Exhibit 4(b)





Exhibit 4(b)




 




LOAN AGREEMENT

2010 SERIES A




BETWEEN




THE INDUSTRIAL DEVELOPMENT AUTHORITY

OF THE COUNTY OF PIMA




AND




TUCSON ELECTRIC POWER COMPANY




 






DATED AS OF OCTOBER 1, 2010




 






RELATING TO




INDUSTRIAL DEVELOPMENT REVENUE BONDS,

2010 SERIES A

(TUCSON ELECTRIC POWER COMPANY PROJECT)




 



 


 









 





TABLE OF CONTENTS*




	 	 	 	 	 
	 	 	Page	 
	 
	ARTICLE I
	 	 	 	 
	 
	 	 	 	 
	DEFINITIONS
	 	 	 	 
	 
	 	 	 	 
	SECTION 1.01 Definitions
	 	 	1	 
	ARTICLE II
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	 
	 	 	 	 
	SECTION 2.01 Representations and Warranties of the Authority
	 	 	1	 
	SECTION 2.02 Representations and Warranties of the Company
	 	 	2	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	 
	 	 	 	 
	THE FACILITIES
	 	 	 	 
	 
	 	 	 	 
	SECTION 3.01 Facilities; Property of the Company
	 	 	3	 
	SECTION 3.02 Construction of the Facilities
	 	 	3	 
	SECTION 3.03 Insufficient Moneys in Construction Fund
	 	 	3	 
	SECTION 3.04 Revision of Plans and Specifications
	 	 	3	 
	SECTION 3.05 Certification of Completion Date
	 	 	4	 
	SECTION 3.06 Maintenance of Facilities; Remodeling
	 	 	4	 
	SECTION 3.07 Insurance
	 	 	4	 
	SECTION 3.08 Condemnation
	 	 	5	 
	SECTION 3.09 Termination of Construction
	 	 	5	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	 
	 	 	 	 
	ISSUANCE OF THE BONDS; THE LOAN; DISPOSITION OF PROCEEDS
OF THE BONDS
	 	 	 	 
	 
	 	 	 	 
	SECTION 4.01 Issuance of the Bonds
	 	 	5	 
	SECTION 4.02 Issuance of Other Obligations
	 	 	5	 
	SECTION 4.03 The Loan; Disposition of Bond Proceeds
	 	 	5	 
	SECTION 4.04 Disbursements from Construction Fund
	 	 	6	 
	SECTION 4.05 Investment of Moneys in Funds and Accounts
	 	 	7	 





 






	 	 	 
	*	 	This table of contents is not part of the Loan
Agreement, and is for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part of the Loan
Agreement.



 


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	 	 	Page	 
	 
	ARTICLE V
	 	 	 	 
	 
	 	 	 	 
	LOAN PAYMENTS; OTHER OBLIGATIONS
	 	 	 	 
	 
	 	 	 	 
	SECTION 5.01 Loan Payments
	 	 	7	 
	SECTION 5.02 Payments Assigned; Obligation Absolute
	 	 	7	 
	SECTION 5.03 Payment of Expenses
	 	 	8	 
	SECTION 5.04 Indemnification
	 	 	8	 
	SECTION 5.05 Payment of Taxes; Discharge of Liens
	 	 	9	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 
	SPECIAL COVENANTS
	 	 	 	 
	 
	 	 	 	 
	SECTION 6.01 Maintenance of Legal Existence
	 	 	9	 
	SECTION 6.02 Permits or Licenses
	 	 	10	 
	SECTION 6.03 Authority’s Access to Facilities
	 	 	10	 
	SECTION 6.04 Tax-Exempt Status of Interest on Bonds
	 	 	10	 
	SECTION 6.05 Use of Facilities
	 	 	11	 
	SECTION 6.06 Financing Statements
	 	 	12	 
	 
	 	 	 	 
	ARTICLE VII
	 	 	 	 
	 
	 	 	 	 
	ASSIGNMENT, LEASING AND SELLING
	 	 	 	 
	 
	 	 	 	 
	SECTION 7.01 Conditions
	 	 	12	 
	SECTION 7.02 Instrument Furnished to the Authority and Trustee
	 	 	14	 
	SECTION 7.03 Limitation
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	 
	 	 	 	 
	EVENTS OF DEFAULT AND REMEDIES
	 	 	 	 
	 
	 	 	 	 
	SECTION 8.01 Events of Default
	 	 	14	 
	SECTION 8.02 Force Majeure
	 	 	15	 
	SECTION 8.03 Remedies
	 	 	15	 
	SECTION 8.04 No Remedy Exclusive
	 	 	16	 
	SECTION 8.05 Reimbursement of Attorneys’ and Agents’ Fees
	 	 	16	 
	SECTION 8.06 Waiver of Breach
	 	 	16	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	 	 
	 
	 	 	 	 
	REDEMPTION OF BONDS
	 	 	 	 
	 
	 	 	 	 
	SECTION 9.01 Redemption of Bonds
	 	 	16	 
	SECTION 9.02 Compliance with the Indenture
	 	 	17	 






 


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	 	 	Page	 
	 
	 	 	 	 
	ARTICLE X



MISCELLANEOUS
	 	 	 	 
	 
	 	 	 	 
	SECTION 10.01 Term of Agreement
	 	 	17	 
	SECTION 10.02 Notices
	 	 	17	 
	SECTION 10.03 Parties in Interest
	 	 	17	 
	SECTION 10.04 Amendments
	 	 	18	 
	SECTION 10.05 Counterparts
	 	 	18	 
	SECTION 10.06 Severability
	 	 	18	 
	SECTION 10.07 Governing Law
	 	 	18	 
	SECTION 10.08 Notice Regarding Cancellation of Contracts
	 	 	18	 
	 
	 	 	 	 
	Exhibit A — Description of the Facilities
	 	 	A-1	 








 


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LOAN AGREEMENT




THIS LOAN AGREEMENT (2010 Series A), dated as of October 1, 2010 (this “Agreement”), between
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of Arizona (hereinafter called the
“Authority”), and TUCSON ELECTRIC POWER COMPANY, a corporation organized and existing under the
laws of the State of Arizona (hereinafter called the “Company”),



W I T N E S S E T H:




WHEREAS, the Authority is authorized and empowered under Title 35, Chapter 5, Arizona Revised
Statutes, as amended (the “Act”), to issue its bonds in accordance with the Act and to make secured
or unsecured loans for the purpose of financing or refinancing the acquisition, construction,
improvement or equipping of projects consisting of land, any building or other improvement, and all
real and personal properties, including machinery and equipment, whether or not now in existence or
under construction, whether located within or without the State of Arizona or Pima County, which
shall be suitable for, among other things, facilities for the furnishing of electric energy, gas or
water, and to charge and collect interest on such loans and pledge the proceeds of loan agreements
as security for the payment of the principal of and interest on bonds, or designated issues of
bonds, issued by the Authority and any agreements made in connection therewith, whenever the Board
of Directors of the Authority finds such loans to further advance the interest of the Authority or
the public and in the public interest; and



WHEREAS, the Authority proposes to issue and sell its revenue bonds for the purpose of
financing a portion of the costs of the acquisition, construction, improvement and equipping of
certain of the facilities for furnishing electric energy described in Exhibit A hereto (the
“Facilities”) pursuant to an Indenture of Trust, dated as of October 1, 2010 (the “Indenture”),
between the Authority and U.S. Bank Trust National Association, as trustee (the “Trustee”);



NOW, THEREFORE, the parties hereto, intending to be legally bound hereby and in consideration
of the premises, DO HEREBY AGREE as follows:



ARTICLE I




DEFINITIONS




SECTION 1.01 Definitions. The terms used in this Agreement shall for all purposes of this
Agreement have the meanings specified in Section 1.01 of the Indenture, unless the context clearly
requires otherwise:



ARTICLE II




REPRESENTATIONS AND WARRANTIES




SECTION 2.01 Representations and Warranties of the Authority. The Authority makes the
following representations and warranties as the basis for the undertakings on the part of the
Company contained herein:




(a) The Authority is an Arizona nonprofit corporation designated by law as a political
subdivision of the State of Arizona created and existing under the Constitution and laws of
the State of Arizona;


 


 









 






(b) The Authority has the power to enter into this Agreement and the Indenture and to
perform and observe the agreements and covenants on its part contained herein and therein,
including without limitation the power to issue and sell the Bonds as contemplated herein
and in the Indenture, and by proper action has duly authorized the execution and delivery
hereof and thereof; and




(c) The execution and delivery of this Agreement and the Indenture by the Authority do
not, and consummation of the transactions contemplated hereby and fulfillment of the terms
hereof and thereof by the Authority will not, result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed of trust or
other agreement or instrument to which the Authority is now a party or by which it is now
bound, or, to the best knowledge of the Authority, any order, rule or regulation applicable
to the Authority of any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction over the Authority or over any of its properties, or
the Constitution or laws of the State of Arizona.



SECTION 2.02 Representations and Warranties of the Company. The Company makes the following
representations and warranties as the basis for the undertakings on the part of the Authority
contained herein:




(a) The Company is a corporation duly organized and existing in good standing under
the laws of the State of Arizona;




(b) The Company has power to enter into this Agreement and to perform and observe the
agreements and covenants on its part contained herein and by proper corporate action has
duly authorized the execution and delivery hereof and of all other documents required hereby
to be executed by the Company;




(c) The execution and delivery of this Agreement by the Company do not, and
consummation of transactions contemplated hereby and fulfillment of the terms hereof by the
Company will not, result in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust or other agreement or instrument to
which the Company is a party or by which it is now bound, or the Restated Articles of
Incorporation or bylaws of the Company, or any order, rule or regulation applicable to the
Company of any court or of any regulatory body or administrative agency or other
governmental body having jurisdiction over the Company or over any of its properties, or any
statute of any jurisdiction applicable to the Company;


 


2









 






(d) The Arizona Corporation Commission has approved all matters relating to the
Company’s participation in the transactions contemplated by this Agreement which require
said approval, and no other consent, approval, authorization or other order of any
regulatory body or administrative agency or other governmental body is legally required
for the Company’s participation therein, except such as may have been obtained or may
be required under the securities laws of any jurisdiction;




(e) The Facilities are to be used solely for purposes contemplated by the Act and are
located within the County of Pima, Arizona; and




(f) The Company estimates that all of the proceeds of the Bonds will be expended to
pay the Cost of Construction.



ARTICLE III




THE FACILITIES




SECTION 3.01 Facilities; Property of the Company. The Facilities shall be the property of the
Company and the Authority shall have no right, title or interest in the Facilities, nor any
obligation regarding the Facilities.



SECTION 3.02 Construction of the Facilities. The Company shall cause the Facilities to be
constructed with all reasonable dispatch in order to effectuate the purposes of the Act. The
Company shall have the sole responsibility under this Agreement for the construction of the
Facilities and may perform the same itself or through its agents, and may make or issue such
contracts, orders, receipts and instructions, and in general do or cause to be done all such other
things as it may in its sole discretion consider requisite or advisable for the construction of the
Facilities and for fulfilling its obligations under this ARTICLE III. The Company shall have full
authority and the sole right under this Agreement to supervise and control, directly or indirectly,
all aspects of the construction of the Facilities.



SECTION 3.03 Insufficient Moneys in Construction Fund. If the moneys in the Construction
Fund, together with any other moneys made available to pay the Cost of Construction, shall not be
sufficient to pay the Cost of Construction in full, then the Company shall pay all that portion of
the Cost of Construction in excess of the moneys available therefor.



The Authority does not make any warranty, either express or implied, that the moneys which
will be paid into the Construction Fund will be sufficient to pay the Cost of Construction in full.



If the Company makes any payments pursuant to this Section 3.03, it shall not be entitled to
any reimbursement therefor from the Authority (except from the proceeds of any obligations
subsequently issued by the Authority in respect of the Facilities), the Trustee or the Owners of
the Bonds, nor shall it be entitled to any diminution in or postponement of the payment of the Loan
Payments or the payment of any other amounts payable under this Agreement.


 


3









 





SECTION 3.04 Revision of Plans and Specifications. The Company may cause one or more
revisions to be made to the plans and specifications for the Facilities (including without
limitation any changes therein, additions thereto, substitutions therefor and deletions therefrom),
at any time and from time to time prior to the Completion Date in any respect; provided, however,
that, if any such revision shall render inaccurate the description of the Facilities contained in
Exhibit A hereto, the Company shall deliver to the Authority and the Trustee (a) a
revised Exhibit A containing a description of the Facilities as revised, the accuracy of which
shall have been certified by an Authorized Company Representative, and (b) an opinion of Bond
Counsel to the effect that the Facilities as described in the revised Exhibit A are such that the
expenditure of the proceeds of the Bonds pursuant to this Agreement will not, in and of itself,
impair the validity of the Bonds under the Act or the exclusion from gross income for federal tax
purposes of interest on the Bonds. A revision of Exhibit A hereto pursuant to this Section 3.04
shall not constitute an amendment, change or modification of this Agreement within the meaning of
Article XII of the Indenture.



SECTION 3.05 Certification of Completion Date. The Completion Date shall be the date on which
the Facilities are completed in their entirety and ready to be placed in service and operated, all
as determined by the Company. Promptly after the Completion Date, the Company shall submit to the
Authority and the Trustee a certificate, executed by an Authorized Company Representative, which
shall specify the Completion Date and shall state that (a) construction of the Facilities has been
completed and the Cost of Construction has been paid, except for any portion thereof which has been
incurred but is not then due and payable, or the liability for the payment of which is being
contested or disputed by the Company, and for the payment of which the Trustee is directed to
retain specified amounts of moneys in specified accounts within the Construction Fund, and (b) the
Facilities are suitable for operation for the purposes for which they were designed.
Notwithstanding the foregoing, such certificate may state that it is given without prejudice to any
rights against third parties which exist at the date thereof or which may subsequently come into
being.



SECTION 3.06 Maintenance of Facilities; Remodeling. The Company shall at all times cause the
Facilities, and every element and unit thereof, to be maintained, preserved and kept in thorough
repair, working order and condition and cause all needful and proper repairs and renewals thereto
to be made; provided, however, that the Company may cause the operation of the Facilities, or any
element or unit thereof, to be discontinued if, in the judgment of the Company, it is no longer
advisable to operate the same, or if the Company intends to sell or dispose of the same and within
a reasonable time shall endeavor to effectuate such sale or disposition.



After the Completion Date, the Company may, subject to the provisions of Section 6.05 hereof,
at its own expense remodel the Facilities or make such substitutions, modifications and
improvements to the Facilities from time to time as it, in its discretion, may deem to be desirable
for its uses and purposes, which remodeling, substitutions, modifications and improvements shall be
included under the terms of this Agreement as part of the Facilities.



SECTION 3.07 Insurance. The Company shall keep the Facilities insured against fire and other
risks to the extent usually insured against by companies owning and operating similar property, by
reputable insurance companies or, at the Company’s election, with respect to all or any element or
unit of the Facilities, by means of an adequate insurance fund set aside and maintained by it out
of its own earnings or in conjunction with other companies through an insurance fund, trust or
other agreement or, by means of unfunded self-insurance as may be reasonable and customary by
companies owning and operating similar property. All proceeds of such insurance shall be for the
account of the Company.


 


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SECTION 3.08 Condemnation. The Company shall be entitled to the entire proceeds of any
condemnation award or portion thereof made for damages to or takings of the Facilities or other
property of the Company.



SECTION 3.09 Termination of Construction. (a) Anything in this Agreement to the contrary
notwithstanding, the Company shall have the right at any time to terminate the construction of the
Facilities, in whole, if the Company shall have determined that the continued construction or
operation of the Facilities, in whole, is impracticable, uneconomical or undesirable for any
reason.



(b) Promptly after the termination of the construction of the Facilities financed with the
proceeds of the Bonds, the Company shall submit to the Authority and the Trustee a certificate,
executed by an Authorized Company Representative, which shall state the reasons for such
termination and shall state that the Cost of Construction, to the extent of the construction of the
Facilities as of the date of such termination, has been paid, except for any Cost of Construction
which have been incurred but are not then due and payable, or the liability for the payment of
which is being contested or disputed by the Company, and for the payment of which the Trustee is
directed to retain specified amounts of moneys in the Construction Fund. Notwithstanding the
foregoing, such certificate may state that it is given without prejudice to any rights against
third parties which exist at the date thereof or which may subsequently come into being.



ARTICLE IV




ISSUANCE OF THE BONDS; THE LOAN; DISPOSITION OF PROCEEDS

OF THE BONDS




SECTION 4.01 Issuance of the Bonds. The Authority shall issue the Bonds under and in
accordance with the Indenture, subject to the provisions of the bond purchase agreement among the
Authority, the initial purchaser or purchasers of the Bonds and the Company. The Company hereby
approves the issuance of the Bonds and all terms and conditions thereof.



SECTION 4.02 Issuance of Other Obligations. The Authority and the Company expressly reserve
the right to enter into, to the extent permitted by law, but shall not be obligated to enter into,
an agreement or agreements other than this Agreement with respect to the issuance by the Authority,
under an indenture or indentures other than the Indenture, of obligations to provide additional
funds to pay the Cost of Construction of the Facilities or obligations to refund all or any
principal amount of the Bonds, or any combination thereof.



SECTION 4.03 The Loan; Disposition of Bond Proceeds. The Authority shall lend to the Company
the proceeds of the issuance and sale of the Bonds for the purposes specified in this Agreement,
such proceeds to be applied as hereinafter and in the Indenture provided.



The Authority shall establish the Bond Fund and the Construction Fund with the Trustee in
accordance with Sections 4.01 and 5.01 of the Indenture. The proceeds of the issuance and sale of
the Bonds shall be deposited into the Construction Fund in accordance with the provisions of the
Indenture.


 


5









 





The moneys on deposit in the Construction Fund shall be applied by the Trustee as provided in
Section 4.04 hereof and as otherwise provided in Article V of the Indenture. Until the moneys on
deposit in the Construction Fund are so applied, such moneys shall be and remain the property of
the Authority, subject to the lien of the Indenture, and the Company shall have no right, title or
interest therein except as expressly provided in this Agreement and the Indenture. However, in
order to secure the payment by the Company of the Loan Payments, and the payment by the Authority
of the principal of and interest on the Bonds, and the performance and observance by the Company
and the Authority of all covenants and conditions expressed herein and in the Indenture and
contained in the Bonds, the Company hereby mortgages, pledges, assigns, creates and grants a
security interest in and confirms to the Trustee such right, title and interest as the Company may
be deemed to have or hereafter acquire in the proceeds of the issuance and sale of the Bonds to be
deposited into the Construction Fund and the proceeds from the investment and reinvestment thereof,
upon terms and conditions co-extensive with those set forth in the Indenture with respect to the
lien and security interest of the Trustee in the Trust Estate (as defined in the Indenture).



SECTION 4.04 Disbursements from Construction Fund. (a) To the extent that moneys on deposit
in the Construction Fund shall not otherwise have been applied in accordance with the provisions of
Article V of the Indenture, such moneys shall be loaned to the Company to reimburse the Company for
portions of the Cost of Construction paid by it or to make payments to persons designated by the
Company in respect of portions of the Cost of Construction, upon receipt by the Trustee of
requisitions executed by, or communications by telegram, e-mail in PDF format or facsimile
transmission from, an Authorized Company Representative, which requisitions or communications shall
state with respect to each payment to be made: (i) the requisition number, (ii) the name and
address of the person, firm or corporation to whom payment is due or has been made (or, in the case
of payments to the Bond Fund, instructions to make such payments thereto), (iii) the amount paid or
to be paid, (iv) (A) that each obligation, item of cost or expense with respect to which such
requisition is being made has been properly incurred and has been paid or is then due and payable
as an item of the Cost of Construction, is a proper charge against the Construction Fund, and has
not been the basis of any previous final payment therefrom or from the proceeds of any other
obligations issued by the Authority or (B) in the event that a portion of the Bonds shall have been
paid, redeemed or deemed to have been paid within the meaning of Article VIII of the Indenture by
reason of the application of the proceeds of the sale of any obligations issued under an indenture
other than the Indenture and if the payment of such requisition is to be made into the
construction, acquisition or other similar fund created under such other indenture, that upon
disbursement from such construction, acquisition or other similar fund, each obligation, item of
cost or expense mentioned in the requisition for such disbursement substantially in the form
attached as Exhibit D to the Indenture, will have been properly incurred and will have been paid or
will then be due and payable as an item of the Cost of Construction, will be a proper charge
against the construction, acquisition or other similar fund under such indenture, and will not have
been the basis of any previous final payment therefrom or from the proceeds of any other revenue
bonds issued by the Authority, (v) that the payment of such requisition will not result in a breach
of any of the covenants of the Company contained in subsection (c) or (d) of this Section 4.04 and
(vi) that, to the best of the knowledge of such Authorized Company Representative, there shall not
have occurred and be continuing any Event of Default described in Section 8.01 hereof. Any such
communication by telegram, e-mail or facsimile transmission shall be promptly confirmed by a
requisition executed by an Authorized Company Representative. The Company shall furnish to
the Authority a copy of each requisition delivered to the Trustee promptly upon request therefor.


 


6









 





(b) In paying any requisition under this Section 4.04, the Trustee shall be entitled to
conclusively rely as to the completeness and accuracy of all statements in such requisition upon
the approval of such requisition by an Authorized Company Representative, execution thereof to be
conclusive evidence of such approval, and the Company shall indemnify and save harmless the
Authority and the Trustee from any liability incurred in connection with any requisition so
executed by an Authorized Company Representative.



(c) The Company shall submit requisitions for Costs of Construction in compliance with the
requirements therefor contained in the Tax Agreement.



(d) The Company shall not submit or cause to be submitted to the Trustee any requisition
pursuant to this Section 4.04, and shall have no claim upon any moneys in the Construction Fund, so
long as there shall have occurred and be continuing any Event of Default described in Section 8.01
hereof.



SECTION 4.05 Investment of Moneys in Funds and Accounts. The Company and the Authority agree
that any moneys held in any fund or account created by the Indenture shall be invested as provided
in the Indenture.



ARTICLE V




LOAN PAYMENTS; OTHER OBLIGATIONS




SECTION 5.01 Loan Payments. In consideration of the issuance of the Bonds and the disposition
of the proceeds thereof as contemplated in Section 4.03 hereof, the Company shall pay, or cause to
be paid, to the Trustee for the account of the Authority an amount equal to the aggregate principal
amount of the Bonds from time to time Outstanding and, as interest on its obligation to pay such
amount, an amount equal to interest on such Bonds, such amounts to be paid in installments due on
the dates, in the amounts and in the manner provided in the Indenture for the Authority to cause
amounts to be deposited in the Bond Fund for the payment of the principal of and interest on the
Bonds whether at stated maturity, upon redemption or acceleration or otherwise; provided, however,
that the obligation of the Company to make any such payment hereunder shall be reduced by the
amount of any reduction under the Indenture of the amount of the corresponding payment required to
be made by the Authority thereunder.



SECTION 5.02 Payments Assigned; Obligation Absolute. It is understood and agreed that all
Loan Payments are, by the Indenture, to be pledged by the Authority to the Trustee, and that all
rights and interest of the Authority hereunder (except for the Authority’s rights under Section
5.03, Section 5.04, Section 6.03 and Section 8.05 hereof and any rights of the Authority to receive
notices, certificates, requests, requisitions and other communications hereunder) are to be pledged
and assigned to the Trustee. The Company assents to such pledge and assignment and agrees that the
obligation of the Company to make the Loan Payments shall be absolute, irrevocable and
unconditional and shall not be subject to cancellation, termination or abatement, or to any defense
other than



 


7









 






payment or to any right of set off, counterclaim or recoupment arising out of any breach by the Authority or the Trustee or any other party under this
Agreement, the Indenture or otherwise, or out of any obligation or liability at any time owing to
the Company by the Authority, the Trustee or any other party, and, further, that the Loan Payments
and the other payments due hereunder shall continue to be payable at the times and in the amounts
herein and therein specified, whether or not the Facilities, or any portion thereof, shall have
been completed or shall have been destroyed by fire or other casualty, or title thereto, or the use
thereof, shall have been taken by the exercise of the power of eminent domain, and that there shall
be no abatement of or diminution in any such payments by reason thereof, whether or not the
Facilities shall be used or useful, whether or not any applicable laws, regulations or standards
shall prevent or prohibit the use of the Facilities, or for any other reason, all of the foregoing
being subject, however, to the provisions of Section 6.01 and Section 7.01 hereof.



SECTION 5.03 Payment of Expenses. The Company shall pay, or, to the extent permitted by this
Agreement, cause to be paid out of the Construction Fund, all Administration Expenses, including,
without limitation, Administration Expenses incurred at and subsequent to the time the Bonds are
deemed to have been paid in accordance with Article VIII of the Indenture. The payment of the
compensation and the reimbursement of expenses and advances of the Trustee under the Indenture
shall be made directly to such entity.



SECTION 5.04 Indemnification. The Company releases the Authority, the Trustee, the County of
Pima, Arizona and their directors, officers, employees and agents from, agrees that the Authority,
the Trustee and the County of Pima, Arizona shall not be liable for, and agrees to indemnify and
hold the Authority, the Trustee, the County of Pima, Arizona and their directors, officers,
employees and agents free and harmless from, any liability (including, without limitation,
attorneys’ and other agents’ fees and expenses) for any loss or damage to property or any injury to
or death of any person that may be occasioned by any cause whatsoever pertaining to the Facilities,
except (i) in the case of the Trustee, as a result of the negligence or willful misconduct of the
Trustee or its directors, officers, employees and agents; and (ii) in the case of the Authority and
the County of Pima, Arizona, as a result of gross negligence or willful misconduct of the Authority
or the County of Pima, Arizona or their directors, officers, employees and agents.



The Company will indemnify and hold the Authority, the Trustee and the County of Pima,
Arizona, free and harmless from any loss, claim, damage, tax, penalty, liability, disbursement,
litigation expenses, attorneys’ and other agents’ fees and expenses or court costs arising out of,
or in any way relating to, the execution or performance of this Agreement, the issuance or sale of
the Bonds, actions taken under the Indenture or any other cause whatsoever pertaining to the
Facilities, except (i) in the case the Trustee, as a result of the negligence or willful misconduct
of the Trustee; and (ii) in the case of the Authority and the County of Pima, Arizona, as a result
of gross negligence or willful misconduct of the Authority or the County of Pima, Arizona.



The Company will indemnify and hold the Authority and the County of Pima, Arizona and their
directors, officers, employees and agents free and harmless from any loss, claim, damage, tax,
penalty, liability, disbursement, litigation expenses, attorney’s fees and expenses or court costs
arising out of or in any way relating to any untrue statement or alleged untrue
statement of any material fact or omission or alleged omission to state a material fact
necessary to make the statements made, in light of the circumstances under which they were made,
not misleading in any official statement or other offering material utilized in connection with the
sale of any Bonds.


 


8









 





SECTION 5.05 Payment of Taxes; Discharge of Liens. The Company shall: (a) pay, or make
provision for payment of, all lawful taxes and assessments, including income, profits, property or
excise taxes, if any, or other municipal or governmental charges, levied or assessed by any
federal, state or municipal government or political body upon the Facilities or any part thereof or
upon the Authority with respect to the Loan Payments, when the same shall become due; and (b) pay
or cause to be satisfied and discharged or make adequate provision to satisfy and discharge, within
sixty (60) days after the same shall accrue, any lien or charge upon the Loan Payments, and all
lawful claims or demands for labor, materials, supplies or other charges which, if unpaid, might be
or become a lien upon such amounts; provided, that, if the Company shall first notify the Authority
and the Trustee of its intention so to do, the Company may in good faith contest any such lien or
charge or claims or demands in appropriate legal proceedings, and in such event may permit the
items so contested and identified as such by the Company to remain undischarged and unsatisfied
during the period of such contest and any appeal therefrom, unless the Trustee shall notify the
Company in writing that, in the opinion of counsel to the Trustee, based upon material facts
disclosed to the Trustee without any duty of investigation, by nonpayment of any such items the
lien of the Indenture as to the Loan Payments will be materially endangered, in which event the
Company shall promptly pay and cause to be satisfied and discharged all such unpaid items. The
Authority shall cooperate fully with the Company in any such contest.



ARTICLE VI




SPECIAL COVENANTS




SECTION 6.01 Maintenance of Legal Existence. Except as permitted in this Section 6.01, the
Company shall maintain its legal existence, shall not sell, transfer or otherwise dispose of all of
its assets, as or substantially as an entirety, and shall not consolidate with or merge with or
into another entity. Unless such action would violate the Company’s covenant in Section 6.04, the
Company may consolidate with or merge into another entity organized and existing under the laws of
the United States of America, any state thereof or the District of Columbia, or sell, transfer or
otherwise dispose of all of its assets, as or substantially as an entirety, to any Person, if the
surviving or resulting Person (if other than the Company) or the transferee Person, as the case may
be, prior to or simultaneously with such merger, consolidation, sale, transfer or disposition,
assumes, by delivery to the Trustee and the Authority of an instrument in writing satisfactory in
form to the Trustee, all the obligations of the Company under this Agreement, including, without
limitation, the obligations of the Company under Section 5.01 hereof. Upon such an assumption
following any such sale, transfer or other disposition of assets, the Company shall be released and
discharged from all liability in respect of all obligations under this Agreement. Notwithstanding
the foregoing, in the case of any such sale, transfer or other disposition of assets, which do not
include the Facilities, the Company shall remain liable in respect of all obligations under this
Agreement other than the obligations under Section 5.01 hereof, and the transferee shall not be
required to assume any obligations hereunder other than
the obligations under Section 5.01 hereof; provided, however, that the transferee shall be
required to assume all such other obligations unless the Company shall have delivered to the
Authority and the Trustee an opinion of Bond Counsel to the effect that the non-assumption by the
transferee of such other obligations will not impair the validity under the Act of the Bonds and
will not adversely affect the exclusion from gross income for federal tax purposes of interest on
the Bonds.


 


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If consolidation, merger or sale, transfer or other disposition is made as permitted by this
Section 6.01, the provisions of this Section 6.01 shall continue in full force and effect and no
further consolidation, merger or sale or other transfer shall be made except in compliance with the
provisions of this Section 6.01.



Anything in this Agreement to the contrary notwithstanding, the sale, transfer or other
disposition by the Company of all of its facilities (a) for the generation of electric energy, (b)
for the transmission of electric energy or (c) for the distribution of electric energy, in each
case considered alone, or all of its facilities described in clauses (a) and (b), considered
together, or all of its facilities described in clauses (b) and (c), considered together, shall in
no event be deemed to constitute a sale, transfer or other disposition of all the properties of the
Company, as or substantially as an entirety, unless, immediately following such sale, transfer or
other disposition, the Company shall own no properties in the other such categories of property not
so sold, transferred or otherwise disposed of. The character of particular facilities shall be
determined by reference to the Uniform System of Accounts prescribed for public utilities and
licensees subject to the Federal Power Act, as amended, to the extent applicable.



SECTION 6.02 Permits or Licenses. In the event that it may be necessary for the proper
performance of this Agreement on the part of the Company or the Authority that any application or
applications for any permit or license to do or to perform certain things be made to any
governmental or other agency by the Company or the Authority, the Company and the Authority each
shall, upon the request of either, execute such application or applications.



SECTION 6.03 Authority’s Access to Facilities. The Authority shall have the right, upon
appropriate prior notice to the Company, to have reasonable access to the Facilities during normal
business hours for the purpose of making examinations and inspections of the same.




SECTION 6.04 Tax-Exempt Status of Interest on Bonds.



(a) It is the intention of the parties hereto that interest on the Bonds shall be and remain
tax-exempt, and to that end the covenants and agreements of the Authority and the Company in this
Section 6.04 and the Tax Agreement are for the benefit of the Owners from time to time of the
Bonds.


 


10









 





(b) Each of the Company and the Authority covenants and agrees for the benefit of the Owners
from time to time of the Bonds that it will not directly or indirectly use or permit the use of (to
the extent within its control) the proceeds of any of the Bonds or any other funds, or take or omit
to take any action, if and to the extent such use, or the taking or omission to take such action,
would cause any of the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code
or otherwise subject to federal income taxation by reason of failing to qualify under
Section 103 and Sections 141 through 150 of the Code and any applicable regulations
promulgated thereunder. To such ends, the Authority and the Company will comply with all
requirements of such Section 148 to the extent applicable to the Bonds. In the event that at any
time the Authority or the Company is of the opinion that for purposes of this Section 6.04(b) it is
necessary to restrict or limit the yield on the investment of any moneys held by the Trustee under
the Indenture, the Authority or the Company shall so notify the Trustee in writing.



Without limiting the generality of the foregoing, the Company and the Authority agree that
there shall be paid from time to time all amounts required to be rebated to the United States of
America pursuant to Section 148(f) of the Code and any applicable Treasury Regulations. This
covenant shall survive payment in full or defeasance of the Bonds and the satisfaction and
discharge of the Indenture. The Company specifically covenants to pay or cause to be paid the
Rebate Requirement as defined and described in the Tax Agreement.



(c) The Authority certifies and represents that it has not taken, and the Authority covenants
and agrees that it will not take, any action which results in interest paid on the Bonds being
included in gross income of the Owners of the Bonds for federal tax purposes pursuant to Section
1.03 of the Code, as applicable; and the Company certifies and represents that it has not taken or
(to the extent within its control) permitted to be taken, and the Company covenants and agrees that
it will not take or (to the extent within its control) permit to be taken any action which will
cause the interest on the Bonds to become includable in gross income for federal income tax
purposes pursuant to Section 1.03 of the Code; provided, however, that neither the Company nor the
Authority shall be deemed to have violated these covenants if the interest on any of the Bonds
becomes taxable to a person solely because such person is a “substantial user” of the Facilities or
a “related person” within the meaning of Section 147(a) of the Code and provided, further, that
none of the covenants and agreements herein contained shall require either the Company or the
Authority to enter an appearance or intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws, rules or regulations or in connection
with any decisions of any court or administrative agency or other governmental body affecting the
taxation of interest on the Bonds. The Company acknowledges having read Section 7.08 of the
Indenture and agrees to perform all duties imposed on it by such Section 7.08, by this Section 6.04
and by the Tax Agreement. Insofar as Section 7.08 of the Indenture and the Tax Agreement, as
amended from time to time, impose duties and responsibilities on the Company, they are specifically
incorporated herein by reference.



(d) Notwithstanding any provision of this Section 6.04 and Section 7.08 of the Indenture, if
the Company shall provide to the Authority and the Trustee an opinion of Bond Counsel to the effect
that any specified action required under this Section 6.04 and Section 7.08 of the Indenture is no
longer required or that some further or different action is required to maintain the exclusion from
gross income of interest on the Bonds for federal income tax purposes, the Company, the Trustee and
the Authority may conclusively rely upon such opinion in complying with the requirements of this
Section 6.04, and the covenants hereunder shall be deemed to be modified to that extent.



SECTION 6.05 Use of Facilities. So long as any Bonds are Outstanding and the Facilities are
operated by or for the benefit of the Company, the Company shall cause the Facilities to be used
for purposes contemplated by the Act and in the Tax Agreement.



SECTION 6.06 Financing Statements. The Company shall file and record, or cause to be filed
and recorded, all financing statements and continuation statements referred to in Section 7.07 of
the Indenture.


 


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ARTICLE VII




ASSIGNMENT, LEASING AND SELLING




SECTION 7.01 Conditions. The Company’s interest in this Agreement may be assigned as a whole
or in part, and its interest in the Facilities may be leased, sold, transferred or otherwise
disposed of by the Company as a whole or in part (whether an interest in a specific element or unit
or an undivided interest), to any Person; provided, however, that no such assignment, lease, sale,
transfer or other disposition (a) shall relieve the Company from its primary liability for its
obligations under Section 5.01 hereof or (b) shall be made unless the assignee, lessee, purchaser
or other transferee, as the case may be, prior to or simultaneously with such assignment, lease,
sale, transfer or other disposition, assumes, by delivery of an instrument in writing satisfactory
in form to the Trustee and the Authority, all other obligations of the Company hereunder to the
extent of the interest assigned, leased, sold, transferred or otherwise disposed of, and the
Company shall be released of and discharged from such obligations to the extent so assumed.
Notwithstanding the foregoing, (a) if (i) the Company’s interest in this Agreement shall be
assigned as a whole or in undivided part, (ii) the Company’s interest in the Facilities shall be
leased as a whole or in undivided part and the term of such leasehold or the term of any extension
or extensions thereof at the option of the Company shall extend beyond the maturity date of the
Bonds or (iii) the Company’s interest in the Facilities shall be sold, transferred or otherwise
disposed of as a whole or in undivided part, and (b) in the event that the assignee, lessee,
purchaser or other transferee shall assume the obligations of the Company under Section 5.01 hereof
for the remaining term of this Agreement, to the extent of such assignment, lease, sale, transfer
or other disposition, the Company shall be released from and discharged of all liability in respect
of such obligations to the extent so assumed (but only to such extent); provided, however, that the
release and discharge of the Company pursuant to clause (b) shall be conditioned upon the delivery
by the Company to the Authority and the Trustee of a certificate of an Independent Expert (as
hereinafter defined) describing the interests so assigned, leased, sold, transferred or otherwise
disposed of, together with all other rights, interests, assets and/or properties assigned, leased,
sold, transferred or otherwise disposed of by the Company to the same Person in the same or a
related transaction, stating that such rights, interests, assets and/or properties so described
constitute facilities for the generation, transmission and/or distribution of electric energy and
stating that, in the opinion of such Independent Expert, the Fair Value (as hereinafter defined) of
such rights, interests, assets and/or properties to the Person acquiring the same is not less than
an amount equal to 10/7 of the sum of (x) the aggregate principal amount of the Bonds then
Outstanding and (y) the outstanding principal amount of all other obligations of the Company
representing indebtedness for borrowed money or for the deferred purchase price of property which
are being assumed by such Person; provided, further, that after any such assumption, release and
discharge as aforesaid, the Company may again assume such obligations under Section 5.01 hereof, in
whole or in part, at any time and from time to time, and, to the extent of any such assumption by
the Company (but only to such extent), the aforesaid assignee, lessee, purchaser or other
transferee shall be released from and discharged of all liability in respect of such obligations.


 


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Anything herein to the contrary notwithstanding, the Company shall not make any assignment,
lease or sale as provided in the immediately preceding paragraph unless it shall have furnished to
the Authority and the Trustee an opinion of Bond Counsel to the effect that the proposed
assignment, lease or sale will not impair the validity under the Act of the Bonds and will not
adversely affect the exclusion of interest on the Bonds from gross income for federal tax purposes.



After any lease, sale, transfer or other disposition of any element or unit of the Facilities,
or any interest therein, the Company may, at its option, cause such element or unit, or interest
therein, to no longer be deemed to be part of the Facilities for the purposes of this Agreement by
delivering to the Authority and the Trustee the agreements or other documents required pursuant to
Section 7.02 hereof together with an instrument signed by an Authorized Company Representative
stating that such element or unit, or interest therein, shall no longer be deemed to be part of the
Facilities for the purposes of this Agreement.




For purposes of this Section 7.01:




(a) “Independent Expert” means a Person which (i) is an engineer, appraiser or other
expert and which, with respect to any certificate to be delivered pursuant to this Section,
is qualified to pass upon the matter set forth in such certificate and (ii)(A) is in fact
independent, (B) does not have any direct material financial interest in the transferee or
in any obligor upon the Bonds or under this Agreement or in any affiliate of the transferee
or any such obligor, (C) is not connected with the transferee or any such obligor as an
officer, employee, promoter, underwriter, trustee, partner, director or any person
performing similar functions and (D) is approved by the Trustee in the exercise of
reasonable care; for purposes of this definition “engineer” means a Person engaged in the
engineering profession or otherwise qualified to pass upon engineering matters (including,
but not limited to, a Person licensed as a professional engineer, whether or not then
engaged in the engineering profession); and for purposes of this definition “appraiser”
means a Person engaged in the business of appraising property or otherwise qualified to pass
upon the Fair Value or fair market value of property.




(b) “Fair Value” means the fair value of the interests, rights, assets and/or
properties assigned, leased, sold, transferred or otherwise disposed of (but, in the case of
a lease, only to the extent of such lease) as may be determined by reference to (i) except
in the case of a lease, the amount which would be likely to be obtained in an arm’s-length
transaction with respect to such interests, rights, assets and/or properties between an
informed and willing buyer and an informed and willing seller, under no compulsion,
respectively, to buy or sell, (ii) in the case of a lease, the amount (discounted to present
value at a rate not lower than the taxable equivalent of the yield to maturity of the Bonds
based on prevailing market prices immediately prior to the first public announcement of the
proposed transaction) which would be likely to be obtained in an arm’s-length transaction
with respect to such interests, rights, assets and/or properties between an informed and
willing lessee and an informed and willing lessor, neither under any compulsion to lease;
(iii) the amount of investment with respect to such interests, rights, assets and/or
properties which, together with a reasonable return thereon, would be likely to be recovered
through ordinary business operations


 


13









 






or otherwise, (iv) the cost, accumulated depreciation and replacement cost with respect to such interests, rights,
assets and/or properties and/or (v) any other relevant factors; provided, however, that (x)
Fair Value shall be determined without deduction for any mortgage, deed of trust, pledge,
security interest, encumbrance, lease, reservation, restriction, servitude, charge or
similar right or any other lien of any kind and (y) the Fair Value to the transferee of any
property shall not reflect any reduction relating to the fact that such property may be of
less value to a Person which is not the owner, lessee or operator of the property or any
portion thereof than to a Person which is such owner, lessee or operator. Fair Value may be
determined, without physical inspection, by the use of accounting and engineering records
and other data maintained by the Company or the transferee or otherwise available to the
Independent Expert certifying the same.



SECTION 7.02 Instrument Furnished to the Authority and Trustee. The Company shall, within
fifteen (15) days after the delivery thereof, furnish to the Authority and the Trustee a true and
complete copy of the agreements or other documents effectuating any such assignment, lease, sale,
transfer or other disposition.



SECTION 7.03 Limitation. This Agreement shall not be assigned nor shall the Facilities be
leased, sold, transferred or otherwise disposed of, in whole or in part, except as provided in this
ARTICLE VII or in Section 6.01 or Section 5.02 hereof. This ARTICLE VII shall not apply to any
sale, transfer or other disposition by the Company of all of its assets, as or substantially as an
entirety, as contemplated in Section 6.01.



ARTICLE VIII




EVENTS OF DEFAULT AND REMEDIES




SECTION 8.01 Events of Default. Each of the following events shall constitute and is referred
to in this Agreement as an “Event of Default”:




(a) a failure by the Company to make any Loan Payment, which failure shall have
resulted in an “Event of Default” under clause (a) or (b) of Section 9.01 of the Indenture;




(b) a failure by the Company to pay when due any amount required to be paid under this
Agreement or to observe and perform any covenant, condition or agreement on its part to be
observed or performed (other than a failure described in clause (a) above), which failure
shall continue for a period of sixty (60) days after written notice, specifying such failure
and requesting that it be remedied, shall have been given to the Company by the Authority or
the Trustee, unless the Authority and the Trustee shall agree in writing to an extension of
such period prior to its expiration; provided, however, that the Authority and the Trustee
shall be deemed to have agreed to an extension of such period if corrective action is
initiated by the Company within such period and is being diligently pursued; or


 


14









 






(c) the dissolution or liquidation of the Company, or failure by the Company promptly
to lift any execution, garnishment or attachment of such consequence as will
impair its ability to make any payments under this Agreement, or the entry of an order
for relief by a court of competent jurisdiction in any proceeding for its liquidation or
reorganization under the provisions of any bankruptcy act or under any similar act which may
be hereafter enacted, or an assignment by the Company for the benefit of its creditors, or
the entry by the Company into an agreement of composition with its creditors (the term
“dissolution or liquidation of the Company,” as used in this clause, shall not be construed
to include the cessation of the corporate existence of the Company resulting either from a
merger or consolidation of the Company into or with another entity or a dissolution or
liquidation of the Company following a transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions contained in Section 6.01 hereof).



SECTION 8.02 Force Majeure. The provisions of Section 8.01 hereof are subject to the
following limitations: if by reason of acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders of any kind of the government of the United States or
of the State of Arizona, or any department, agency, political subdivision, court or official of any
of them, or any civil or military authority; insurrections; riots; epidemics; landslides;
lightning; earthquakes; volcanoes; fires; hurricanes; tornadoes; storms; floods; washouts;
droughts; arrests; restraint of government and people; civil disturbances; explosions; breakage or
accident to machinery; partial or entire failure of utilities; or any cause or event not reasonably
within the control of the Company, the Company is unable in whole or in part to carry out any one
or more of its agreements or obligations contained herein, other than its obligations under Section
5.01, Section 5.03, Section 5.05 and Section 6.01 hereof, the Company shall not be deemed in
default by reason of not carrying out said agreement or agreements or performing said obligation or
obligations during the continuance of such inability. The Company shall make reasonable effort to
remedy with all reasonable dispatch the cause or causes preventing it from carrying out its
agreements; provided, that the settlement of strikes, lockouts and other industrial disturbances
shall be entirely within the discretion of the Company, and the Company shall not be required to
make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands
of the opposing party or parties when such course is in the judgment of the Company unfavorable to
the Company.



SECTION 8.03 Remedies. (a) Upon the occurrence and continuance of any Event of Default
described in clause (a) of Section 8.01 hereof, and further upon the condition that, in accordance
with the terms of the Indenture, the Bonds shall have been declared to be immediately due and
payable pursuant to any provision of the Indenture, the Loan Payments shall, without further
action, become and be immediately due and payable.



Any waiver of any “Event of Default” under the Indenture and a rescission and annulment of its
consequences shall constitute a waiver of the corresponding Event or Events of Default under this
Agreement and a rescission and annulment of the consequences thereof.



(b) Upon the occurrence and continuance of any Event of Default, the Authority, or the
Trustee with respect to the rights of the Authority assigned to the Trustee by the Indenture, may
take any action at law or in equity to collect any payments then due and thereafter to become due,
or to enforce performance and observance of any obligation, agreement or covenant of the Company
hereunder.



(c) Any amounts collected by the Trustee from the Company pursuant to this Section 8.03 shall
be applied in accordance with the Indenture.


 


15









 





SECTION 8.04 No Remedy Exclusive. No remedy conferred upon or reserved to the Authority
hereby is intended to be exclusive of any other available remedy or remedies, but each and every
such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any
right or power accruing upon any default shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right or power may be exercised from time to time and as often
as may be deemed expedient. In order to entitle the Authority to exercise any remedy reserved to
it in this ARTICLE VIII, it shall not be necessary to give any notice, other than such notice as
may be herein expressly required.



SECTION 8.05 Reimbursement of Attorneys’ and Agents’ Fees. If the Company shall default under
any of the provisions hereof and the Authority or the Trustee shall employ attorneys or agents or
incur other reasonable expenses for the collection of payments due hereunder or for the enforcement
of performance or observance of any obligation or agreement on the part of the Company contained
herein, the Company will on demand therefor reimburse the Authority or the Trustee and any
predecessor Trustee, as the case may be, for the reasonable fees of such attorneys and such other
reasonable expenses so incurred.



SECTION 8.06 Waiver of Breach. In the event any obligation created hereby shall be breached
by either of the parties and such breach shall thereafter be waived by the other party, such waiver
shall be limited to the particular breach so waived and shall not be deemed to waive any other
breach hereunder. In view of the assignment of certain of the Authority’s rights and interest
hereunder to the Trustee, the Authority shall have no power to waive any breach hereunder by the
Company in respect of such rights and interest without the consent of the Trustee, and the Trustee
may exercise any of such rights of the Authority hereunder.



ARTICLE IX




REDEMPTION OF BONDS




SECTION 9.01 Redemption of Bonds. The Authority shall take, or cause to be taken, the actions
required by the Indenture to discharge the lien created thereby through the redemption, or
provision for payment or redemption, of all Bonds then Outstanding, or to effect the redemption, or
provision for payment or redemption, of less than all the Bonds then Outstanding, upon receipt by
the Authority and the Trustee from the Company of a notice designating the principal amount of the
Bonds to be redeemed, or for the payment or redemption of which provision is to be made, and, in
the case of redemption of Bonds, or provision therefor, specifying the date of redemption and the
applicable redemption provision of the Indenture. Such redemption date shall not be less than
twenty-five (25) days from the date such notice is given (unless a shorter notice is satisfactory
to the Trustee). Unless otherwise stated therein, such notice shall be revocable by the Company at
any time prior to the time at which the Bonds to be redeemed, or for the payment or redemption of
which provision is to be made, are first deemed to be paid in accordance with Article VIII of the
Indenture. The Company shall furnish any moneys or Government Obligations (as defined in the
Indenture) required by the Indenture to be deposited
with the Trustee or otherwise paid by the Authority in connection with any of the foregoing
purposes.


 


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SECTION 9.02 Compliance with the Indenture. Anything in this Agreement to the contrary
notwithstanding, the Authority and the Company shall take all actions required by this Agreement
and the Indenture in order to comply with any provisions of the Indenture requiring the mandatory
redemption of Bonds.



ARTICLE X




MISCELLANEOUS




SECTION 10.01 Term of Agreement. This Agreement shall remain in full force and effect from
the date hereof until the right, title and interest of the Trustee in and to the Trust Estate (as
defined in the Indenture) shall have ceased, terminated and become void in accordance with Article
VIII of the Indenture and until all payments required under this Agreement shall have been made.
Notwithstanding the foregoing, the covenants contained in Section 5.03, Section 5.04, Section 6.04
and Section 8.05 hereof shall survive the termination of this Agreement.



SECTION 10.02 Notices. Except as otherwise provided in this Agreement, all notices,
certificates, requests, requisitions and other communications hereunder shall be in writing and
shall be sufficiently given and shall be deemed given when mailed by registered mail, postage
prepaid, addressed as follows: if to the Authority, c/o Russo, Russo & Slania, P.C., 6700 North
Oracle Road, Suite 100, Tucson, Arizona 85704; if to the Company, at One South Church Avenue, Suite
100, Tucson, Arizona 85701, Attention: Treasurer; and if to the Trustee, at such address as shall
be designated by it in the Indenture. A copy of each notice, certificate, request or other
communication given hereunder to the Authority, the Company, or the Trustee shall also be given to
the others. The Authority, the Company, and the Trustee may, by notice given hereunder, designate
any further or different addresses to which subsequent notices, certificates, requests or other
communications shall be sent. Notwithstanding any other provision of this Agreement to the
contrary, any notice required to be delivered hereunder may be delivered by electronic means
including, without limitation, email in PDF format.



SECTION 10.03 Parties in Interest. This Agreement shall inure to the benefit of and shall be
binding upon the Authority, the Company and their respective successors and assigns, and no other
person, firm or corporation shall have any right, remedy or claim under or by reason of this
Agreement; provided, however, that the lien and security interest granted to the Trustee in Section
4.03 hereof, as well as the rights and remedies granted to the Authority in Article VIII hereof,
shall inure to the benefit of the Trustee, on behalf of the Owners from time to time of the Bonds,
and shall be enforceable by the Trustee as a third party beneficiary or as assignee of the
Authority; and provided, further, that neither Pima County, Arizona nor the State of Arizona shall
in any event be liable for the payment of the principal of or premium, if any, or interest on the
Bonds or for the performance of any pledge, mortgage, obligation or agreement created by or arising
out of this Agreement or the issuance of the Bonds, and further that neither the Bonds nor any such
obligation or agreement of the Authority shall be construed to constitute an indebtedness of Pima
County, Arizona or the State of Arizona within the meaning of any
constitutional or statutory provisions whatsoever, but shall be limited obligations of the
Authority payable solely out of the revenues derived from this Agreement, or from the sale of the
Bonds, or from the investment or reinvestment of any of the foregoing, as provided herein and in
the Indenture.


 


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SECTION 10.04 Amendments. This Agreement may be amended only by written agreement of the
parties hereto, subject to the limitations set forth herein and in the Indenture.



SECTION 10.05 Counterparts. This Agreement may be executed in any number of counterparts,
each of which, when so executed and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Agreement.



SECTION 10.06 Severability. If any clause, provision or section of this Agreement shall, for
any reason, be held illegal or invalid by any court, the illegality or invalidity of such clause,
provision or section shall not affect any of the remaining clauses, provisions or sections hereof,
and this Agreement shall be construed and enforced as if such illegal or invalid clause, provision
or section had not been contained herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement or obligation shall be deemed to
be the agreement or obligation of the Authority or the Company, as the case may be, to the full
extent permitted by law.



SECTION 10.07 Governing Law. The laws of the State of Arizona shall govern the construction
and enforcement of this Agreement, except that the provisions of Section 13.09 of the Indenture,
construed as provided in Section 13.07 of the Indenture, shall apply to this Agreement as if
contained herein.



SECTION 10.08 Notice Regarding Cancellation of Contracts. As required by the provisions of
Section 38-511, Arizona Revised Statutes, as amended, notice is hereby given that political
subdivisions of the State of Arizona or any of their departments or agencies may, within three (3)
years of its execution, cancel any contract, without penalty or further obligation, made by the
political subdivisions or any of their departments or agencies on or after September 30, 1988, if
any person significantly involved in initiating, negotiating, securing, drafting or creating the
contract on behalf of the political subdivisions or any of their departments or agencies is, at any
time while the contract or any extension of the contract is in effect, an employee or agent of any
other party to the contract in any capacity or a consultant to any other party of the contract with
respect to the subject matter of the contract. The cancellation shall be effective when written
notice from the chief executive officer or governing body of the political subdivision is received
by all other parties to the contract unless the notice specifies a later time.



The Company covenants and agrees not to employ as an employee, agent or, with respect to the
subject matter of this Agreement, a consultant, any person significantly involved in initiating,
negotiating, securing, drafting or creating such Agreement on behalf of the Authority within three
(3) years from the execution hereof, unless a waiver is provided by the Authority.



[Remainder of Page Intentionally Left Blank]



 


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IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed as
of the day and year first above written.



	 	 	 	 	 	 	 	 	 
	 	 	THE INDUSTRIAL DEVELOPMENT AUTHORITY	 	 
	 	 	OF THE COUNTY OF PIMA	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Stanley Lehman	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Stanley Lehman	 	 
	 

	 	 	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	TUCSON ELECTRIC POWER COMPANY	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Kentton C. Grant	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Kentton C. Grant	 	 
	 

	 	 	 	Title:
	 	Vice President and Treasurer	 	 






Signature Page to Loan Agreement





 


 









 







EXHIBIT A




A portion of the costs of the acquisition, construction, improvement or equipping of the
following Facilities will be financed with the proceeds of The Industrial Development Authority of
the County of Pima Industrial Development Revenue Bonds, 2010 Series A (Tucson Electric Power
Company Project) issued by The Industrial Development Authority of the County of Pima and referred
to in the foregoing Loan Agreement.



 






Certain additions and improvements to Tucson Electric Power Company’s lower voltage electric
transmission and distribution system in the City of Tucson and environs in Pima County, more
particularly described in the Tax Certificate and Agreement, dated October 5, 2010, between The
Industrial Development Authority of the County of Pima and Tucson Electric Power Company.




 


A-1