This GUARANTY AGREEMENT, dated as of
March 26, 2009 (this “ Guaranty ”),
is made by UNISOURCE ENERGY CORPORATION, an Arizona corporation
(the “ Guarantor ”), in favor of
(i) UNION BANK, N.A., as Agent (in such capacity, together
with its successors and assigns in such capacity, the “
Agent ”) for each of the Secured Parties (as
defined in the UED Credit Agreement referred to below), and
(ii) the other Secured Parties.
1. Pursuant to that certain Credit
Agreement, dated as of March 26, 2009 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the
“ UED Credit Agreement ”; the capitalized
terms defined therein not otherwise defined herein being used
herein as therein defined), among Unisource Energy Development
Company, an Arizona corporation (the “ Company
”), the Banks named therein and from time to time party
thereto, and Union Bank, N.A., as Agent, the Banks have agreed to
make certain Loans available to the Company on the terms and
conditions set forth therein.
2. The obligation of the Banks to make
Loans to the Company pursuant to the UED Credit Agreement is
conditioned upon, among other things, the execution and delivery of
this Guaranty by the Guarantor.
3. The Guarantor owns 100% of the issued
and outstanding shares of capital stock of the Company, and will
derive substantial direct and indirect benefits from the
transactions contemplated by the UED Credit Agreement. The
Guarantor is willing to guarantee the Obligations of the Company
under the UED Credit Agreement and the other Financing Documents as
hereinafter provided to obtain such benefits.
NOW, THEREFORE, in consideration of the premises
and in order to induce the Banks to make Loans under the UED Credit
Agreement and to induce the Secured Parties to otherwise satisfy
their obligations under the UED Credit Agreement and the other
Financing Documents, the Guarantor hereby agrees as
follows:
The Guarantor hereby absolutely, unconditionally
and irrevocably guarantees the punctual payment when due, whether
at scheduled maturity or on any date of a required prepayment or by
acceleration, demand or otherwise, of all Obligations of the
Company now or hereafter existing under or in respect of the UED
Credit Agreement and the other Financing Documents (including,
without limitation, any extensions, modifications, substitutions,
amendments or renewals of any or all of the foregoing Obligations),
whether direct or indirect, absolute or contingent, and whether for
principal, interest, reimbursement obligations, premiums, fees,
indemnities, contract causes of action, costs, expenses or
otherwise, including, without limitation, the obligation of the
Company to pay principal, interest, charges, expenses, fees,
attorneys’ fees and disbursements, indemnities and other
amounts payable by the Company under any Financing Document (such
Obligations, the “ Guaranteed Obligations
”), and agrees to pay any and all costs and expenses
(including, without limitation, reasonable fees and expenses of
counsel) incurred by any Secured Party in enforcing any rights
under this Guaranty. Without limiting the generality of the
foregoing, the Guarantor’s liability shall extend to all
amounts that constitute part of the Guaranteed Obligations and
would be owed by the Company to any Secured Party under or in
respect of the Financing Documents but for the fact that they are
unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the
Company.
SECTION
2. Guaranty Absolute.
The Guarantor guarantees that the Guaranteed
Obligations will be paid strictly in accordance with the terms of
the Financing Documents, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of
such terms or the rights of any Secured Party with respect thereto.
The obligations of the Guarantor under or in respect of this
Guaranty are independent of the Guaranteed Obligations or any other
obligations of the Company under or in respect of the Financing
Documents, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Company
or whether the Company is joined in any such action or actions. The
liability of the Guarantor under this Guaranty shall be
irrevocable, absolute and unconditional irrespective of, and the
Guarantor hereby irrevocably waives any defenses it may now have or
hereafter acquire in any way relating to, any or all of the
following:
(a) any lack of validity or enforceability
of any Financing Document or any agreement or instrument relating
thereto;
(b) any change in the time, manner or place
of payment of, or in any other term of, all or any of the
Guaranteed Obligations or any other obligations of the Company
under or in respect of the Financing Documents, or any other
amendment or waiver of or any consent to departure from any
Financing Document, including, without limitation, any increase in
the Guaranteed Obligations resulting from the extension of
additional credit to the Company or any of its Subsidiaries or
otherwise;
(c) any taking, exchange, release or
non-perfection of any collateral, or any taking, release or
amendment or waiver of, or consent to departure from, any other
guaranty, for all or any of the Guaranteed Obligations;
(d) any manner of application of any
collateral, or proceeds thereof, to all or any of the Guaranteed
Obligations, or any manner of sale or other disposition of any
collateral for all or any of the Guaranteed Obligations or any
other assets of the Company or any of its Subsidiaries;
(e) any change, restructuring or
termination of the corporate structure or existence of the Company
or any of its Subsidiaries;
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(f) any failure of any Secured Party to
disclose to the Guarantor any information relating to the business,
condition (financial or otherwise), operations, performance,
properties or prospects of the Company now or hereafter known to
such Secured Party (the Guarantor waiving any duty on the part of
the Secured Parties to disclose such information);
(g) the failure of any other Person to
execute or deliver this Guaranty or any other guaranty or agreement
or the release or reduction of liability of the Guarantor or any
other guarantor or surety with respect to the Guaranteed
Obligations; or
(h) any other circumstance (including,
without limitation, any statute of limitations) or any existence of
or reliance on any representation by any Secured Party that might
otherwise constitute a defense available to, or a discharge of, the
Guarantor or any other guarantor or surety.
This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time any payment of
any of the Guaranteed Obligations is rescinded or must otherwise be
returned by any Secured Party or any other Person upon the
insolvency, bankruptcy or reorganization of the Guarantor, the
Company or otherwise, all as though such payment had not been
made.
SECTION
3. Waivers and Acknowledgments.
(a) The Guarantor hereby unconditionally
and irrevocably waives promptness, diligence, notice of acceptance,
presentment, demand for performance, notice of nonperformance,
default, acceleration, protest or dishonor and any other notice
with respect to any of the Guaranteed Obligations and this Guaranty
and any requirement that any Secured Party protect, secure, perfect
or insure any Lien or any property subject thereto or exhaust any
right or take any action against the Company or any other Person or
any collateral.
(b) The Guarantor hereby unconditionally
and irrevocably waives any right to revoke this Guaranty and
acknowledges that this Guaranty is continuing in nature and applies
to all Guaranteed Obligations, whether existing now or in the
future.
(c) The Guarantor hereby unconditionally
and irrevocably waives (i) any defense arising by reason of
any claim or defense based upon an election of remedies by any
Secured Party that in any manner impairs, reduces, releases or
otherwise adversely affects the subrogation, reimbursement,
exoneration, contribution or indemnification rights of the
Guarantor or other rights of the Guarantor to proceed against the
Company or any other Person or any collateral and (ii) any
defense based on any right of set-off or counterclaim against or in
respect of the Guaranteed Obligations.
(d) The Guarantor hereby unconditionally
and irrevocably waives any duty on the part of any Secured Party to
disclose to the Guarantor any matter, fact or thing relating to the
business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company or any of its
Subsidiaries now or hereafter known by such Secured
Party.
(e) The Guarantor acknowledges that it will
receive substantial direct and indirect benefits from the financing
arrangements contemplated by the Financing Documents and that the
waivers set forth in Section 2 and this Section 3 are
knowingly made in contemplation of such benefits.
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The Guarantor hereby unconditionally and
irrevocably agrees not to exercise any rights that it may now have
or hereafter acquire against the Company that arise from the
existence, payment, performance or enforcement of the Guaranteed
Obligations under or in respect of this Guaranty, including,
without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to
participate in any claim or remedy of any Secured Party against the
Company, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly
or indirectly, in cash or other property or by set-off or in any
other manner, payment or security on account of such claim, remedy
or right, unless and until all of the Guaranteed Obligations and
all other amounts payable under this Guaranty shall have been paid
in full in cash. If any amount shall be paid to the Guarantor in
violation of the immediately preceding sentence at any time prior
to the later of (a) the payment in full in cash of the
Guaranteed Obligations and all other amounts payable under this
Guaranty, and (b) the termination or expiration of all
Interest Rate Protection Agreements to which any Secured Party is a
party, such amount shall be received and held in trust for the
benefit of the Secured Parties, shall be segregated from other
property and funds of the Guarantor and shall forthwith be paid or
delivered to the Agent in the same form as so
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