one or more of them, should signify its or their intention under Section 13.4 to purchase less than the entire Transfer
47

Interest, the Participant desiring to Assign shall serve written notice of this fact upon the remaining Participants in accordance with Section 23 hereof within ten (10) days after its receipt of the last of the written notices given pursuant to Section 13.4 hereof, or after the expiration of the one hundred twenty (120) day period referred to in Section 13.4 hereof, whichever is earlier.
13.7.The one or more remaining Participants who signify an intention to purchase less than the entire Transfer Interest may signify the intention to purchase the remainder of the Transfer Interest by serving written notice pursuant to Section 23 hereof of its or their intention to do so upon the Participant desiring to Assign within thirty (30) days after the receipt of written notice given pursuant to Section 13.6 hereof.
13.8.When intention to purchase the entire Transfer Interest has been indicated by notices duly given hereunder by the applicable Participant(s) desiring to purchase the Transfer Interest, the Participants shall thereby incur the following obligations:
13.8.1.The Participant desiring to Assign and the Participant(s) desiring to purchase the Transfer Interest shall be obligated to proceed in good faith and with diligence to obtain all required authorizations and approvals to Assign;
13.8.2.The Participant desiring to Assign shall be obligated to obtain the release of any liens imposed by or through it upon any part of the Transfer Interest, and to Assign the Transfer Interest at the earliest practicable date thereafter; and
48

13.8.3.The Participant(s) desiring to purchase the Transfer Interest shall be obligated to perform all terms and conditions required of it or them to complete the purchase of the Transfer Interest. The purchase of the Transfer Interest shall be fully consummated within eighteen (18) months following the date upon which all notices required to be given under this Section 13 have been duly served, unless the Participant(s) are then diligently pursuing applications to appropriate regulatory bodies (if any) for required authorizations to effect such assignment or are then diligently prosecuting or defending appeals from orders entered or authorizations issued in connection with such application, in which case the purchase of the Transfer Interest shall be fully consummated at the earliest possible date following issuance of the requested authorization(s) or the resolution of any appeal.
13.9.If the intention to purchase the entire Transfer Interest has not been indicated by notices given within the time periods specified in this Section 13 by the Participant(s) desiring to purchase the Transfer Interest, the Participant desiring to Assign shall be free to Assign all but not less than all of its Transfer Interest to the Outside Party that made the bona fide written offer of the type described in Section 13.1.1 upon the terms and conditions set forth in said bona fide written offer. If such assignment of the entire Transfer Interest to the Outside Party is not completed within eighteen (18) months after the approximate proposed date to assign specified in the notice given pursuant to Section 13.3, the Participant desiring to Assign its Transfer Interest must, unless it is then diligently pursuing its applications to appropriate regulatory bodies (if any) for
49

required authorizations to effect such assignment, or is then diligently prosecuting or defending appeals from orders entered or authorizations issued in connection with such applications, give another complete new right of first refusal to the remaining Participants pursuant to the provisions of this Section 13, before such Participant shall be free to Assign a Transfer Interest to said Outside Party.
13.10.The Participant(s) who purchase the Transfer Interest shall receive title to and shall own the Transfer Interest as tenants in common, subject to the same rights and obligations as are applied to the Transfer Interest in the hands of the assigning Participant, and shall acquire the Transfer Interest as follows:
13.10.1.Unless otherwise agreed to by the purchasing Participants, if there is more than one purchasing Participant, the percentage interest of each such purchasing Participant in the Transfer Interest shall be determined by the following formula:
T =     A x C
B

Where:
T =     The percentage of the Transfer Interest to be purchased by each Participant desiring to purchase.
A =     The existing undivided percentage interest of such Participant in the capacity entitlement of the Four Corners Project.
B =     The total undivided percentage interests in the capacity entitlement of the Four Corners Project of all Participants desiring to purchase the Transfer Interest.
C =     The percentage interest in the Four Corners Project of the Transfer Interest.
50

13.10.2.If there is only one purchasing Participant, it shall acquire title to and own the entire Transfer Interest.
13.11.No assignment of a Transfer Interest, whether to another Participant or to an Outside Party, shall relieve the assigning Participant from full liability and financial responsibility for performance after any such assignment:
13.11.1.Of all obligations and duties incurred by such Participant prior to such assignment under the terms and conditions of the Project Agreements; and/or
13.11.2.Of all obligations and duties provided and imposed after such assignment upon such assigning Participant under the terms and conditions of the Project Agreements; unless and until the assignee shall agree in writing with the remaining Participants to assume such obligations and duties; provided further, however, that such assignor shall not be relieved of any of its obligations and duties by an assignment under this Section 13, without the express prior written consent of all of the remaining Participants. [4See note below.]
13.12.Any transferee, successor or assignee, or any party who may succeed to the Transfer Interest pursuant to this Section 13, shall specifically agree in writing with the remaining Participants at the time of such transfer or assignment that it will not transfer or assign all or any portion of the Transfer Interest so acquired without complying with the terms and conditions of this Section 13.

* [Note: In connection with the transfer by Edison of its interests to Arizona, the following provision was agreed to: In accordance with Section 13.11.2 of the Co-Tenancy Agreement, Arizona agrees to assume from and after the Amendment No. 7 Effective Date the obligations and duties of Edison under the Project Agreements. In accordance with Section 13.12 of the Co-Tenancy Agreement, Arizona agrees that it shall not transfer or assign all or any portion of the Transfer Interest acquired by Arizona upon consummation of the Edison Interest Transfer without complying with Section 13 of the Co-Tenancy Agreement.]
51

13.13.Nothing contained in this Section 13 shall be deemed to apply to or limit the right of Arizona to assign, transfer, convey or otherwise dispose of its rights, titles and interests in the Initial Four Corners Plant, or its rights, titles and interests in, to and under the Project Agreements insofar as they relate to the Initial Four Corners Plant, or its rights, titles and interests in the Granted Lands or Leased Lands, or any part thereof or interest therein, insofar as such lands are granted or leased to Arizona under the Amended Original Lease and the Arizona §323 Grant.
13.14.Any assignment of a Transfer Interest to an Outside Party that is not then a Participant that is a governmental or sovereign entity, agency or instrument of a governmental or sovereign entity or a foreign person shall not be effective unless the assumption by such Outside Party of the obligations of the transferring Participant includes a waiver of sovereign immunity, a consent to the dispute resolution provisions of Section 19 of this Co-Tenancy Agreement, a consent to the governing law provisions of Section 25.4 of this Co-Tenancy Agreement, and any other consents or waivers the Participants deem necessary, sufficient to assure the remaining Participants of the enforceability of the obligations of such Outside Party under the Project Agreements.
13.15.A Party shall be prohibited from assigning its Transfer Interest to an Outside Party unless such Outside Party, concurrently with such transfer, provides to the Operating Agent any financial assurance or guarantee required by the Financial Assurance Policy, attached as Exhibit 1 to Amendment No. 16 of the Operating Agreement, as then in effect, and the transferring Participant provides evidence, to the reasonable satisfaction of the non-transferring
52

Participants, that the transferee, successor or assignee, or any party who may succeed to the Transfer Interest pursuant to this Section 13 is financially capable, or provides reasonable financial assurances, of fulfilling the obligations under the Co-Tenancy Agreement.
14.SEVERANCE OF IMPROVEMENTS FROM LEASEHOLD:
14.1.With the exception of any of the “non-removable buildings” defined in the
Original Lease as follows:
Office Building
Warehouse Building
Laboratory
Machine Shop
Cafeteria and Kitchen Building
Recreation Building
that have been constructed as a part of the Initial Four Corners Plant, or that may hereafter be constructed as a part of the Four Corners Project, Participants agree that all other facilities, structures, improvements, equipment and property of whatever kind and nature constructed, placed or affixed by Participants hereafter on the Reservation Lands under the rights-of-way and easements granted in the §323 Grant, or pursuant to the rights leased under the New Lease or Amended Original Lease, expressly including but not being limited to Units 4 and 5, all facilities and structures used therewith and related thereto, the Switchyard Facilities and all Common Facilities and Related Facilities, as against the Tribe and all other parties and persons whomsoever (including without limitation any party acquiring any interest in the Leased Lands or the Granted Lands or any interest in or lien, claim or encumbrance against any of such facilities, structures, improvements, equipment and property of whatever
53

kind and nature), shall be deemed to be and remain personal property of the Participants, not affixed to the realty, and, with the exception of the Common Facilities and Related Facilities, shall be removable by the Participants at any time prior to or within one hundred twenty (120) days after the expiration of the later to terminate or expire of the §323 Grant and the New Lease; and the Common Facilities and Related Facilities (exclusive of any non-removable buildings) shall be removable by the Participants at any time prior to or within one hundred twenty (120) days after the expiration of the later to terminate or expire of the §323 Grant, the Arizona §323 Grant, the New Lease and the Amended Original Lease.
15.CAPITAL ADDITIONS, CAPITAL BETTERMENTS, CAPITAL REPLACEMENTS AND RETIREMENTS OF FOUR CORNERS PROJECT:

15.1.The Participants hereto recognize that from time to time it may be necessary or desirable to make Capital Additions or Capital Betterments to, Capital Replacements of and retirements of facilities comprising the Four Corners Project, including Common Facilities and Related Facilities.
15.2.Any such Capital Additions, Capital Betterments, Capital Replacements and retirements shall be noted in or supplement to the appropriate exhibits attached hereto or through procedures established by the Operating Agent and approved by the Coordination Committee.
15.3.The rights, titles and interests, including percentage ownership interests, of any Participant in and to any Capital Additions, Capital Betterments or Capital Replacements of facilities shall be as provided for the respective classes of property described in Sections 6 or 7 hereof, as the case may be. The
54

Participants shall be obligated for the costs of such Capital Additions, Capital Betterments or Capital Replacements in the same percentages as their percentage ownership interests therein.
15.4.In the event of the removal or retirement of any facilities comprising part of the Four Corners Project, any proceeds realized from the salvage of such facilities shall be distributed to the Participants in accordance with their percentage ownership interests therein, or shall be applied on account of the Participant’s obligations to pay for Capital Additions, Capital Betterments or Capital Replacements replacing facilities removed or retired.
15.5.Each Participant shall have the right, at its own expense, to add facilities to the Leased Lands including the Switchyard Facilities and to use the portion of the Leased Lands occupied by such facilities, subject to approval pursuant to Section 8.6 of the Operating Agreement; provided, however, the facilities shown on Exhibit 7 and Exhibit 8 hereto shall be deemed to have been so approved. However, if such additions of facilities involve a new interconnection to the Switchyard Facilities, approval to interconnect to the Switchyard Facilities shall be set forth in a written agreement among the Participants. Such agreement shall specify the terms and conditions for the additions of facilities and charges, if any, to the Participants, including the interconnecting Participant.
15.6.Each Participant shall have the right at its own expense to add protective relay or communication equipment to facilities solely owned by it, if the Participant determines the protective relay or communication equipment is needed for the protection of its electric system.
55

16.DESTRUCTION, DAMAGE OR CONDEMNATION OF THE FOUR CORNERS PROJECT:

16.1.If all, or substantially all of Unit 4 or Unit 5 of the Four Corners Project should be destroyed, damaged or condemned, then the Participants may elect to repair, restore or reconstruct the damaged, destroyed or condemned facilities in such a manner as to restore the facilities to substantially the same general character or use as the original, or to such other character or use as the Participants may then agree. In the event of such election, it shall be the obligation of the Participants to pay for the costs of such repair, restoration or reconstruction in accordance with the percentage ownership interests of the respective Participants in such facilities, and, upon completion thereof, the Participants’ rights, titles and interests therein shall be as provided in this Co- Tenancy Agreement.
16.2.If the Participants elect not to repair, restore or reconstruct the damaged, destroyed or condemned facilities, the proceeds from any insurance or from any award shall be distributed to the Participants in accordance with their respective percentage ownership interests in and to such facilities. The facilities not destroyed, damaged or condemned shall be disposed of in a manner agreed upon by the Participants, and the proceeds from such disposition shall be distributed in accordance with the percentage ownership interests of the respective Participants in such facilities.
16.3.In the event that less than substantially all of Unit 4 or Unit 5 of the Four Corners Project shall be destroyed, damaged or condemned, then it shall be the obligation of the Participants to repair, restore or reconstruct the damaged,
56

destroyed or condemned facilities in such a manner as to restore such facilities to substantially the same general character or use as the original. Each Participant shall be obligated to pay its proportionate share of the costs of such repair, restoration or reconstruction. The requirements set forth above shall similarly apply to all or any portion of the Common Facilities or the Related Facilities necessary for the operation of Unit 4 or Unit 5, as the case may be.
17.RIGHTS OF PARTICIPANTS UPON TERMINATION:

17.1.Within one hundred twenty (120) days after the termination of the New Lease and the §323 Grant, the facilities forming the Four Corners Project (exclusive of the Common Facilities and Related Facilities) shall be disposed of by the Participants in a manner to be mutually agreed upon, and the proceeds from such disposition shall be distributed to the Participants in accordance with their respective percentage ownership interests or Decommissioning obligations, as applicable, in such facilities, but the Common Facilities and Related Facilities shall not be so disposed of until one hundred twenty (120) days after the later to terminate or expire of the §323 Grant, the Arizona §323 Grant, the New Lease and the Amended Original Lease.
17.2.In the event the Participants by mutual agreement abandon the Four Corners Project prior to the termination of this Co-Tenancy Agreement, the Facilities forming the Four Corners Project (exclusive of the Common Facilities) shall be disposed of by the Participants in a manner to be mutually agreed upon and the proceeds from such disposition shall be distributed to such Participants in accordance with their respective percentage ownership interests or Decommissioning obligations, as applicable, in such facilities.
57

18.RIGHTS OF PARTICIPANTS IN WATER AND COAL:
18.1.If, pursuant to the terms and conditions of the Original Fuel Agreement, the Additional Fuel Agreement or the Conditional Partial Assignment, the Participants succeed to some or all of the rights of Utah Mining under the Coal Lease and in the Utah Mining Leased Lands, the rights, titles and interests of the Participants therein, and the rights, titles and interests of the Participants in the water rights assigned pursuant to the terms and conditions of the Original Fuel Agreement and the Additional Fuel Agreement shall be held as tenants in common, with each Participant having the same undivided percentage ownership interests therein as provided in Section 6.5 hereof, and such rights, titles and interests shall be subject to all the terms and conditions set forth and contained in this Co-Tenancy Agreement.
19.ARBITRATION:
19.1.In the event that any Unresolved Dispute between some or all of the Participants should arise under the Project Agreements, any of such Participants may call for resolution of such Unresolved Dispute in the manner hereinafter set forth, which call shall be binding upon all Participants.
19.2.An Unresolved Dispute shall mean a disagreement, dispute, controversy or claim arising under or relating to the Project Agreements that has been identified as the same by a Participant in a written Notice submitted to all other involved Participants.
19.3.The Participants, through the Coordination Committee, agree to use diligent efforts to attempt to resolve all Unresolved Disputes, equitably and in good faith, and further agree to provide each other, in a timely manner, with
58

reasonable non-privileged records, information and data pertaining to any such Unresolved Dispute.
19.4.If the Unresolved Dispute has not been resolved within 90 days after notice of the Unresolved Dispute has been given pursuant to Section 19.2, and a Participant has determined in its sole discretion that it has exhausted opportunities to settle any such Unresolved Dispute in accordance with Section 19.3 and has determined that it desires to commence arbitration, it may initiate arbitration in accordance with Section 19.5 (“Arbitration”) hereof by serving upon the other involved Participants a formal demand for arbitration.
19.5.The arbitration procedure shall follow the Commercial Arbitration Rules of the American Arbitration Association then in effect, except as modified herein, and excluding the mediation rules. Unless agreed to otherwise among the Participants, the optional rules for emergency measures of protection are also excluded. Unresolved Disputes that require emergency relief shall be brought in the federal or, if jurisdiction does not lie in the federal courts, the state courts of New Mexico.
19.5.1.One or more participants shall initiate arbitration by issuing a written notice of claim to the Participants with whom there is an Unresolved Dispute. The notice shall set forth a description of the nature of the dispute, including the amounts, if any, involved in the dispute, and the remedy sought. The notice delivered to the other Participants shall be accompanied by a copy or a description by category of the documents and tangible things that the Participant providing notice has in its possession, custody, or control and may use to support its claims or
59

defenses, unless the use would be solely for impeachment. Any documents that do not accompany the notice shall be made available for review within five (5) business days at a mutually convenient location.
19.5.2.Within twenty (20) business days after the later of receipt of the notice or the availability of the documentation, the other Participants involved in the dispute may issue to the initiating Participants, and file with the American Arbitration Association, their own statement of the matter at issue, in adequate detail, and address additional related matters or issues to be arbitrated. If documentation is material, the notice delivered to the other Participants shall be accompanied by a copy or a description by category of the documents and tangible things that the Participant providing notice has in its possession, custody, or control and may use to support its claims or defenses, unless the use would be solely for impeachment. Any documents that do not accompany the notice shall be made available for review within five (5) business days at a mutually convenient location.
19.5.3.Within ten (10) business days after the later of receipt of the statement of additional matters or issues to be arbitrated or the availability of documentation, the initiating Participant(s) may issue to the Participants and file with the American Arbitration Association a rebuttal, along with any additional pertinent relevant documentation.
60

19.6.The Participants shall agree on arbitrator(s) within fifteen (15) business days after receipt of the notice initiating arbitration; otherwise they shall follow the procedures in AAA rules for selection, as modified herein.
19.6.1.The arbitrators must be impartial and independent, as well as experienced in issues arising in jointly owned industrial projects.
19.6.2.All decisions of the arbitrators regarding discovery are to be consistent with the principles of proportionality, set forth in Rule 26(b)(2)(C) of the Federal Rules of Civil Procedure, as it is then in effect.
19.7.The time allowed for discovery shall be set by the arbitrators, consistent with the expedited nature of arbitration and the principles of proportionality set forth in the Federal Rules of Civil Procedure; provided that in no event shall the time for discovery (other than of experts) be more than forty-five (45) days.
19.7.1.Documents to be produced shall include electronically stored information (1) with the consent of the Participants, subject to such limitations as they shall agree, or (2) otherwise, only if permitted by the arbitrators, for good cause shown.
(a)Electronically stored information shall be produced in native format, unless the Participants agree otherwise or the arbitrators decide otherwise, for good cause shown.
19.7.2.Requests for documents in addition to the initial disclosures may be permitted by the arbitrators, for good cause shown.
61

19.7.3.Depositions are discouraged, but up to three (3) depositions of up to one day each per side may be permitted by the arbitrators, for good cause shown.
(a)If depositions are permitted, witnesses who are employees or consultants of Participants shall be made to appear voluntarily, by the respective Participants.
19.7.4.Disclosures shall be made consistent with FRCP 26(a)(2)(B), for any witness who will be providing evidence as an expert.
19.7.5.Depositions of expert witnesses of up to two days each may be permitted by the arbitrators, for good cause shown.
19.7.6.If depositions of experts are allowed, the arbitrators shall apply the principles of FRCP 26(b)(4)(E).
19.8.Not less than five (5) days before the beginning of the hearing, the arbitrators will set the number of days of testimony to be permitted for the hearing.
19.8.1.The arbitrators will seek to set sufficient hearing time to allow for the presentation of each Participant’s reasonably material and pertinent evidence, consistent with the expedited nature of arbitration and the principle of proportionality to the complexity of the matters at issue and the amount or type of relief requested; but in no event shall there be more than five (5) days of hearings unless consented to by all involved Participants.
(a)In setting the length of the hearing, the arbitrators may consider, but need not follow, the recommendations of the Participants, as to the number of days required.
62

(b)The time set for the hearing will not be expanded during the hearing except for circumstances that could not reasonably have been anticipated by the Participants and the Panel.
19.8.2.The time for the hearing will be divided substantially evenly among the respective sides. In determining the allocation, time for cross-examination by a Participant will be included with time for direct examination by that Participant.
19.8.3.A decision of the Panel shall be determined by a majority of the Panel.
19.8.4.Unless the Participants agree otherwise, the award will be accompanied by a statement describing the factors considered by the panel and how the panel reached its decision.
19.8.5.Unless the Participants agree otherwise, the award shall have a precedential effect on future disputes and the conduct of the Participants.
19.8.6.Awards of fees and expenses may be made only to a substantially prevailing party, as may be determined by the arbitrators on an issue-by-issue basis.
20.DEFAULTS AND COVENANTS REGARDING OTHER AGREEMENTS:
20.1.Each Participant hereby agrees with all of the other Participants that it shall pay all monies and carry out all other performances, duties and obligations agreed to be paid and/or performed by it pursuant to all of the terms and conditions set forth and contained in the Project Agreements, and a default by any Participant in the covenants and obligations to be by it kept and performed pursuant to the
63

terms and conditions set forth and contained in any of the Project Agreements shall be an act of default under this Co-Tenancy Agreement.
20.2.Upon: (a) a default in the payment by a Participant of any amount due pursuant to the monthly bill from the Operating Agent, (b) a default by a Participant of any other amount due from such Participant (subsentences (a) and (b) hereinafter collectively referred to as a “Payment Default”), or (c) an event of default for any other reason, then:
20.2.1.[Reserved]
20.2.2.The Operating Agent shall, and any non-defaulting Participant may, give written notice of such default to each member of the Coordination Committee.
20.2.3.If the default is a Payment Default, and provided that the defaulting Participant has received fifteen (15) days prior written notice of the Payment Default, pursuant to Section 20.2.2, the Operating Agent or such other entity designated by the Coordination Committee shall draw on or seek payment under the Financial Assurance Policy, with respect to the defaulting Participant, for the amount in default. If adequate funds are not available under the Financial Assurance Policy, the Operating Agent is authorized to include in the next monthly bills to the non-defaulting Participants the amount required to fund any shortfall resulting from the Payment Default, such amount to be allocated among the non-defaulting Participants as follows:
NP Share = NEGC of NP/(100 – NEGC of DP)
where:
64

“NP Share” is the share of the shortfall to be funded by a non-defaulting Participant;
“NEGC of NP” is the percentage of Net Effective Generating Capacity of that Participant;
“NEGC of DP” is the percentage of Net Effective Generating Capacity of the defaulting Participant;
provided that the aggregate shortfall to be funded by the non-defaulting Participants at any time shall not exceed $250,000,000, as adjusted to reflect changes in the Consumer Price Index after July 6, 2016.
20.2.4.If the Operating Agent or such other entity designated by the Coordination Committee draws on or seeks payment under the Financial Assurance Policy, the Operating Agent shall give written notice of the same to each member of the Coordination Committee.
20.2.5.For a Payment Default that remains uncured, the Operating Agent or such other entity designated by the Coordination Committee, shall, on the sixtieth (60th) day following the original written notice of default, as set forth in Section 20.2.2, suspend the defaulting Participant’s voting rights and its entitlement to its Net Effective Generating Capacity from the Four Corners Project. The suspension of a defaulting Participant’s rights shall not suspend its obligations under the Project Agreements.
20.2.6.For a performance default that is not being disputed, the Operating Agent or such other entity designated by the Coordination
65

Committee, may, on the sixtieth (60th) day following the original written notice of default, as set forth in Section 20.2.2, suspend the defaulting Participant’s voting rights. The suspension of a defaulting Participant’s voting rights shall not suspend its obligations under the Project Agreements. A suspension under this Section 20.2.6 shall require the approval of the Coordination Committee.
20.2.7.Upon a suspension for a Payment Default, as set forth in Section 20.2.5, the non-defaulting Participants, through the Coordination Committee, may either reduce the energy generation of the Four Corners Project or one or more non-defaulting Participants may elect to take additional generation from the Four Corners Project. If more than one non-defaulting Participant elects to take additional generation from the Four Corners Project, the amount of additional generation shall be apportioned in accordance with their respective Net Effective Generating Capacity or as they may otherwise agree. Any non-defaulting Participant that takes additional generation from the Four Corners Project shall be responsible for the non-capital operating expenses, including fuel costs, associated with such additional generation.
20.2.8.For a period of 180 days from the notice of a Payment Default, set forth in Section 20.2.2, the defaulting Participant may reinstate its entitlement to its Net Effective Generating Capacity by paying to the respective non-defaulting Participants the total amount of money (and/or the reasonable equivalent in money for services or property
66

provided) paid by each non-defaulting Participant, together with interest thereon at a rate of interest 2 percent greater than the “prime rate.” The right of a defaulting Participant to reinstate its entitlement to its Net Effective Generating Capacity, shall be limited to three times during the term of the Project Agreements (provided such right may be exercised only once in any five (5) year period), unless the Coordination Committee consents to an additional number of times that a defaulting Participant may reinstate its entitlement to its Net Effective Generating Capacity.
20.2.9.If the defaulting Participant has not cured a Payment Default during the 180-day cure period set forth in Section 20.2.8, such event of default shall be deemed incurable and the non-defaulting Participants shall have the right to continue to exercise their rights under Section 20.2.7 and shall have the right to permanently transfer the defaulting Participant’s Net Effective Generating Capacity to one or more of the other Participants or a third party (such party being a “Permanent Transferee” and such transfer being a “Permanent Transfer”), who shall: (a) pay the non-capital operating expenses, including fuel costs, and capital expenditures associated with such Net Effective Generating Capacity following the Permanent Transfer and (b) reimburse the other non-defaulting Participants the pro-rata share of any capital expenditures associated with the additional generation used by the Permanent Transferee (as set forth in Section 20.2.7) and funded by the other non-defaulting Participants prior to the Permanent
67

Transfer. Such agreement by a Permanent Transferee shall not relieve the defaulting Participant from any other liabilities under the Project Agreements for the remainder of the term of the Project Agreements.
20.3.[Reserved]
20.4.In the event that any Participant shall dispute an asserted default by it, then such Participant shall pay the disputed payment or perform the disputed obligation, but may do so under protest. The protest shall be in writing, shall accompany the disputed payment, or precede the performance of the disputed obligation, and shall specify the reasons upon which the protest is based. Copies of such protest shall be mailed by such Participant to all other Participants. Payments not made under protest shall be deemed to be correct, except to the extent that periodic or annual audits may reveal over or under payment by Participants or may necessitate adjustments. In the event it is determined by arbitration, pursuant to the provisions of this Co-Tenancy Agreement or otherwise, that the protesting Participant is entitled to a refund of all or any portion of a disputed payment or payments, or is entitled to the reasonable equivalent in money of non-monetary performance of a disputed obligation theretofore made, then, upon such determination, the non-protesting Participants shall pay such amount to the protesting Participant, together with interest thereon at the rate of six percent (6%) per annum from the date of payment or of the performance of a disputed obligation to the date of reimbursement. Reimbursement of the amount so paid shall be made by the
68

non-protesting Participants in the ratio of their respective capacity entitlements to the total capacity entitlement of all non-protesting Participants.
20.5.[Reserved]
20.6.No waiver by a Participant of its rights with respect to a default under this Co-Tenancy Agreement, or with respect to any other matter arising in connection with this Co-Tenancy Agreement, shall be effective unless all non-defaulting Participants waive their respective rights and any such waiver shall not be deemed to be a waiver with respect to any subsequent default or matter. No delay, short of the statutory period of limitations, in asserting or enforcing any right hereunder shall be deemed a waiver of such right.
20.7.The rights and remedies provided in this Co-Tenancy Agreement shall be in addition to the rights and remedies of the Participants as set forth and contained in any other of the Project Agreements.
20.8.Other Remedies Available to Non-Defaulting Participants. The Coordination Committee may elect to impose any one or more of the alternative remedies set forth below, in lieu of or in addition to the remedy set forth in Section 20.2:
20.8.1.Extend the time for the defaulting Participant to cure the default, before the defaulting Participant’s Net Effective Generating Capacity is temporarily or permanently transferred to the non-defaulting Participants.
20.8.2.Seek injunctive relief against or specific performance by the defaulting Participant to compel performance by the defaulting Participant of its obligations hereunder to permit the non-defaulting Participants to exercise their remedies herewith.
69

20.9    Pinnacle West Capital Corporation (“PNW”) has guaranteed the payment obligations of NTEC under this Section 20 pursuant to a Guarantee in favor of the Participants dated July 3, 2018 (the “Guarantee”). In the event that PNW funds one or more of NTEC’s payment obligations under this Section 20 pursuant to the Guarantee, then NTEC shall be deemed to have committed a Payment Default. The Payment Default shall commence on the date the payment is made by PNW and continue until such time as NTEC provides a written notice to the Operating Agent certifying that NTEC has repaid PNW for all amounts paid by PNW on behalf of NTEC under the Guarantee (the “Cure Notice”). The Cure Notice must be executed by a duly authorized officer of NTEC, and countersigned as being true and correct by a duly authorized officer of PNW. The period during which the Payment Default is in effect is referred to as the “Default Period.” During the Default Period, NTEC shall be subject to all of the default provisions of Section 20. Notwithstanding the foregoing, in no event shall the non-defaulting Participants be responsible for any shortfall resulting from NTEC’s default as a Participant, as otherwise set forth in Section 20.2.3 of the Co-Tenancy Agreement. The provisions of this Section 20.9 shall be terminated and of no force or effect at such time as the Participants irrevocably release PNW of its obligations under the Guarantee and any amounts paid by PNW thereunder have been fully reimbursed by NTEC.
21.TERM:
21.1.This Co-Tenancy Agreement shall terminate on July 7, 2041, provided, however, that all liabilities and obligations of the Participants arising under the
70

Project Agreements, as well as the sections of the Project Agreements related thereto or relevant to the resolution or apportionment of such liabilities and obligations (including, without limitation, the voting/governance provisions and the dispute resolution provisions) shall survive the termination of the Project Agreements.
22.RELATIONSHIP OF PARTIES:
22.1.The duties, obligations and liabilities of the Participants hereto are intended to be several and not joint or collective, and nothing herein contained shall ever be construed to create an association, joint venture, trust or partnership, or impose a trust or partnership duty, obligation or liability on or with regard to any one or more of the Participants hereto. Each Participant hereto shall be individually responsible for its own obligations as herein provided. No Participant or group of Participants shall be under the control of or shall be deemed to control any other Participant or the Participants as a group. No Participant shall have a right or power to bind any other Participant(s) without its or their express written consent, except as expressly provided in this Co-Tenancy Agreement, the Construction Agreement or the Operating Agreement.
22.2.The Participants intend that the Project Agreements, including this Co-Tenancy Agreement, are to be part of an integrated transaction and that the Project Agreements may not be individually or selectively disaffirmed by a bankruptcy trustee.
23.NOTICES:
23.1.Any notice, demand or request provided for in this Co-Tenancy Agreement, or served, given or made in connection with it, shall be deemed properly served,
71

given or made if delivered in person or sent by Registered or Certified Mail, postage prepaid, to the persons specified below:
23.1.1.Arizona Public Service Company
c/o Secretary
P. O. Box 2591
    Phoenix, Arizona 85002                    

23.1.2.    Navajo Transitional Energy Company, LLC
Attn: Chief Executive Officer
385 Interlocken Crescent #400
Broomfield, CO 80021

23.1.3    Public Service Company of New Mexico
c/o Secretary
Main Offices
Albuquerque, New Mexico 87103

23.1.4Salt River Project Agricultural
Improvement and Power District
c/o Secretary
Mail Station PAB215
P. O. Box 52025
Phoenix, Arizona 85072-2025

23.1.5[Reserved]

23.1.6    Tucson Electric Power Company
c/o Secretary
P. O. Box 711
Tucson, Arizona 85702

23.2Any Participant may at any time or from time to time, by written notice to all other Participants, change the designation or address of the person so specified as the one to receive notices pursuant to this Co-Tenancy Agreement.
24.COVENANTS RUNNING WITH THE LAND:
24.1.Except as otherwise provided in Section 24.4 hereof, all of the respective covenants and obligations of each of the Participants set forth and contained in
72

the Project Agreements shall bind and shall be and become the respective obligations of:
24.1.1.Each such Participant;
24.1.2.All mortgagees, trustees and secured parties under all present and future mortgages, indentures and deeds of trust, and security agreements which are or may become a lien upon any of the properties of such Participant;
24.1.3.All receivers, assignees for the benefit of creditors, bankruptcy trustees and referees of such Participant;
24.1.4.All other persons, firms, partnerships or corporations claiming through or under any of the foregoing; and
24.1.5.Any successors or assigns of any of those mentioned in Sections 24.1.1 to 24.1.4, inclusive, and shall be obligations running with the Participants’ rights, titles and interests in the Four Corners Project, with all of the rights, titles and interests of each Participant, in, to and under the Project Agreements and with their rights, titles and interests in the Granted Lands and Leased Lands, excluding the Amended Original Plant Site except to the extent that it is subject to the rights granted in the §323 Grant or leased in the New Lease for the Common Facilities and Related Facilities that may be located thereon. It is the specific intention of this provision that all of such covenants and obligations shall be binding upon any party which acquires any of the rights, titles and interests of any of the Participants in the Four Corners Project, in, to and under the Project Agreements, and/or in
73

the Granted Lands or Leased Lands (except as aforesaid), and that all of the above-described persons and groups shall be obligated to use such Participant’s rights, titles and interests in the Four Corners Project, in, to and under the Project Agreements, and in the Granted Lands and Leased Lands (except as aforesaid) for the purpose of discharging its covenants and obligations under the Project Agreements.
24.2.Except as otherwise provided in Section 24.4 hereof, all of the covenants and obligations of Arizona set forth and contained in the Project Agreements pertaining to the Common Facilities and the Related Facilities allocated to the Initial Four Corners Plant, subject to the terms and conditions set forth and contained in Arizona’s existing 5Indenture of Mortgage, shall bind and shall be and become the obligations of:
24.2.1.Arizona;
24.2.2.All mortgagees, trustees and secured parties under all present and future mortgages, indentures, deeds of trust and security agreements which are or may become a lien upon any of the properties of Arizona;

* Indenture of Mortgage recorded as a realty mortgage in Book 472, page 140, and in Book 472 of Chattel Mortgages, page 140, in the office of the County Clerk of San Juan County, New Mexico, which said instrument is supplemented and amended by nine supplemental indentures, recorded in the office of the County Clerk of San Juan County, New Mexico, as a realty mortgage in Book 472, pages 141 through 149, and in Book 472 of Chattel Mortgages, pages 141 through 149, and as supplemented by a tenth supplemental indenture recorded as a realty mortgage in Book 502, page 141 and Book 78920 of Chattel Mortgages, and by an eleventh supplemental indenture recorded as a realty mortgage in Docket 518, page 153, and in Book 2463 of Chattel Mortgages, and by a twelfth supplemental indenture recorded as a realty mortgage in Docket 538 page 259, and in Book 2463-A of Chattel Mortgages, and by a thirteenth supplemental indenture recorded as a realty mortgage in Docket 562, page 33, and in Book 4088 of Chattel Mortgages, in the office of the County Clerk of San Juan County, New Mexico.
74

24.2.3.All receivers, assignees for the benefit of creditors, bankruptcy trustees and referees of Arizona;
24.2.4.All other persons, firms, partnerships or corporations claiming through or under any of the foregoing; and
24.2.5.Any successors or assigns of any of those mentioned in Sections 24.2.1 to 24.2.4, inclusive, and shall, subject to said Indenture of Mortgage, be obligations running with the rights, titles and interests of Arizona, in, to and under the Project Agreements, in and to the Common Facilities and the Related Facilities allocated to the Initial Four Corners Plant, and in and to the Granted Lands and Leased Lands, excluding the Amended Original Plant Site except to the extent it is subject to the rights granted in the §323 Grant or leased in the New Lease for the Common Facilities and Related Facilities that may be located thereon. Except as herein otherwise provided, it is the specific intention of this provision that, subject to said Indenture of Mortgage, all of the covenants and obligations of Arizona set forth and contained in the Project Agreements pertaining to the Common Facilities and the Related Facilities allocated to the Initial Four Corners Plant shall be binding upon any party that acquires any of the rights, titles or interests of Arizona in and to the Common Facilities and the Related Facilities allocated to the Initial Four Corners Plant in, to and under the Project Agreements, and/or in and to the Granted Lands and Leased Lands (except as aforesaid), and that all of the above-described persons and groups shall be obligated to use said
75

rights, titles and interests for the purpose of discharging such covenants and obligations.
24.3.The rights, titles and interests of each Participant in the Four Corners Project, its rights, titles and interests in, to and under the Project Agreements and its rights, titles and interests in and to the Granted Lands and Leased Lands, shall inure to the benefit of its successors and assigns, including any successors and assigns of Arizona’s rights, titles and interests in the Initial Four Corners Plant.
24.4.Any mortgagee, trustee or secured party, or any receiver or trustee appointed pursuant to the provisions of any present or future mortgage, deed of trust, indenture or security agreement creating a lien upon or encumbering the rights, titles or interests of any Participant in the Four Corners Project, in, to and under the Project Agreements and/or in the Granted Lands or Leased Lands, and any successor thereof by action of law or otherwise, and any purchaser, transferee or assignee of any thereof, shall not be obligated to pay any monies accruing on account of any of the obligations or duties of such Participant under the Project Agreements incurred prior to the taking of possession or the initiation of foreclosure or other remedial proceedings by such mortgagee, trustee or secured party.
24.5.In the event that any or all of the provisions of this Section 24 shall not be legally effective as to any Participant, or its mortgagees, trustees, secured parties, receivers, successors or assigns, then such Participant shall not be deemed in violation of this Section 24 by reason thereof.
25.MISCELLANEOUS PROVISIONS:
76

25.1.Each Participant agrees, upon request by the other Participant, to make, execute and deliver any and all documents reasonably required to implement the terms of this Co-Tenancy Agreement.
25.2.No Participant shall be considered to be in default in the performance of any of the obligations hereunder (other than obligations of any of said Participants to pay costs and expenses) if failure of performance shall be due to uncontrollable forces. The term “uncontrollable forces” shall mean any cause beyond the control of the Participant affected, including but not limited to failure of facilities, flood, earthquake, storm, fire, lightning, epidemic, war, riot, civil disturbance, labor dispute, sabotage and restraint by Court order or public authority, which by exercise of due diligence and foresight such Participant could not reasonably have been expected to avoid and which by exercise of due diligence it shall be unable to overcome. Nothing contained herein shall be construed so as to require a Participant to settle any strike or labor dispute in which it may be involved. Any party rendered unable to fulfill any obligation by reason of uncontrollable forces shall exercise due diligence to remove such inability with all reasonable dispatch.
25.3.Any federal or state regulatory or legal prohibition that prevents performance by a Participant of its obligations hereunder shall constitute an “uncontrollable force” provided that such Participant shall have provided to the other Participants an opinion of independent counsel confirming the effect of the regulatory or legal prohibition. Such federal or state regulatory or legal prohibition shall not excuse the affected Participant from its payment obligations, including operating expenses, capital expenditures,
77

Decommissioning costs, or liabilities to the other Participants. If, after reasonably commercial efforts, the affected Participant is unable to mitigate the federal or state regulatory or legal prohibition to allow it to substantially perform its obligations under the Project Agreements, the affected Participant may meet its financial obligations through one or more of the following alternatives:
(a)Transfer or sale of the affected Participant’s Net Effective Generating Capacity to an unregulated affiliate of the affected Participant or to a third party; or
(b)Allow one or more of the other Participants to utilize the affected Participant’s Net Effective Generating Capacity until such federal or state regulatory or legal prohibition is removed; provided that the Participant(s) utilizing the affected Participant’s Net Effective Generating Capacity agree(s) to pay all associated non-capital operating costs.
25.4.The captions and headings appearing in this Co-Tenancy Agreement are inserted merely to facilitate reference and shall have no bearing upon the interpretation of the provisions hereof.
25.5.This Co-Tenancy Agreement is made under and shall be governed by the laws of the State of New Mexico.
25.6.This Co-Tenancy Agreement may be executed in any number of counterparts, and each executed counterpart shall have the same force and effect as an original instrument as if all the Participants to the aggregated counterparts had signed the same instrument. Any signature page of this Co-Tenancy Agreement may be detached from any counterpart thereof without impairing
78

the legal effect of any signatures thereon and may be attached to any other counterpart of this Co-Tenancy Agreement identical in form thereto but having attached to it one or more additional pages.
25.7.The covenants and obligations set forth and contained in this Co-Tenancy Agreement are to be deemed to be independent covenants not dependent covenants, and the obligation of any Participant to perform all of the obligations and covenants to be by it kept and performed is not conditioned on the performance by the other Participants of all of the covenants and obligations to be kept and performed by them.
25.8.In the event that any of the terms or conditions of this Co-Tenancy Agreement, or the application of any such term or condition to any person or circumstance, shall be held invalid by any Court having jurisdiction in the premises, the remainder of this Co-Tenancy Agreement, and the application of such terms or conditions to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby.
26.WAIVER OF SOVEREIGN IMMUNITY.
26.1.For purposes of this Section 26, the term “Project Agreements” means: (a) the Project Agreements, as defined in Section 5.28, (b) all agreements listed on Schedule 2.1(h) of the Purchase and Sale Agreement, by and between 4CA and NTEC, the form of which will be filed by 4CA in FERC Docket o. EC15-159 in May 2018, and (c) any future Amendments to the Project Agreements or other agreements executed by NTEC or approved by a vote of the Coordination Committee (in accordance with Section 9.5) that binds NTEC to obligations or entitles NTEC to rights related to the Four Corners Project.
79

26.2. If, in the judgment of the Operating Agent, an express waiver of sovereign immunity is required in any future Project Agreement executed by NTEC that binds NTEC to obligations or entitles NTEC to rights related to the Four Corners Project, NTEC agrees that it shall clearly, expressly, unequivocally, and irrevocably waive its sovereign immunity in such Project Agreement to the same extent it has done so in this Section 26.
26.3.NTEC agrees to waive and hereby waives its sovereign immunity and consents to arbitration and litigation proceedings as described in the Project Agreements, to the extent necessary to make the Project Agreements enforceable as to the Participants. All future references in this Section 26 to “a Participant” or “the Participants” shall mean APS as the Operating Agent or as Participant, as the case may be, or one or more of the other Participants.
26.4.NTEC clearly, expressly, unequivocally, and irrevocably, waives its sovereign immunity and consents to arbitration and litigation proceedings as described in the Project Agreements for purposes of the Project Agreements, and in accordance with and as limited by, the terms of the Project Agreements, to the extent necessary to make the Project Agreements enforceable as to the Participants.
26.5.NTEC agrees that, to the extent it possesses sovereign immunity from suit by any third parties, the provisions of this Section 26 apply to NTEC’s liability to the Participants for: (a) Operating Work Liability, as that term is defined in Section 5.53 of the Operating Agreement, and (b) any other liability that NTEC, as a Participant, has or may have to the Participants under the Project Agreements, including without limitation any liability of NTEC under the
80

Project Agreements arising from third party claims or suits; provided, nothing herein shall be construed as a waiver of NTEC’s sovereign immunity to any third party or to limit NTEC’s ability to intervene, or limitedly intervene, in any third-party proceeding, including for purposes of moving to dismiss such proceeding on the basis of NTEC’s sovereign immunity from suit by such third parties.
26.6.NTEC limitedly waives its sovereign immunity from suit in accordance with and for the limited purposes described in this Section 26, for arbitration and any litigation proceedings necessary to compel arbitration, or to enforce an arbitral award, or for exigent or emergency equitable relief, pursuant to the terms and provisions of the Project Agreements, to the extent necessary to make the Project Agreements enforceable against NTEC as to the Participants. NTEC represents and agrees that NTEC expressly, unequivocally, and irrevocably waives its immunity from suit and consents to the dispute resolution mechanisms stated in the Project Agreements, and to permit enforcement of the terms and conditions of the Project Agreements, to the extent necessary to make the Project Agreements enforceable as to the Participants. To the extent necessary to make the Project Agreements enforceable as to the Participants, NTEC further expressly agrees that:
26.6.1.To the extent arbitration must be compelled, challenged, or sought to be enforced by a Participant, NTEC consents to such judicial proceedings in a New Mexico state court of competent jurisdiction, as necessary to compel a Participant’s participation in arbitration, a
81

Participant’s challenge of award, or a Participant’s enforcement of an award.
26.6.2.A Participant may seek and obtain specific performance, money damages, and injunctive relief.
26.6.3.NTEC waives any benefits, rights, immunities, privileges, or limitations in applicable Navajo Nation Law that would otherwise foreclose specific performance, injunctive relief, or money damages.
26.6.4.NTEC waives any otherwise existing right or claim of right to require exhaustion of tribal administrative or judicial remedies prior to exercise of the dispute resolution provisions of the Project Agreements, including with respect to arbitration and any ancillary litigation proceedings, to compel arbitration or enforce any arbitration award in a New Mexico state court of competent jurisdiction. NTEC’s consent to the jurisdiction of a New Mexico state court of competent jurisdiction as provided in this Agreement is irrevocable. NTEC waives any rights to have any dispute heard in a Navajo Nation tribunal, in any Navajo Nation administrative or judicial body whatsoever.
26.6.5.NTEC agrees and expressly, unequivocally, and irrevocably waives its sovereign immunity, but only to the Participants and its successors and assigns, and exclusively for the purposes the Project Agreement, to have binding arbitration conducted pursuant to and in accordance with the provisions of the Project Agreements or, if no dispute
82

resolution provision exists in the applicable Project Agreement, this Co-Tenancy Agreement.
26.6.6. To the extent arbitration must be compelled, a Participant challenges an arbitration award, or a Participant seeks to enforce an arbitration award, NTEC clearly, expressly, unequivocally, and irrevocably consents to such judicial proceedings in a New Mexico state court of competent jurisdiction.
26.6.7.NTEC agrees and expressly, unequivocally, and irrevocably waives its sovereign immunity and any right otherwise existing, but only to the Participants, to have a dispute between the Participants heard in any Navajo Nation adjudicatory tribunal, forum, or other bodies that may otherwise have exclusive or concurrent jurisdiction over any such dispute, whether or not the same now exist or are hereinafter created.
26.6.8.NTEC agrees and expressly, unequivocally, and irrevocably waives its sovereign immunity, but only to the Participants, for recourse and enforcement against any and all of the assets of NTEC only. NTEC’s agreement and express, unequivocal, and irrevocable waiver of its sovereign immunity shall not be asserted, interpreted, or applied to any other assets except NTEC’s assets, [including any other assets owned directly by NTEC], the Navajo Nation or by any of the Navajo Nation’s arms, entities or instrumentalities, or to permit or authorize the sale or transfer of any property held by NTEC or the Navajo Nation apart from NTEC’s property, or any other property held by
83

any other Navajo Nation arm, instrumentality or entity other than NTEC, whether such property is held in trust by the United States, or otherwise, and nothing herein shall be construed to create a lien of any kind in the property of NTEC, the Navajo Nation, or any other, arm, entity or instrumentality of the Navajo Nation.
26.6.9.NTEC clearly, expressly, unequivocally, and irrevocably waives its sovereign immunity for a Participant’s disputes with NTEC, a Participant’s claims against NTEC, or a Participant’s causes of action against NTEC, but only for a Participant to enforce its rights and the obligations of NTEC created and existing pursuant to the Project Agreements. NTEC clearly, expressly, unequivocally, and irrevocably waives its sovereign immunity for the Participants to seek to obtain, and where deemed appropriate by an arbitrator, an arbitration panel, or a judge of a New Mexico state court of competent jurisdiction, for a Participant to obtain one or more of the following: (A) to interpret a Project Agreement; (B) to make NTEC perform a specific action NTEC is obligated to perform pursuant to a Project Agreement or to make NTEC discontinue some specific action that NTEC is precluded from performing pursuant to the Project Agreements; or (C) to require NTEC to comply with the duties and obligations clearly and expressly agreed to by NTEC within the Project Agreements.
26.6.10.NTEC clearly, expressly, unequivocally, and irrevocably waives its sovereign immunity solely with respect to actions by a Participant in accordance with the terms of the Project Agreements, and NTEC’s
84

limited waiver shall survive the termination or expiration of the Project Agreements and remain effective until any applicable statute of limitations runs.
26.6.11.NTEC clearly, expressly, unequivocally, and irrevocably agrees that, to the extent NTEC changes its company, corporate, or organizational form, any resulting company, corporation, or organization will, by Navajo Nation Council resolution if necessary, provide all of the same limited waivers of sovereign immunity to the Participants as those set forth in this Section 26.
26.6.12.NTEC agrees that to the extent any later changes in Navajo Nation Law cause NTEC to be unable to comply with any provision(s) of a Project Agreement, NTEC shall nonetheless remain subject to all of its obligations under the applicable Project Agreement or Agreements notwithstanding any such changes in Navajo Nation Law, and NTEC’s failure to comply with any provision(s) of a Project Agreement on the basis of any such change in Navajo Nation Law shall not be excused and shall constitute a breach of the applicable Project Agreement(s) and be actionable under the dispute resolution terms of the applicable Project Agreement(s).
26.6.13.NTEC agrees that the Navajo Nation’s independent covenant not to regulate any aspects of the Four Corners Project remains unchanged and unaffected by the Project Agreements.
26.7.NTEC’s agreement and express, unequivocal, and irrevocable waiver of its sovereign immunity in the Project Agreements shall not apply, redound, or
85

inure to, without limitation, any third-party (or non-Party) person or entity, shall apply only to the Participants and their successors and assigns, and authorizes only the remedies provided by the Project Agreements against NTEC for only a claim, dispute, or cause of action brought by a Participant against NTEC to enforce its rights, and NTEC’s obligations, created and existing pursuant to the Project Agreements.
26.8.The Participants agree that nothing in the Project Agreements shall be asserted, interpreted, or otherwise understood to constitute any waiver of the Navajo Nation’s sovereign immunity, nor any waiver of any of the Navajo Nation’s rights, powers, or authorities as a sovereign governmental institution, whether express or implied.
26.8.1.The Participants agree that although NTEC is a wholly-owned instrumentality of the Navajo Nation that otherwise possesses sovereign immunity, by virtue of its relationship to and with the Navajo Nation, NTEC is a company with its own particular assets, liabilities, rights, and obligations.
26.8.2.NTEC’s limited waiver of sovereign immunity with respect to the Project Agreements extends only to the Participants, and only as described in this Section 26, and shall not be asserted, interpreted, implied or applied to permit or authorize the sale or transfer of any property held by the Navajo Nation apart from NTEC’s property, whether such Navajo Nation property is held in trust for the Navajo Nation by the United States, or otherwise.
86

26.8.3.NTEC’s limited waiver of sovereign immunity shall not be asserted, interpreted, implied or applied to permit or authorize the sale or transfer of any property held by any Navajo Nation instrumentality, entity or enterprise other than NTEC.
26.8.4.NTEC agrees that the Navajo Nation’s independent covenant not to regulate any aspects of the Four Corners Project pursuant to the Original Lease and the New Lease Amendments remains unchanged and unaffected by the Project Agreements; . Except for the Original Lease and the New Lease, the Navajo Nation is not a party to the Project Agreements.
27.AUTHORITY TO BIND AND OBLIGATE:
27.1.Each Participant represents and warrants that the person or persons executing the Project Agreements or who will in the future execute any Project Agreement on behalf of such Participant, are or will be, as the case may be, duly authorized by any and all necessary actions on the part of such Participant and, as necessary, such Participant’s owner, as applicable, including the Navajo Nation as to NTEC, to execute the applicable Project Agreement, and that the person or persons are vested with all authorities necessary to bind and obligate such Participant to the terms of the applicable Project Agreement.
28.RESTRICTION ON NTEC SALE:
28.1.Except as permitted pursuant to Section 12, NTEC may not sell or otherwise transfer any of its ownership interests in the Four Corners Project (including the ownership interests of New Mexico to be acquired at the closing of the New Mexico – NTEC PSA) without the prior written unanimous consent of all
87

then existing Participants with ownership of Net Effective Generating Capacity, such consent to be within the sole discretion of each such Participant.

IN WITNESS WHEREOF, the parties hereto have caused this Co-Tenancy Agreement to be executed in Phoenix, Arizona as of the __ day of _________, 2018.

                    ARIZONA PUBLIC SERVICE COMPANY
                    
By:_________________________________
Vice President

PUBLIC SERVICE COMPANY OF
NEW MEXICO
                    
By:__________________________________
President

SALT RIVER PROJECT AGRICULTURAL
IMPROVEMENT AND POWER DISTRICT
                    
By:__________________________________
President

TUCSON ELECTRIC POWER COMPANY
                    
By:__________________________________
Vice President

NAVAJO TRANSITIONAL ENERGY COMPANY, LLC.
                    
By:_________________________________
CEO
88

EXHIBIT 1
COMMON FACILITIES FOR ENLARGED FOUR CORNERS
GENERATION STATION

F.P.C.
Account
No.     Description

310.2        Land Rights, Including Lease Payments During Construction,
        Right-of-Way Expense and Surveys

311.100Clearing Site of Brush and Rough Grading

     .103    Landscaping and Planting Adjacent to Service Building

    .104        Yard Finish Grading of Plant Areas Not Requiring Paving or
            Gravel Surfacing

    .1200    Plant Access Road, including Subbase, Surfacing, Auxiliary Dike
            Culverts and Asphalt Coat from San Juan bridge to BIA canal

    .1201    River Access Road, including Subbase Gravel Surfacing, Pipeline
            Bridge Crossing, Culverts and Riprap

    .1202    Plant Area Roads, including Asphaltic Surfaced, Gravel Based and
            Other Gravel Surfaced Roads

    .121        Cement and Asphaltic Paving in Operating and Parking Areas,
            Including Curbing

    .123        Concrete Walks at the Service Building, Warehouse and Circulating
            Water Intake Area

    .124        Plant Area Chain Link Fence, Remote Controlled Main Gate,
            Manual Gates and Barbed Wire Fence

311.13Yard Lighting Standards, Conduit, Cable Foundations and Lamps

     .15        Fire Protection Pumps, Piping With Excavation and Backfill, Valves,
            Hydrants and Hose Carts with Hoses and Nozzles

     .16        Sanitary Sewer System, including Cast Iron and Clay Sewer Lines
            Manholes, Septic Tank and Accessories

     .2        Service Water System Chlorinator, Coagulator, Filters, Pumps, Yard
            Piping, Foundations and Domestic Water Lines (Accounts 311.22
Ex. 1-1

            through 311.27)
F.P.C.
Account
No.     Description

     .5        Service and Shop Building Foundation, Walls, Doors, Windows,
            Heating and Ventilating Equipment Plumbing, Toilet Facilities and
            Lighting (Accounts 311.50 through 311.594)

     .6        Warehouse Foundation, Floor Slab Superstructure and Lighting
            (Accounts 311.60 through 311.62)

     .7        Miscellaneous Buildings, Foundations, Floor Slabs, Superstructures
            and lighting

312.1863Coal Mobile Equipment, includes Hough D500 Paydozer

314.50        Cooling Pond Dam, Spillway, Blowdown Structure, Intake Canal,
            Curtain Wall and Temperature Recorders (Accounts 314.50 through
            314.507)

    .510        Concrete Intake Structure Excavation, Backfill Caissons and
            Concrete Structure for Service Water Pumps and Fire Pumps

    .511        Hoist Structure and Hoist for Intake Area

    .512        Screens and Stoplogs for Service Water and Fire Pumps

    .513        Miscellaneous Equipment for Service Water and Fire Pumps

    .515        Concrete Cribbing Between Intake Structure and Canal Bank

    .541        Circulating Water Discharge Canal to Cooling Pond

    .55        River Pumping Plant, Includes River Weir, Sluiceway Pump
            Chamber, Gates, Stop Logs, Pumps, Motors, Lube Water Cooling
            System, Freeze Protection, Switchgear, Motor Control Center,
            Transformers, Lighting, Equipment Building, 69 kV Transmission
            Line, Power Supply, Fence, Gates, Make-up Water Line, Metering
            Station and Canal (Accounts 314.550 through 314.563)

315.1113Circulating and Service Water Intake Motor Control Center

315.204    General Services Transformer for Area Lighting, Service Water
            Pump No. 2 Freeze Protection, Fire Booster Pump, etc.

Ex. 1-2

    .206        Intake Area Transformer for Water Treatment Building, Fire Pump
            No. 1, Service Water Pumps No. 1 and No. 3, Service Building,
            Area Lighting, Freeze Protection, etc.

    .207        Station Lighting Transformers

Ex. 1-3

F.P.C.
Account
No.     Description

    .26        Station Grounding and Cathodic Protection Systems, including
            Rectifier, Anode Bed, Ground Rods and Ground Cable

    .27        Freeze Protection Strip and Unit Heaters, Heating Cables, Controls
            and Panels

    .5        Underground Manholes, Handholes and Conduit, including
            Excavation, Backfill and Concrete Envelope (Accounts 319.55 and
            315.57)

316.        Miscellaneous Power Plant Equipment, including Portable Cranes
            and Hoists, Fire Extinguishers, Vacuum Cleaner, Weather Station,
            Office Equipment, Garage Equipment, Stores Equipment Shop
            Equipment, Laboratory Equipment, Small Tools, Kitchen
            Equipment, Testing Equipment and Forklift (Accounts 316.10,
            316.20, 316.25, 316.26, 316.30 through 316.37 and 316.39)

352/353    69 kV and 230 kV Switchyard Common to River Pumping Station,
            Including Portion of Site Improvement, Structures, Bus Conductors,
            Transformers, Oil Circuit Breakers, Air Switches, Lightning
            Protection, Panels, Wiring, Conduits, Ducts, Manholes, Grounding
            and Shielding

316.23        Intra-site Communication (Gaitronic and PAX Telephones Serving
            Common Facilities)

            Spare Parts for Above Facilities

NOTE:

1.    As actual design of Units 4 and 5 proceeds, there may be additions or deletions to the above list of Common Facilities. The list is subject to final adjustment, by mutual consent as a result of such additions or deletions.

Ex. 1-4

EXHIBIT 2

STEAM ELECTRIC GENERATING UNITS 4 AND 5 AND ASSOCIATED
SWITCHYARD FACILITIES

FOUR CORNERS

    Steam Electric Generating Units 4 and 5 and their associated switchyard facilities shall consist principally of two 755 MW class 3500 psig, 1000 F with reheat to 1000 F, cross-compound, 3600/1800 rpm, double flow, outdoor turbine-generator units, complete with accessories; two pressurized type, super-critical-pressure steam generating units, designed for burning pulverized coal as primary fuel with natural gas available for ignition fuel, complete with accessories; 345 kV and 500 kV switchyards; 345 kV/500 kV tie transformers; reserve auxiliary power source; and other items required for the complete generating installation and associated switchyards, excluding the Common Facilities and Related Facilities allocated thereto.

    Included within the limits of the 345 kV switchyard, 500 kV switchyard, 345 kV/500 kV tie transformer bank and the reserve auxiliary power source shall be the following facilities:

I.345 kV Switchyard

The 345 kV switchyard shall be comprised of eleven breaker-and-a-half positions serving (as shown in Figure 1):

    230 kV/345 kV Tie Transformer No. 1.
    No. 1 APS 345 kV line.
    230 kV/345 kV Tie Transformer No. 2.
    No. 2 APS 345 kV Line.
    Generating Unit No. 4.
    No. 1 PSNM 345 kV line.
    345 kV/500 kV Tie Transformer.
    345 kV/500 kV Tie Transformer (100% APS ownership).
    No. 2 PSNM 345 kV line.
    Shiprock 345 kV line.
    Pinto 345 kV line

II.500 kV Switchyard

The 500 kV switchyard shall be comprised of two bays of breaker and a half switchyard serving (as shown in Figure 1):

    The Moenkopi 500 kV line
    Generating Unit No. 5
Ex. 2-1

    One 345 kV/500 kV Tie Transformer Bank
    One 345 kV/500 kV Tie Transformer Bank

III.345 kV/500 kV Transformer

One (1) 1025 MVA, 345 kV/500 kV tie transformer bank comprised of four (4) single phase 341.7 MVA transformers together with any required bus work, taps and steel terminating towers for the 345 and 500 kV leads.

One (1) 1025 MVA, 345 kV/500 kV tie transformer bank comprised of three (3) single phase 341.7 MVA transformers together with any required bus work, taps and steel terminating towers for the 345 and 500 kV leads.

IV.Reserve Auxiliary Power Source

The No. 4 and No. 8 230 kV/345 kV bus tie transformers. The point of attachment to such transformers for the Connection to Reserve Auxiliary Power Source will be the tertiary bushings.

V.    Connection to Reserve Auxiliary Power Source

Connection to Units 4 and 5 from the existing tertiary windings of the No. 4 and No. 8 230 kV/345 kV bus tie transformers including disconnect switches, power circuit breakers, underground cables and three 13.8 kV/4.36 kV power transformers.

VI.    Connection to 345 kV Switchyard:

Towers, foundations, conductors, insulators and necessary hardware to connect the existing 345 kV bushings of the Reserve Auxiliary Power Source to positions No. 4 and No. 8 of the 345 kV switchyard.

VII.    345 kV/500 kV Switchyard Common Facilities

All metering protective equipment, communication equipment, control, DC control circuits, relay house, etc., associated with the facilities described in Paragraphs I, II, III, IV, V and VI above. This also includes fencing, lighting, landscaping, security and other common facilities associated with the 345 kV/500 kV switchyard.

Ex. 2-2

FIGURE 1
Pre-Sale of New Mexico’s interest in the Four Corners Project

Ex. 2-3

Post-Sale of New Mexico’s interest in the Four Corners Project

Ex. 2-4

FIGURE 2

Pre-Sale of New Mexico’s interest in the Four Corners Project

Ex. 2-5

Post-Sale of New Mexico’s interest in the Four Corners Project

Ex. 2-6

EXHIBIT 3

RELATED FACILITIES FOR FOUR CORNERS

EXISTING RELATED FACILITIES

1.Coal Handling System

From the point of the Utah Mining termination at the surge bins down to the gates in the bottom of the bins, including chutes, gates, motor control center enclosure, and surge bins. Includes wiring, lighting, foundations, dust control, CO2 blanketing, electrical feed and control, structure, stairs and platforms.

2.    Machine Shop Structure

Structure, foundation, lighting, wiring doors, heating and ventilating equipment, and plumbing, toilet, and shower facilities.

3.    Warehouse

Structure, floor slab, lighting, heating and ventilating equipment, plumbing and office facilities.

4.    Modifications to Service Building

Structural changes, walls, doors, windows, heating and ventilating equipment lighting, and wiring.

5.    Vehicle Bridge Over Intake Canal

Structure, guard rail, pipe supports and surfacing.

6.    Reroute Access Road Through Units 4 and 5 Area

Subbase, base material, surfacing and culverts.

7.    Modifications to River Pumping Station and Make-Up Pipeline

    Structures, foundations, pumps, motors, electrical supply facilities, valves, piping and control apparatus for pump station and relocated section of 36-inch make-up pipeline, new 2-inch pipeline for river pump packing gland water, paving of roads and parking area and barricades for protection from earth slides.

Ex. 3-1

8.    Mobile Equipment Maintenance Building

    Foundation, floor slab, superstructure and lighting, and repair equipment.

9.    Miscellaneous Power Plant Equipment

Small tools, machine shop tools, laboratory equipment, lockers, bins, shelving, portable firefighting equipment, etc.

10.    Enlargement of Discharge Canal

Excavation to enlarge channel for discharging circulating water to lake and protection from erosion of channel walls.

11.    Combustibles Storage Building

Foundation, floor slab, repairs to superstructure, and lighting.

12.    Station Mobile Equipment

Hydraulic crane, forklift trucks, small electric vehicles, and bicycles.

13.    Plant Access Road

Access road, including subbase preparation, base material, asphalt surfacing, culverts and drainage facilities from BIA Canal to the station gate.

FUTURE RELATED FACILITIES

14.    Coal Sampling Building and Equipment

Sampling building structure from point of connection with the surge bin structure including foundations, stairs, lighting, power facilities, dust control facilities, heating and ventilating sampling equipment, sample preparation room with furnishings.

15.    Wind Velocity and Direction Instruments

Wind velocity and direction instruments, wiring conduit and recorders.

16.    River Water Solids Measuring Equipment

Ex. 3-2

Flow recorder, conductivity recorder and cells, conduit, wiring and     support.

17.    New Administration Building

Structure, foundation, lighting, windows, heating and ventilating     equipment.

18.    Guardhouse - Main and Satellite

Structure, foundation, lighting, doors, heating and ventilating equipment.

19.Switchyard Shop

Structure, foundation, lighting, doors, heating and ventilating equipment and office facilities.

20.    Shop 4 & 5

Structure, foundation, lighting, wiring, doors, heating and ventilating equipment, plumbing, toilet and shower facilities and office facilities.

21.    Common Building

Structure, foundation, lighting, wiring, doors, heating and ventilating equipment, plumbing, toilet and shower facilities, office facilities and lunch room facilities.

22.    Overhaul Shop

Structure, foundation, lighting, wiring, doors, heating and ventilating equipment, plumbing, toilet facilities and office facilities.

23.    150 Gallon Demineralizer

Structure, foundation, pumps, motors, electrical supply facilities and water treatment facilities.

24.    National Pollution Discharge Elimination System (NPDES) Trench

Excavated canal and concrete lined trench.

25.    Brine Concentrator and Related Capital Improvements

Ex. 3-3

The brine concentrator and the capital improvements related thereto are part of the S02 removal project for Units 4 and 5 including the separator blowdown line and the chemical cleaning piping.

26.    Construction Personnel Facility

Structure, foundation, lighting, windows, heating and ventilating equipment, plumbing, toilet facilities, warehouse, conference room and office facilities.

Ex. 3-4

    

Ex. 4-5
4850-8546-6593\9
4850-8546-6593\12
4850-8546-6593\22
118124801v2
4850-8546-6593\25

    

EXHIBIT 4

NEW FACILITIES

The New Facilities shall consist of steam-electric generating Units 4 and 5 of the Four Corners Generating Station, which consist principally of two 755 MW class 3500 psig 1000ºF with reheat to 1000ºF , cross-compound, 3600/1800 rpm, double flow, outdoor turbine-generator units, complete with accessories; two pressurized type, super-critical-pressure steam-generating units, designed for burning pulverized coal as primary fuel with natural gas required for ignition fuel, complete with accessories; all Related Facilities; and all structures and facilities used with or related to the foregoing; but excluding the following:

A.    This list of 74 items, which shall be acquired by the six Participants pursuant to Section 6.2 of the Co-Tenancy Agreement:

1.    Elevator (to be installed by supplier).

2.    Heating, ventilating and air conditioning systems (to be installed by supplier).

3.    Landscaping (to be installed by supplier).

4.    Steam generators and accessories.

5.    Main turbine generators and accessories.

6.    Condensers, including condensate pumps, motor drives and air removal equipment.

7.    Condenser tubes.

8.    Boiler feed pump steam turbine drives, including couplings.

9.    High pressure feedwater heaters.

10.    Low pressure feedwater heaters.

11.    Flue gas duct precipitators, breeching and supports (to be installed by supplier).

12.    Main deaerators, including storage tanks.

13.    Evaporators, including evaporator condensers, preheaters and blowdown heat exchangers.

14.    Water treating equipment.

15.    Condensate polishing systems.
Ex. 4-1

16.    Lube oil conditioners and storage tanks.

17.    Forced draft fans, including motor drives, couplings, vane and damper control.

18.    Ash disposal system, including pumps, drives, tanks, special piping and valves, and all related equipment from point of collection to storage bins for outloading into trucks.

19.    Coal handling facilities, including conveyors, supports, walkways, enclosures, motor drive equipment, scales, magnetic separators, feeders, metal hoppers, stackers, trippers, coal bunkers and supports, bunker house, dust collection equipment and all related equipment from point of coal delivery to entrance of pulverizer feeders.

20.    Air compressors, including drives.

21.    Gantry cranes, excluding track.

22.    Lube oil centrifuge.

23.    Instrument air dryers.

24.    Chlorinating equipment.

25.    Lube oil for flushing and initial fill.

26.    Chemicals for water treating, initial fill.

27.    Hydrogen gas, initial fill.

28.    Carbon dioxide gas, initial fill.

29.    Nitrogen gas, initial fill.

30.    Boiler feed pumps.

31.    Boiler feed booster pumps, including drives.

32.    Cooling water pumps, including drives.

33.    Circulating water pumps, including drives.

34.    River pumping plant pumps, including drives.

35.    Chemical feed pumps, including drives.    
Ex. 4-2

36.Evaporator feed pumps, including drives.

37.    Service water pumps, including drives.

38.    Fire pumps, including drives.

39.    Portable firefighting equipment, including hose and reels.

40.    Lockers, bins, shelving and racks.

41.    Office furniture.

42.    Machine shop tools and equipment.

43.    Permanent station portable tools and mobile equipment.

44.    Laboratory test equipment.

45.    Spare parts for plant permanent equipment.

46.    Pulverizer motor drives.

47.    Boiler recirculating fan motor drives.

48.    Primary air booster fan motor drives.

49.    Main power transformers, including lightning arresters, 22/500 kV
    and 22/345 kV.

50.Auxiliary power transformers, 22/4 kV.

51.    Power leads from generator terminals to low voltage side of transformers.

52.    Switchgear, 4160 volts.

53.Switchgear, 440 volts.

54.    Auxiliary power unit substations.

55.    Motor control centers.

56.    Station batteries.

57.Area load frequency control equipment.
Ex. 4-3

58.Oscillograph.

59.    Station annunciator.

60.    Battery chargers.

61.Intercommunication equipment.

62.    Public address amplifier and equipment.

63.    Steam air heaters.

64.    Valves, butterfly.

65.    Valves, stainless steel.

66.    Valves, evaporator blowdown.

67.    Valves, large cast steel.

68.    Valves bronze.

69.    Valves, cast iron.

70.    Valves, high pressure.

71.    Valves, small forged steel.

72.    Valves, plug.

73.    Valves, motor operated.

74.    Valves, control and controllers, regulating, temperature, steam and feedwater sampling.

B.    Related Facilities included in items 19, 34, 39, 40, 41, 42, 43 and 44 of Section A above.

C.    The Common Facilities.

D.    The Minimum Coal Storage Pile.

E.    The 500 kV Switchyard Facilities.

F.    The 345 kV Switchyard Facilities.

Ex. 4-4

G.    The portion of the Switchyard Facilities described in Exhibit 2 of the Co-Tenancy Agreement as the 345 kV/500 kV transformer.

H.    Reserve Auxiliary Power Source.

I.    Connection to Reserve Auxiliary Power Source.

J.The Connection to 345 kV Switchyard Facilities.    
Ex. 4-5

    

EXHIBIT 5

AMENDED ORIGINAL PLANT SITE

Two parcels of land, Parcel “A” being located in Sections 25, 35 and 36, and Parcel “B” being located in Sections 25 and 36, Township 29 North, Range 16 West, New Mexico Principal Meridian and described by metes and bounds as follows: (Bearing reference is true North.)

(Parcel “A”) Beginning at the northwest corner of Section 36, thence S 25º 50’ 23” E, 1264.17 feet to the most southerly corner of Parcel “A”, which is the true point of beginning; thence N 50º 37’ E, 445.00 feet; thence N 39º 23’ W, 292.00 feet; thence N 50º 37’ E, 175.00 feet; thence N 39º 23’ W, 34.00 feet; thence N 50º 37’ E, 114.00 feet; thence N 39º 23’ W, 25.00 feet; thence N 50º 37’ E, 151.00 feet; thence N 39º 23’ W, 391.37 feet to the north line of Section 36, from which the northwest corner of Section 36 bears N 89º 48’ W, 763.98 feet; thence N 39º 23’ W, 117.63 feet; thence S 50º 37’ W, 142.36 feet to the south line of Section 25, from which the southwest corner of Section 25 bears N 89º 48’ W, 579.31 feet; thence S 50º 37’ W, 56.14 feet; thence N 84º 23’ W, 121.62 feet; thence S 50º 37’ W, 130.50 feet; thence N 39º 23’ W, 139.28 feet to the north line of Section 36, from which the northwest corner of Section 36 bears N 89º 48’ W, 225.65 feet; thence N 39º 23’ W, 10.22 feet; thence N 84º 23’ W, 79.90 feet; thence N 39º 23’ W, 44.67 feet; thence S 50º 37’ W, 78.31 feet to the south line of Section 25, from which the southwest corner of Section 25 bears N 89º 48’ W, 50.77 feet; thence S 50º 37’ W, 57.69 feet; thence S 39º 23’ E, 127.67 feet; thence S 50º 37’ W, 112.73 feet to the west line of Section 36, from which the northwest corner of Section 36 bears N 0º 01’ W, 206.97 feet; thence S 50º 37’ W, 24.77 feet; thence S 39º 23’ E, 30.19 feet to the east line of Section 35, from which the northeast corner of Section 35 bears N 0º 01’ W, 246.03 feet; thence S 39º 23’ E, 147.81 feet; thence S 50º 37’ W, 58.00 feet; thence S 39º 23’ E, 151.50 feet; thence N 50º 37’ E, 238.00 feet; thence S 39º 23’ E, 53.00 feet; thence S 50º 37’ W, 290.00 feet; thence S 39º 23’ E, 47.00 feet; thence N 50º 37’ E, 110.00 feet; thence S 39º 23’ E, 6.00 feet; thence N 50º 37’ E, 180.00 feet; thence S 39º 23’ E, 53.00 feet; thence S 50º 37’ W, 180.00 feet; thence S 39º 23’ E, 41.00 feet, thence S 50º 37’ W, 110.00 feet, thence S 39º 23’ E, 112.00 feet; thence N 50º 37’ E, 110.00 feet; thence S 39º 23’ E, 6.00 feet; thence N 50º 37’ E, 180.00 feet; thence S 39º 23’ E, 53.00 feet; thence S 50º 37’ W, 180.00 feet; thence S 39º 23’ E, 41.00 feet; thence S 50º 37’ W, 140.00 feet; thence S 39º 23’ E, 327.50 feet to the true point of beginning.
            
(Parcel “B”) Beginning at the northwest corner of Section 36, thence S 86º 32’ 04” E, 1223.42 feet to the most southerly corner of Parcel “B”, which is the true point of beginning; thence N 50º 37’ E, 109.97 feet to the north line of Section 36, from which the northwest corner of Section 36 bears N 89º 48’ W, 1306.18 feet; thence N 50º 37’ E, 640.03 feet; thence N 39º 23’ W, 176.63 feet; thence N 84º 23’ W, 181.02 feet; thence S 65º 37’ W, 295.05 feet; thence S 50º 7’ W, 342.00 feet; thence S 5º 37’ W, 152.73 feet; thence S 39 23’ E, 87.67 feet; thence N 62º 22’ E, 115.42 feet; thence S 39º 23’ E, 70.96 feet to the south line of Section 25, from which the southwest corner of Section 25 bears N 89º 48’ W, 1163.54 feet; thence S 39º 23’ E, 90.87 feet to the true point of beginning.

Ex. 5-1

    

                        Parcel “A”    Parcel “B”    Total
        Section 25    Acres        0.30        6.22         6.52
        Section 35    Acres        0.01                 0.01
        Section 36    Acres        14.55        0.11        14.66
            Total    Acres        14.86        6.33        21.19
    
NEW PLANT SITE

A parcel of land located in Sections 25, 26, 35, and 36, Township 29 North, Range 16 West, New Mexico Principal Meridian, and described by metes and bounds as follows: (Bearing reference is true North.)

Beginning at the northeast corner of Section 35, thence S 0º 01’ E, 1557.04 feet, thence S 89º 37’ W, 628.55 feet to the most westerly corner of the parcel of land which is the true point of beginning; thence S 39º 23’ E, 990.95 feet to the east line of Section 35, from which the northeast corner of Section 35 bears N 0º 01’ W, 2327.17 feet; thence S 39º 23’ E, 1171.78 feet; thence N 89º 37’ E, 1831.50 feet; thence N 0º 23’ W, 2020.76 feet; thence S 89º 37’ W, 414.44 feet; thence N 39º 23’ W, 1338.30 feet; thence S 50º 37’ W, 40.00 feet; thence N 39º 23’ W, 30.00 feet; thence N 50º 37’ E, 40.00 feet; thence N 39º 23’ W, 182.87 feet to the north line of Section 36, from which the northwest corner of Section 36 bears N 89º 48’ W, 1163.54 feet; thence N 39º 23’ W, 70.96 feet; thence S 62º 22’ W, 115.42 feet; thence N 39º 23’ W, 87.67 feet; thence N 5º 37’ E, 251.73 feet; thence S 50º 37’ W, 288.00 feet; thence S 39º 23’ E, 175.87 feet to the south line of Section 25, from which the southwest corner of Section 25 bears N 89º 48’ W, 874.26 feet; thence S 39º 23’ E, 321.13 feet; thence S 50º 37’ W, 236.00 feet; thence S 39º 23’ E, 25.00 feet; thence S 50º 37’ W, 114.00 feet; thence S 39º 23’ E, 34.00 feet; thence S 50º 37’ W, 175.00 feet; thence S 39º 23’ E, 292.00 feet; thence S 50º 37’ W, 445.00 feet; thence N 39º 23’ W, 610.00 feet; thence S 50º 37’ W, 75.00 feet; thence N 39º 23’ W, 166.75 feet to the west line of Section 36, from which the northwest corner of Section 36 bears N 0º 01’ W, 584.99 feet; thence N 39º 23’ W, 408.97 feet; thence N 16º 37’ E, 281.21 feet to the north line of Section 35, from which the northeast corner of Section 35 bears S 89º 49’ E, 178.91 feet; thence N 16º 37’ E, 34.67 feet; thence N 73º 23’ W, 120.00 feet; thence S 16º 37’ W, 70.07 feet to the south line of Section 26, from which the southeast corner of Section 26 bears S 89º 49’ E, 304.02 feet; thence S 16º 37’ W, 375.96 feet; thence S 39º 23’ E, 648.98 feet to the east line of Section 35, from which the northeast corner of Section 35 bears N 0º 01’ W, 860.90 feet; thence S 39º 23’ E, 142.67 feet; thence S 50º 37’ W, 117.05 feet to the west line of Section 36, from which the northwest corner of Section 36 bears N 0º 01’ W, 1045.44 feet; thence S 50º 37’ W, 812.93 feet to the true point of beginning.
Ex. 5-2

        Section 25            1.02 Acres
        Section 26            0.14 Acres
        Section 35         12.32 Acres
        Section 36         138.77 Acres
    
Total         152.25 Acres

PUMPING PLANT SITE

A parcel of land containing 1.35 acres, more or less, located in Section 7, Township 29 North, Range 15 West, New Mexico Principal Meridian, and described by metes and bounds as follows: (Bearing reference is true North.)
    
Beginning at the southwest corner of Section 7, thence N 29º 01’ E, 3250.46 feet to the southwest corner of the parcel of land, which is the true point of beginning; thence N 89º 39’ E, 250.00 feet; thence N 0º 21’ W, to the north boundary of the Navajo Reservation, being the San Juan River; thence along the north boundary of the Navajo Reservation to a point; thence S 89º 39’ W, to a point from which the northwest corner of Section 7 bears N 35º 59’ W, 2671.50 feet; thence S 0º 21’ E, 300.00 feet, to the true point of beginning.
    
DAM SITE
    
    A parcel of land containing 293.21 acres, more or less, located in Sections 23, 24, 25, 26 and 35, Township 29 North, Range 16 West, New Mexico Principal Meridian, and described by metes and bounds as follows: (Bearing reference is true North.)
    
    Beginning at the northwest corner of Section 35, thence S 89º 49’ E 3200.91 feet, thence S 11º 30’ W, 3.74 feet, thence S 0º 24’ E, 1323.65 feet to the Southwest corner of the parcel of land, which is the true point of beginning; thence N 89º 37’ E, 1407.45 feet, to a point common to the west boundary of the Common and Related Facilities Area; thence N 11º 30’ E, 1339.34 feet to the north line of Section 35 from which the northeast corner of Section 35 bears S 89º 49’ E, 362.48 feet; thence N 11º 30’ E, 1813.91 feet to the east line of Section 26º from which the southeast corner of Section 26 bears S 0º 01’ E, 1778.62 feet; thence N 11º 30’ E, 3595.29 feet to the north line of Section 25 from which the northwest corner of Section 25 bears N 89º 49’ W, 718.46 feet; thence N 11º 30’ E, 930.37 feet; thence N 78º 29’ W, 922.99 feet to the west line of Section 24 from which the southwest corner of Section 24 bears S 0º 01’ E, 1093.61 feet; thence N 78º 29’ W, 727.01 feet; thence S 11º 30’ W, 1260.96 feet to the south line of Section 23 from which the southeast corner of Section 23 bears S 89º 50’ E, 964.33 feet; thence S 11º 30’ W, 5408.99 feet to the south line of Section 26 from which the southeast corner of Section 26 bears S 89º 49’ E, 2045.23 feet;
Ex. 5-3

thence S 11º 30’ W, 3.74 feet; thence S 0º 24’ E, 1323.65 feet to the true point of beginning.
    
        Section 23            22.63 Acres
        Section 24            18.87 Acres
        Section 25            29.05 Acres
        Section 26            175.84 Acres
        Section 35             46.82 Acres
        Total                293.21 Acres

COMMON AND RELATED FACILITIES AREA

    Parcel “A” located in Sections 25, 26, 35, 36, Township 29 North, Range 16 West, and Section 30, Township 29 North, Range 15 West, New Mexico Principal Meridian, and described by metes and bounds as follows: (Bearing reference is true North.)

    Beginning at the northeast corner of Section 35, thence S 0º 01’ E, 1557.04 feet, thence S 89º 37’ W, 628.55 feet to the southwest corner of the parcel of land which is the true point of beginning; thence S 39º 23’ E, 990.95 feet to the east line of Section 35, from which the northeast corner of Section 35 bears N 0º 01’ W, 2327.17 feet; thence S 39º 23’ E, 1171.78 feet; thence N 89º 37’ E, 1831.50 feet; thence N 0º 23’ W, 2930.76 feet; thence N 89º 38’ E, 1400.00 feet; thence N 0º 22’ W, 267.72 feet, to the north line of Section 36 from which the northeast corner of Section 36 bears S 89º 48’ E, 1291.85 feet; thence N 0º 22’ W, 16.09 feet; thence N 71º 12’ E, 1125.38 feet; thence N 42º 31’ E, 336.04 feet, to the east line of Section 25 from which the southeast corner of Section 25 bears S 0º 03’ W, 631.02 feet; thence N 42º 31’ E, 695.89 feet; thence N 47º 29’ W, 300.00 feet; thence S 42º 31’ W, 368.16 feet, to the west line of Section 30 from which the southwest corner of Section 30 bears S 0º 03’ W, 1075.35 feet; thence S 42º 31’ W, 587.07 feet; thence S 71º 12’ W, 790.56 feet; thence N 45º 22’ W, 777.81 feet; thence S 89º 38’ W, to a point 100.00 feet from the shoreline of the Storage Lake, the water level in the Storage Lake being 5327.50 feet above mean sea level, thence in a southwesterly direction along a line within the Storage Lake, parallel with and 100.00 feet from the shoreline of said Storage Lake, the water level in the Storage Lake being 5327.50 feet above mean sea level, cross the west line of Section 25 and continue to the east boundary of the Dam Site, thence along the east boundary of the Dam Site S 11º 30’ W, to the south line of Section 26, from which the southeast corner of Section 26 bears S 89º 49’ E, 362.48 feet; thence S 11º 30’ W, 1339.34 feet, to the southeast corner of the Dam Site; thence S 0º 23’ E, 250.00 feet to the true point of beginning, except those parcels described as Parcel “A” and Parcel “B” in the Amended Original Plant Site”, and except that parcel described in the “New Plant Site.”

Ex. 5-4

Parcel “B” located in Section 25, Township 29 North, Range 16 West, New Mexico Principal Meridian, and described by metes and bounds as follows: (Bearing reference is true North.)

Beginning at the southeast corner of Section 25, thence N 31º 19’ W, 754 72 feet to a point on the north boundary line of the Common and Related Facilities Area as described in Parcel “A” which is the true point of beginning; thence N 13º 31’ W, 1006.80 feet; thence N 70º 06’ W, 1409.20 feet; thence S 49º 33’ W, 290.00 feet; thence S 1º 14’ E, 419.00 feet; thence S 26º 07’ E, 624.77 feet to a point on the north boundary line of the Common and Related Facilities Area (Parcel “A”); thence easterly along said line N 89º 38’ E, 195.13 feet; thence S 45º 22’ E, 777.81 feet; thence N 71º 12’ E, 790.56 feet to the true point of beginning, containing 43.08 acres.

Parcel “C’ located in Sections 35, 36, Township 29 North, Range 16 West, New Mexico Principal Meridian, and described by metes and bounds as follows: (Bearing reference is true North.)

Beginning at the northeast corner of Section 35, thence S 25º 39’ 13” W, 1454.64 feet to a point common to the west boundary line of the Common and Related Facilities Area (Parcel “A”) and the southeast corner of the Dam Site; thence S 0º 23’ E, 250.00 feet to the most westerly corner of the new plant site; thence S 39º 23’ E, 990.95 feet along the westerly line of the new plant site to the east line of Section 35, from which the northeast corner of Section 35 bears N 0º 01’ W, 2327.17 feet; thence continuing S 39º 23’ E, 1171.78 feet; thence S 89º 37’ W, 743.25 feet to the west line of Section 36 from which the northwest corner of Section 36 bears N 0º 01’ W, 3237.83 feet; thence continuing S 89º 37’ W, 3024.69 feet to a point common with the Ash Disposal Area; thence N 0º 24’ W, along the boundary of the Ash Disposal Area 1930.47 feet; thence N 89º 36’ E, 1000.00 feet to a point common to the Ash Disposal Area and the southwest corner of the Dam Site; thence N 89º 37’ E, 1407.45 feet to the true point of beginning containing 132.95 acres.
        
                         Acres                             Parcel     Parcel    Parcel
“A”     “B”    “C’        Total
    
    Section 25    T29N, R16W        70.00     43.08             113.08
    Section 26    T29N, R16W        148          -         1.48
    Section 35    T29N, R16W        11.76         125.18        136.94
    Section 36    T29N, R16W        37.51          7.77         45.28
    Section 30    T29N, R15W        3.66                   3.66
            Total Acreage        124.41     43.08    132.95        300.44

Ex. 5-5

ASH DISPOSAL AREA

    A parcel of land located in Sections 26, 27, 33, 34 and 35, Township 29 North, Range 16 West, and a portion of unsurveyed Township 28 North, Range 16 West, New Mexico Principal Meridian, described by metes and bounds as follows: (Bearing reference is true North.)

    Beginning at the southwest corner of Section 34, thence S 89º 50’ E, 38.07 feet to a point on the south line of Section 34; thence S 0º 25’ E, 107.96 feet to the most southerly corner of the parcel of land which is the true point of beginning; thence N 89º 35’ E, 2432.94 feet; thence N 0º 25’ W, 83.19 feet to the south line of Section 34, from which the southwest corner of Section 34 bears N 89º 50’ W, 2471.13 feet; thence N 0º 25’ W, 1416.81 feet; thence N 89º 35’ E, 2778.61 feet to the east line of Section 34, from which the northeast corner of Section 34 bears N 0º 05’ W, 3859.17 feet; thence N 89º 35’ E, 221.39 feet; thence N 0º 24’ W, 1500.00 feet; thence N 89º 36’ E, 2000.00 feet; thence N 0º 24’ W, 1000.00 feet; thence N 89º 36’ E, 1000.00 feet to a point that is common to the southwest corner of the Dam Site boundaries; thence along the west boundary of the Dam Site N 0º 24’ W, 1323.65 feet; thence continuing along the west boundary of the Dam Site N 11º 30’ E, 691.18 feet; thence S 89º 36’ W, 3142.43 feet; thence N 0º 24’ W, 1000.00 feet; thence S 89º 35’ W, 190.87 feet to the west line of Section 26, from which the southwest corner of Section 26 bears S 0º 05’ E, 1641.00 feet; thence S 89º 35’ W, 4809.13 feet; thence S 0º 25’ E,1594.67 feet to the south line of Section 27, from which the southwest corner of     Section 27 bears N 89º 52’ W, 444.00 feet; thence S 0º 25’ E, 405.33 feet; thence S 89º 35’ W, 446.01 feet to the west line of Section 34, from which the northwest corner of Section 34 bears N 0º 08’ W, 405.33 feet; thence S 89º 35’ W, 1313.99 feet; thence S 30º 20’ W, 283.00 feet; thence S 17º 26’ W, 874.00 feet; thence S 7º 05’ W, 751.00 feet; thence S 16º 05’ W, 564.00 feet; thence S 23º 25’ E, 297.00 feet; thence N 83º 35’ E, 436.00 feet; thence S 83º 55’ E, 347.00 feet; thence S 70º 25’ E, 385.00 feet; thence S 52º 55’ E, 503.00 feet; thence S 29º 55’ E, 623.00 feet; thence S 4º 10’ E, 69.85 feet to the east line of Section 33, from which the northeast corner of Section 33 bears N 0º 08’ W, 4087.04 feet; thence S 4º 10’ E, 478.15 feet; thence S 0º 25’ E, 845.48 feet to the true point of beginning.

        Section 26    T29N, R16W    53.73    Acres
        Section 27    T29N, R16W    178.45    Acres
        Section 33    T29N, R16W    111.57    Acres
        Section 34    T29N, R16W    542.12    Acres
        Section 35    T29N, R16W    157.03    Acres
        Unsurveyed    T28N, R16W     5.34    Acres

        Total Acreage            1048.24 Acres

Ex. 5-6

ADDITIONAL ASH DISPOSAL AREA

    A parcel of land located in Sections 34 and 35, Township 29 North, Range 16 West, and a portion of unsurveyed Township 28 North, Range 16 West, New Mexico Principal Meridian, described by metes and bounds as follows: (Bearing reference is true North.)
    
    Beginning at the southwest corner of Section 34, Township 29 North, Range 16 West; thence S 89º 50’ E, 38.07 feet to a point on the south line of Section 34; thence S 0º 25’ E, 107.96 feet to a point in unsurveyed Township 28 North, Range 16 West, which is the most southerly corner of the parcel of land as described in Ash Disposal Area (Exhibit No. 6) and the true point of beginning of the parcel herein described: Thence continuing S 0º 25’ E, 1996.97 feet; thence N 89º 35’ E, 6036.47 feet to a point on the westerly rightofway line of the Four Corners to Cholla 345 kV powerline thence N 34º 26’ 42” E, 2442.34 feet along afore mentioned powerline rightofway; thence N 0º 24’ W, 25.23 feet to a point on the township line between Township 28 North and Township 29 North from which the southwest corner of Section 35, Township 29 North, Range 16 West bears N 89º 50’ W, 2229.49 feet; thence continuing N 0º 24’ W, 2036.66 feet to a point which is common with the southwest corner of Parcel “C’ of the Common and Related Facilities Area; thence continuing N 0º 34’ W, 930.74 feet along the west line of Parcel “C” to a point common with Parcel “C” and the Ash Disposal Area thence S 89º 36’ W, 2000.00 feet along the southerly line of Ash Disposal Area thence S 0º 24’ E, 1500.00 feet; thence S 89º 35’ W, 221.39 feet to the west line of Section 35 from which the northwest corner of Section 35 bears N 0º 05’ W, 3859.17 feet; thence continuing S 89º 35’ W, 2778.61 feet; thence S 0º 25’ E, 1416.81 feet to a point on the south line of Section 34, Township 29 North, Range 16 West, from which the southwest corner of Section 34 bears N 89º 50’ W, 2471.11 feet; thence continuing S 0º 25’ E, 83.19 feet to a point in unsurveyed Township 28 North, Range 16 West; thence S 89º 35’ W, 2432.94 feet to the true point of beginning containing 549.65 acres.

    Section 34 T29N, R16W     91.14 Acres
        Section 35 T29N, R16 W     143.26 Acres
        Unsurveyed T28N, R16 W      315.25 Acres
        
    Total Acreage         549.65 Acres

Ex. 5-7

STORAGE LAKE
    
A parcel of land located in Sections 24, 25 and 26, Township 29 North, Range 16 West, and Sections 19 and 30, Township 29 North, Range 15 West, New Mexico Principal Meridian, and described as follows:

The area bounded by the shoreline of a storage lake (“Morgan Lake”) impounded by an earthfill dam located upon the Dam Site, the water level in the storage lake being 5327.50 feet above mean sea level, except an area along the south shoreline contained within the Common and Related Facilities Area, and except an area along the west shoreline contained within the Dam Site.

    Net Area of Storage Lake as Described Herein    =    1119.94 Acres
    Lake Area Contained Within Common and
        Related Facilities Area            =    54.08 Acres
Lake Area Contained Within Dam Site        =    113.71 Acres
Gross Area of Lake        =    1287.73 Acres

PUMPING PLANT ACCESS ROAD AND WATER
PIPELINE RIGHTOFWAY

    Portion “A” is situated in Section 7 Township 29 North, Range 15 West, New Mexico Principal Meridian and includes the rightofway for the Pumping Plant Access Road, 36 inch water pipeline and 2 inch water pipeline. Portion “A” is described as follows: (Bearing reference is true North.)
    
    Beginning at the southwest corner of Section 7, thence N 45º 14’ 57” E, 3112.63 feet, which is the true point of beginning (and a point common with the beginning of the centerline of Portion “B”) thence N 80º 32’ 00” W, 50.00 feet; thence N 28º 32’ 00” W, 44.00 feet; thence N 87º 21’ 22” W, 205.43 feet; thence N 40º 20’ 06’ W, 229.53 feet; thence N 10º 17’ 10” W, 136.53 feet; thence N 45º
36’ 10” W, 215.12 feet; thence N 0º 21’ 00” W, 135.12 feet to a point on the south line of the Pumping Plant Site from which the southwest corner of the Pumping Plant Site bears S 89º 39’ 00” W, 30.78 feet; thence N 89º 39’ 00” E, 219.22 feet along the south line of the Pumping Plant Site to the southeast corner of the site; thence S 47º 26’ 00” E, 114.03 feet; thence S 38º 03’ 00” E, 168.89 feet; thence S 28º 32’ 00” E, 513.02 feet; thence N 80º 32’ 00” W, 50.00 feet to the true point of beginning, containing 4.4216 acres.
    
Portion “B” 100 feet wide, extends from Portion “A” through or across Sections 7, 18, 19, Township 29 North, Range 15 West, New Mexico Principal Meridian, the centerline of Portion “B” being described as follows: (Bearing reference is true North.)

Ex. 5-8

    Beginning at the southwest corner of Section 7, thence N 45º 14’ 57” E, 3112.63 feet to a point common with the beginning of Portion “A”, which is the true point of beginning (Sta. 0+00); thence S 09º 28’ 00” W, 147.11 feet; thence S 09º 18’ 00” W, 194.10 feet; thence S 22º 02’ 00” E, 280.00 feet; thence S 25º 11’ 00” E, 847.87 feet; thence S 26º 01’ 00” W, 499.63 feet; thence S 09º 06’ 00” E, 382.99 feet, to a point on the south line of Section 7, from which the southwest corner of Section 7 bears S 89º 59’ 00” W, 2462.19 feet; thence continuing S 09º 06’ 00” E, 97.01 feet; thence S 42º 36’ 00” E, 1024.10 feet; thence S 34º 50’ 00” E, 1939.30 feet; thence S 10º 58’ 00” E, 825.00 feet; thence S 10º 50’ 00” W, 2089.76 feet to a point on the south line of Section 18, from which the southeast corner of Section 18 bears N 89º 59’ 00” E, 1211.82 feet; thence continuing S 10º 50’ 00” W, 2964.14 feet; thence S 21º 47’ 00” W, 2208.78 feet to the end of Portion “B” (Sta. 134+99.79) from which the southwest corner of Section 19, Township 29 North, Range 15 West, bears S 82º 43’ 00” W, 2696.72 feet.

    Portion “C”, 100 feet wide, extends from Portion “B” through or across Sections 19, 29, 30, Township 29 North, Range 15 West, New Mexico Principal Meridian, to the Plant Access Road rightofway, the centerline of said Portion “C” being described as follows:

    Beginning at the southeast corner of Section 19 thence N 50º 13’ 54’ W, 2566.17 feet to a point common with the east boundary line of Portion “B” which is the true point of beginning (Sta. 0+00); thence S 45º 38’ 22” E, 2347.84 feet, to a point on the south line of Section 19, from which the southeast corner of Section 19 bears east 293.86 feet; thence continuing S 45º 38’ 22” E, 181.10 feet to (Sta. 25+28.94) to a point of intersection with the west boundary of the Plant Access Road right-of-way from which the northwest corner of Section 29, Township 29 North, Range 15 West, bears N 17º 22’ 02” W, 433.76 feet.

Portion “A”    Metes & Bounds                 4.4216 Acres
    Portion “B”    Width = 100 Feet Length - 2.5568 Miles 30.9915 Acres
    Portion “C’    Width = 100 Feet Length = 0.5568 Miles 6.7491 Acres
                        Total Acreage 42.1622 Acres

PLANT ACCESS ROAD

    A rightofway extending from the Common and Related Facilities Area through or across Section 36, Township 29 North, Range 16 West, Sections 31, 30, 29, 17, 16, 9 and 10, Township 29 North, Range 15 West, New Mexico Principal Meridian, to the north boundary of the Navajo Indian Reservation, said right-of-way consisting of three portions described as follows: (Bearing reference is true North.)

Ex. 5-9

    Portion “A” is a rightofway, 100 feet wide whose centerline is described as follows:
    
    Beginning at the northeast corner of Section 36, Township 29 North, Range 16 West; thence S 51º 54’ 40” W, 3374.45 feet to a point common with the east boundary of the Common and Related Facilities Area, which is the true point of beginning (Sta. 0+00); thence N 72º 54’ 57” E, 84.34 feet; thence along a circular curve to the left, 232.80 feet, the radius of the curve being 577.71 feet and its angle of intersection being 23º 05’ 18”; thence N 49º 49’ 39” E, 1077.15 feet; thence along a circular curve to the right, 245.23 feet (Sta. 16+39.51), the radius of the curve being 353.12 feet and its angle of intersection being 39º 47’ 22”; thence N 89º 37’ 00” E, 1322.83 feet to a point on the east line of Section 36, from which the northeast corner of Section 36 bears N 0º 03’ 00” E, 1159.08 feet; thence continuing N 89º 37’ 00” E, 1971.08 feet; thence along a circular curve to the left, 812.91 feet (Sta. 57+46.33), the radius of the curve being 737.94 feet and its angle of intersection being 63º 07’ 00” to a point common with the centerline of Portion “C” of this rightofway. Portion “B” is a rightofway, 100 feet wide, whose centerline is described as follows:

    Beginning at the northeast corner of Section 36, Township 29 North, Range 16 West; thence S 55º 32’ 38” W, 3222.99 feet to a point common with the east boundary of the Common and Related Facilities area which is the true point of beginning (Sta. 0+00); thence N 50º 32’ 13” E, 879.73 feet; thence along a circular curve to the right 280.59 feet, the radius of the curve being 411.38 feet, and its angle of intersection being 39º 04’ 47”; thence N 89º 37’ 00” E, 395.85 feet, to a point common with the centerline of Portion “A” (Sta. 16+39.51) of this rightofway.

    Portion “C” is a rightofway, 40 feet wide, whose centerline is described as follows:

    Continuing from the point common with Portion “A” of this rightofway (Sta. 57+46.33), N 26º 30’ E, 6887.25 feet; thence N 25º 52’ E, 94.64 feet; thence N 29º 08’ E, 434.70 feet; thence N 30º 50’ E, 872.50 feet; thence N 30º 41’ E, 1399.10 feet; thence N 30º 59’ E, 1800.16 feet; thence along a circular curve to the left, 510.79 feet (to Sta. 177+45.47), the radius of the curve being 2341.45 feet and its angle of intersection being 12º 30’; thence N 18º 29’ E, 3538.15 feet; thence along a circular curve to the right 857.50 feet (to Sta. 221+41.12) the radius of the curve being 1212.21 feet and its angle of intersection being 40º 32’; thence N 59º 01’ E, 325.29 feet; thence N 52º 27’ E, 378.40 feet; thence N 43º
30’ E, 2118.80 feet; thence N 43º 59’ E, 1030.20 feet; thence N 63º 23’ E, 100.00 feet; thence N 87º 19’ E, 99.80 feet; thence S 76º 20’ E, 100.00 feet; thence S 66º 15’ E, 124.50 feet; thence S 59º 50’ E, 509.70 feet; thence S 54º 55’ E, 703.50 feet; thence S 60º 39’ E, 396.00 feet; thence S 81º 16’ E, 228.51 feet; thence along
Ex. 5-10

a circular curve to the right 301.84 feet, the radius of the curve being 959.09 feet and its angle of intersection being 18º 02’; thence S 63º 14’ E, 271.94 feet; thence along a circular curve to the left 238.29 feet (to Sta. 290+67.89), the radius of the curve being 160.00 feet, and its angle of intersection being 85º 20’, to the point of tangency of this curve from which the northeast corner of Section 16, Township 29 North, Range 15 West, bears N 41º 51’ E, 607.03 feet; thence N 31º 26’ E, 2541.40 feet; thence along a circular curve to the right, 352.50 feet (to Sta. 319+61.79), the radius of the curve being 200.00 feet and its angle of intersection being 100º 59’; thence S 47º 35’ E, 889.00 feet; thence along a circular curve to the left, 278.27 feet, the radius of the curve being 200.00 feet and its angle of intersection being 79º 44’; thence N 52º 41’ E, 948.46 feet to a point (Sta. 340+77.52) at the south end of the San Juan County Bridge over the San Juan River, from which point the southeast corner of Section 10, Township 29 North, Range 15 West, bears S 52º 21’ E, 2955.00 feet.

Portion “A”     Width = 100 Feet Length = 1.0883 Miles 13.1915 Acres
    Portion “B”    Width = 100 Feet Length = 0.2947 Miles 3.5721 Acres
    Portion “C”    Width = 40 Feet Length = 5.3658 Miles 26.0160 Acres
    
                     Total Acreage          42.7796 Acres

SIX INCH GAS PIPELINE

    A rightofway extending from the Common and Related Facilities area through or across Section 36, Township 29 North, Range 16 West and Section 31, Township 29 North, Range 15 West, New Mexico Principal Meridian, to the El Paso Natural Gas Company’s Four Corners Meter Station.

    A 20 foot wide rightofway whose centerline is described as follows:
(Bearing reference is true North.)

    Beginning at the Northeast corner of Section 36, Township 29 North, Range 16 West; thence S 66º 52’ 26” W, 2894.60 feet, to a point common with the east boundary of the Common and Related Facilities area, which is the true point of beginning (Sta. 0+00); thence N 89º 37’ 00” E, 846.56 feet to a point of intersection with the north boundary line of the Plant Overload Road right-of-way; thence continuing easterly within the Plant Access Road rightofway 4156.60 feet to a point of intersection with the south rightofway line of the Plant Access Road from which the northwest corner of Section 31, Township 29 North, Range 15 West bears N 64º 18’ 00” W, 2598.14 feet; thence S 63º 20’ 00” E, 48.62 feet to a point within the El Paso Natural Gas Company’s Four Corners Meter Station.

    Right-of-Way    Width = 20 Feet = 0.1695 Miles = 0.4109 Acres
Ex. 5-11

    RIGHT-OF-WAY FOR ACCESS ROAD TO UTAH LEASED LANDS

    A right-of-way, 150 feet wide, extending from the Common and Related Facilities Area through Section 36, Township 29 North, Range 16 West, and Section 31, Township 29 North, Range 15 West, New Mexico Principal Meridian, to the Utah Construction and Mining Company Lease, the centerline of said right-of-way being described as follows: (Bearing reference is true North.)

    Beginning at the northwest corner of Section 36, Township 29 North, Range 16 West, thence S 81º 52’ E, 2582.51 feet, to a point common with the Common and Related Facilities Area, which is the true point of beginning; (Sta. 0+00) thence N 89º 38’ E, 1400.00 feet (north boundary of rightofway is common with south boundary of Common and Related Facilities Area between the above two points); thence N 87º 57’ E, 1290.25 feet, to a point on the east line of Section 36, Township 29 North, Range 16 West, from which the northeast corner of Section 36 bears N 0º 03’ E, 291.97 feet; thence continuing N 87º 57’ E, 1879.38 feet; thence along a circular curve to the right, 874.07 feet, the radius of the curve being 1273.57 feet and its angle of intersection being 39º 20’; thence S 52º 43’ E, 1550.00 feet (to Sta. 69+93.70) to a point on the west boundary of the Utah Construction and Mining Company Leased Area, from which the northeast corner of Section 31, Township 29 North, Range 15 West, bears N 43º 15’ E, 1944.82 feet. Total RightofWay Width = 150 Feet Length = 1.3246 Miles

RIGHT-OF-WAY FOR WATER LINES TO UTAH MINING LEASED LANDS

Three rights-ofway described as follows:

(A) A right-of-way, common with the right-of-way for the Right-of-Way for Access Road to Utah Leased Lands, 150 feet wide, extending from the Common and Related Facilities Area through Section 36, Township 29 North, Range 16 West, and Section 31, Township 29 North, Range 15 West, New Mexico Principal Meridian, to the Utah Construction and Mining Company Lease, the centerline of said rightofway being described as follows: (Bearing reference is true North.)

    Beginning at the northwest corner of Section 36, Township 29 North, Range 16 West, thence S 81º 52’ E, 2582.51 feet, to a point common with the Common and Related Facilities Area, which is the true point of beginning; (Sta. 0+00) thence N 89º 38’ E, 1400.00 feet (north boundary of rightofway is common with south boundary of Common and Related Facilities Area between the above two points); thence N 87º 57’ E, 1290.25 feet, to a point on the east line of Section 36, Township 29 North, Range 16 West, from which the northeast corner of Section 36 bears N 0º 03’ E, 291.97 feet; thence continuing N 87º 57’ E, 1879.38 feet; thence along a circular curve to the right, 874.07 feet, the radius of
Ex. 5-12

the curve being 1273.57 feet and its angle of intersection being 39º 20’; thence S 52º 43’ E, 1550.00 feet (to Sta. 69+93.70) to a point on the west boundary of the Utah Construction and Mining Company Leased Area, from which the northeast corner of Section 31, Township 29 North, Range 15 West, bears N 43º 15’ E, 1944.82 feet.

    (B) A rightofway, a portion of which is common with the rightofway plotted and described as Portion “C” on Exhibit 9, 100 feet wide, extending from Portion “A” of the rightofway plotted and described on Exhibit 9, through Sections 19, 20 and 29, Township 29 North, Range 15 West, New Mexico Principal Meridian, to the Utah Construction and Mining Company Lease Area, the centerline of said rightofway being described as follows:

    Beginning at the southeast corner of Section 19, thence N 63º 56’ W, 2479.22 feet, to a point, which is the true point of beginning; (Sta. 0+00) thence S 68º 10’ E, 2399.30 feet, to a point on the east line of Section 19 from which the southeast corner of Section 19 bears S 0º 04’ W, 197.44 feet; thence continuing S 68º 10’ E, 511.82 feet to the south line of Section 20, from which the southwest corner of Section 20 bears S 89º 09’ W, 475.48 feet; thence continuing S 68º 10’ E, 2136.62 feet, (to Sta. 50+47.74) to a point on the west boundary of the Utah Construction and Mining Lease Area, from which lease corner L-23 bears N 0º 04’ E, 797.84 feet.

    (C) A right-of-way, 100 feet wide, extending from the storage Lake, through Section 30, Township 29 North, Range 15 West, New Mexico Principal Meridian to the Utah Construction and Mining Company Lease Area, the centerline of said rightofway being described as follows:

Beginning at the southeast corner of Section 30, thence N 50º 42’ W, 2784.44 feet, to a point, which is the true point of beginning; (Sta. 0+00) thence S 69º 09’ E, 2298.17 feet, (to Sta. 22+98.17) to a point on the west boundary of Utah Construction and Mining Company Lease Area, from which point lease corner L-33 bears N 0º 02’ E, 347.08 feet.

        Portion “A” Width = 150 Feet Length = 1.3246 Miles
        Portion “B” Width = 100 Feet    Length = 0.9560 Miles
        Portion “C” Width = 100 Feet    Length = 0.4353 Miles
    
Total RightofWay Length = 2.7159 Miles

    PUMPING PLANT SITE POWER LINE RIGHT-OF-WAY
    
A right-of-way, 40 feet wide, extending from the Pumping Plant Site through or across Sections 7 and 18, Township 29 North, Range 15 West, and Sections 13 and 24, Township 29 North, Range 16 West, New Mexico Principal
Ex. 5-13

Meridian, to the north boundary of the Dam Site, the centerline of said rightofway being described as follows: (Bearing reference is true North.) Beginning at the northwest corner of Section 7, Township 29 North, Range 15 West, thence S 33º 07’ E, 2938.30 feet to a point common with the Pumping Plant Site, which is the true point of beginning (Sta. 0+00); thence S 36º 42’ W, 194.25 feet; thence S 28º 07’ W, 3046.81 feet to a point on the south line of Section 7, from which the southwest corner of Section 7 bears S 89º 58’ W, 57.08 feet; thence S 28º 07’ W, 121.26 feet (to Sta. 33+62.32) to a point on the west line of Section 18, Township 29 North, Range 15 West, from which the northwest corner of Section 18 bears N 0º 03’ E, 106.95 feet; thence S 28º 07’ W, 5882.16 feet (to Sta. 92+44.48) to a point on the south line of Section 13, Township 29 North, Range 16 West, from which the southeast corner of Section 13 bears S 89º 49’ E, 2768.12 feet; thence S 28º 07’ W, 4814.37 feet, to the end point of the right-of-way described, (Sta. 140+58.85) said point being common with the north boundary of the Dam Site and from which point the southwest corner of Section 24, Township 29 North, Range 16 West bears S 11º 42’ W, 1071.55 feet.

        Total RightofWay    Width = 40 Feet    Length = 2.6627

Ex. 5-14

EXHIBIT 66

6 The conditions of Letter of Understanding No. 1, dated March 28, 1967 and Letter of Understanding No. 2, dated February 9, 1972, have been satisfied. Therefore, such letters are not included in this exhibit. The original signed letters may be found with the original agreement.
Ex. 6-1

EXHIBIT 7

APPROVED LOCATIONS OF EXISTING CAPITAL ITEMS
(AS OF DECEMBER 31, 1981)

FACILITY             APPROVED            SHOULD HAVE BEEN
                LOCATION             LOCATED ON____

1. Warehouse            FC Project            Common and Related
    
2. New Admin. Bldg.          “                    “        

3. Guardhouse Main &
Satellite             “                    “
    
4. Switchyard Shop         “                    “
    
5. Shop for Units 4 & 5     “                    “

6. Overhaul Shop         “                    “

7. 150 Gallon
Demineralizer         “                     “

8. Common Building        1/3 on Initial FC Plant
                2/3 on FC Project             “

9. National Pollution        part on Initial FC Plant        Initial FC Plant
Discharge Elimination    part on Common & Rel.
System (NPDES) Trench

10. NPDES East Sump.    part on Common & Rel.        “
                part on FC Project

11. NPDES West Sump.    Common & Related             “

12. Scrubber Upgrade
Control Bldg.         “                      “

13. Thickener Tanks A & B     “                      “

14. Original Lime Slaker     “                       “
15. Lime Upgrade         “                      “
(SO2 removal)         “                 “

Ex. 7-1

16. RCC Building         “                     “

FACILITY             APPROVED            SHOULD HAVE BEEN
                LOCATION             LOCATED ON    

17. Initial FC Plant Bldg.     “                    “

18. Scrubber Intercept
Sump             “                    “

19. NPDES Hydrobin Sump     “                    “

20. Combination Storage
Bldg.             “                    “

21. Utah Power and Light
345 kV Interconnection      “                    “

Ex. 7-2

EXHIBIT 8

APPROVED LOCATIONS OF FACILITIES COMMITTED FPR
CAPITAL ITEMS
(AS OF DECEMBER 31, 1981)

FACILITY          APPROVED            SHOULD HAVE                      LOCATION            BEEN LOCATED ON

1    Old Turbine         FC Project                  Common and Related    
    Construction Covers

2.    Chemical Storage Bldg.    “                     “

3.    Combination Storage     Common and Related        Initial FC Plant
    Bldg.

4.    Public Service Co. of
New Mexico Intercon-
nection bay in the
500 kV Switchyard,
the 500 kV/345 kV
transformer and
associated bays in
the 500 kV and
345 kV Switchyards.

5.     Baghouses for the        “                FC Project
    Four Corners Project

6.    Truck scales         FC Project                Common and Related

7.    Storage racks for the        “                    “
    existing warehouse

8.    Transmission line        “                Partly on Initial
from Initial Four                        FC Plant (up to
Corners Plant                            the canal)
substation and
switchyard over to                        Partly on FC
the new substation                        Project (after    
and switchyard under                        the canal)
construction for the    
PRP and S02
Removal Projects.
Ex. 8-1

ATTACHMENT A

BILL OF SALE FROM ARIZONA TO EL PASO, NEW MEXICO, SALT RIVER PROJECT, EDISON AND TUCSON

1.    The definition of Common Facilities in Section 5.8 of the CoTenancy Agreement shall apply to this Attachment A.
2.    Arizona, for value received, hereby grants, bargains, sells and conveys to El Paso, New Mexico, Salt River Project, Edison and Tucson, hereinafter referred to as “Second Parties”, their successors and assigns, the following undivided interests in the Common Facilities, to wit:
El Paso as to 5.07%,
New Mexico as to 9.42%,
Salt River Project as to 7.24%,
Edison as to 34.76%, and
Tucson as to 5.07%,
to have and to hold as tenants in common with Arizona.

3.    Arizona binds itself and its successors and assigns to warrant and defend the rights, titles, interests and estates herein granted, bargained, sold and conveyed to Second Parties against the lawful claims and demands of all persons claiming or to claim said rights, titles, Interests and estates, or any part thereof by, through or under Arizona, and no other.
4.    This Bill of Sale is made upon the express condition that the rights, titles, interests and estates herein granted, bargained, sold and conveyed to Second Parties shall be held by Second Parties in accordance with the Co-Tenancy Agreement.

5.    Arizona agrees that the 38.44% interest in the Common Facilities retained by Arizona shall be held by Arizona as a tenant in common with Second Parties, and shall be subject to the CoTenancy Agreement.
6.    Arizona shall not be deemed to be in violation of Section 7 of the Exchange Agreement in the event that the provisions of said Section 7shall not be legally effective as to Arizona, its mortgagees, trustees, secured parties, receivers, successors or assigns.

ATTACHMENT B

BILL OF SALE FROM EL PASO, NEW MEXICO, SALT RIVER PROJECT.
EDISON AND TUCSON TO ARIZONA

1.    The definitions of Existing New Facilities and Existing Related Facilities in Sections 5.14(a) and 5.14(b) of the CoTenancy Agreement shall apply to this Attachment B.
2.    El Paso, New Mexico, Salt River Project, Edison and Tucson (hereinafter collectively referred to in this Attachment B as “First Parties” and singularly as “First Party”), for value received, hereby respectively grant, bargain, sell and convey to Arizona, its successors and assigns, undivided 1.24%, 2.29%, 1.76%, 8.47% and 1.24% interests in the existing New Facilities [being in total, an undivided 15% in the Existing New Facilities (except for the Existing Related Facilities)], and undivided 3.17%, 5.87%0 4.52%, 21.71% and 3.17% interests in the Existing Related Facilities (being in total an undivided 38.44% interest in the Existing Related Facilities (27.58% of which is allocated to the Initial Four Corners Plant and 10.86% of which is allocated to Arizona’s interest in the Four Corners Project)], to have and to hold as a tenant in common with First Parties.
3.    First Parties, respectively, bind themselves and their successors and assigns to warrant and defend the rights, titles, interests and estates herein respectively granted, bargained, sold and conveyed to Arizona against the lawful claims and demands of all persons claiming or to claim said rights, titles, interests and estates, or any part thereof, by, through or under First Parties, respectively, and no other.

4.    This Bill of Sale is made upon the express condition that the rights, titles interests and estates herein granted, bargained, sold and conveyed to Arizona shall be held by Arizona in accordance with the CoTenancy Agreement.
5.    First Parties hereby agree that the following undivided interests in the Existing New Facilities (excepting the Existing Related Facilities), to wit: El Paso as to 7%, New Mexico as to 13%, Salt River Project as to 10%, Edison as to 48%, and Tucson as to 7%, and the following undivided interests in the Existing Related Facilities, to wit: El Paso as to 5.07%, New Mexico as to 9.42%, Salt River Project as to 7.24%, Edison as to 34.76%, and Tucson as to 5.07%, retained by First Parties, respectively, shall be held by First Parties as tenants in common with Arizona, and shall be subject to the CoTenancy Agreement.
6.    No First Party shall be deemed to be in violation of Section 7 of the Exchange Agreement in the event that the provisions of said Section 7 shall not be legally effective as to it, its mortgagee$, trustees, secured parties, receivers, successors or assigns.

ATTACHMENT C

BILL OF SALE FROM ARIZONA TO EL PASO, NEW MEXICO, SALT RIVER PROJECT, EDISON AND TUCSON

1.    Arizona, for remuneration received pursuant to Section 3 hereof hereby grants, bargains, sells and conveys to El Paso, New Mexico, Salt River Project, Edison and Tucson, (hereinafter collectively referred to as “Purchasing Participants”), their successors and assigns, the following undivided interests in the brine concentrator and capital improvements thereto, to wit:
        1.1    El Paso as to 5.07%
        1.2    New Mexico as to 9.42%
        1.3     Salt River Project as to 7.24%
        1.4     Edison as to 34.76%
        1.5     Tucson as to 5.07%
    to have and to hold as tenants in common with Arizona. Arizona shall retain a 38.44% undivided interest in said facilities.
2.    The purchase price of the brine concentrator and capital improvements thereto has been computed by straight line depreciation of the replacement cost of such facilities to be $4,479,922. Such determination was computed using the Handy Whitman Index for boiler plant in the Plateau Region from the date of installation (July 1, 1979) till June 1, 1983.
3.    The Purchasing Participants have, prior to July 1, 1983, individually paid to Arizona the $4,479,922 purchase price of the brine concentrator and capital improvements thereto, in the following amounts:

3.1    El Paso        $ 368,960

3.2    New Mexico        685,524
3.3    Salt River Project    526,879
3.4    Edison            2,529,599
3.5    Tucson            368,960
4.    The brine concentrator and the capital improvements thereto shall become a part of the SOD2U Removal Project for Units 4 and 5 at the Enlarged Four Corners Generating Station.
5.    Arizona binds itself and its successors and assigns to warrant and defend the rights, titles, interests and estates herein granted, bargained, sold and conveyed to the Purchasing Participants against the lawful claims and demands of all persons claiming or attempting to claim said rights, titles, interests and estates, or any part thereof by, through or under Arizona, and no other.
6.    This Bill of Sale is made upon the express condition that the rights, titles interests and estates herein granted, bargained, sold and conveyed to the Purchasing Participants shall be held by such Purchasing Participants in accordance with the CoTenancy Agreement.
7.    Arizona agrees that the 38.44% interest in the brine concentrator and the capital improvements thereto retained by Arizona shall be held by Arizona as a tenant in common with the Purchasing Participants, and shall be subject to the CoTenancy Agreement.
8.    The terms and conditions agreed to herein pertain only to the purchase of the brine concentrator and the capital improvements thereto and shall not establish a basis or set a precedent for any further transactions involving the sale of machinery or equipment or other ownership rights regarding the Enlarged Four Corners Generating Station.

Exhibit 31.1
 
CERTIFICATION
 
I, Jeffrey B. Guldner, certify that:
 
1.    I have reviewed this Quarterly Report on Form 10-Q of Pinnacle West Capital Corporation;
 
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    August 5, 2021

						
 	/s/ Jeffrey B. Guldner	
 	Jeffrey B. Guldner	
 	Chairman of the Board, President and Chief Executive Officer	

Exhibit 31.2
 
CERTIFICATION
 
I, Theodore N. Geisler, certify that:
 
1.    I have reviewed this Quarterly Report on Form 10-Q of Pinnacle West Capital Corporation;
 
2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    August 5, 2021

						
 	/s/ Theodore N. Geisler	
 	Theodore N. Geisler	
 	Senior Vice President and Chief Financial Officer	

Exhibit 31.3
 
CERTIFICATION
 
I, Jeffrey B. Guldner, certify that:
 
1.    I have reviewed this Quarterly Report on Form 10-Q of Arizona Public Service Company;
 
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    August 5, 2021

						
 	/s/ Jeffrey B. Guldner	
 	Jeffrey B. Guldner	
 	Chairman of the Board and Chief Executive Officer	

1

Exhibit 31.4
 
CERTIFICATION
 
I, Theodore N. Geisler, certify that:
 
1.    I have reviewed this Quarterly Report on Form 10-Q of Arizona Public Service Company;
 
2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.    The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)    designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b)    designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c)    evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d)    disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.    The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)    all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:    August 5, 2021
						
 	/s/ Theodore N. Geisler	
 	Theodore N. Geisler	
 	Senior Vice President and Chief Financial Officer	

1

Exhibit 32.1
 
CERTIFICATION
OF
CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Jeffrey B. Guldner, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Pinnacle West Capital Corporation for the quarter ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Pinnacle West Capital Corporation.
 
Date:     August 5, 2021

						
 	/s/ Jeffrey B. Guldner	
 	Jeffrey B. Guldner	
 	Chairman of the Board, President and	
 	Chief Executive Officer	
 
I, Theodore N. Geisler, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Pinnacle West Capital Corporation for the quarter ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Pinnacle West Capital Corporation.
 
Date:     August 5, 2021

						
 	/s/ Theodore N. Geisler	
 	Theodore N. Geisler	
 	Senior Vice President and	
 	Chief Financial Officer	

Exhibit 32.2
 
CERTIFICATION
OF
CHIEF EXECUTIVE OFFICER
AND
CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Jeffrey B. Guldner, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Arizona Public Service Company for the quarter ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Arizona Public Service Company.
 
Date:      August 5, 2021

						
 	/s/ Jeffrey B. Guldner	
 	 Jeffrey B. Guldner	
 	Chairman of the Board and Chief Executive Officer	

I, Theodore N. Geisler, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Arizona Public Service Company for the quarter ended June 30, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Arizona Public Service Company.
     
Date:     August 5, 2021

						
 	/s/ Theodore N. Geisler	
 	Theodore N. Geisler	
 	Senior Vice President and	
 	Chief Financial Officer