Loan Agreement



 Exhibit 4(b) 

 
  

 
 LOAN AGREEMENT 

(2012 Series A) 
 between 
 THE INDUSTRIAL DEVELOPMENT AUTHORITY 

OF THE COUNTY OF APACHE 
 and 
 TUCSON ELECTRIC POWER COMPANY 

 
  

Dated as of March 1, 2012 
  

 
 Relating To

 Pollution Control Revenue Bonds, 
 2012 Series A 
 (Tucson Electric Power Company Project) 

 
  

 







 TABLE OF CONTENTS 

 

									
	 	  	Page	 
		
	 LOAN AGREEMENT 
	  	 	1	  
			
	 ARTICLE I
	  	DEFINITIONS 	  	 	2	  
			
	 Section 1.01.
	  	        Definitions	  	 	2	  
			
	 ARTICLE II
	  	REPRESENTATIONS AND WARRANTIES 	  	 	2	  
			
	 Section 2.01.
	  	        Representations and Warranties of the Authority	  	 	2	  
	 Section 2.02.
	  	        Representations and Warranties of the Company 	  	 	3	  
			
	 ARTICLE III
	  	THE FACILITIES 	  	 	4	  
			
	 Section 3.01.
	  	        Ownership of the Facilities 	  	 	4	  
	 Section 3.02.
	  	        Revision of Plans and Specifications 	  	 	4	  
	 Section 3.03.
	  	        Maintenance of Facilities; Remodeling 	  	 	4	  
	 Section 3.04.
	  	        Insurance 	  	 	5	  
	 Section 3.05.
	  	        Condemnation 	  	 	5	  
			
	 ARTICLE IV
	  	ISSUANCE OF THE BONDS; THE LOAN; DISPOSITION OF PROCEEDS OF THE BONDS 	  	 	5	  
			
	 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.
	  	        Investment of Moneys in Funds and Accounts 	  	 	6	  
			
	 ARTICLE V
	  	LOAN PAYMENTS; OTHER OBLIGATIONS 	  	 	6	  
			
	 Section 5.01.
	  	        Loan Payments 	  	 	6	  
	 Section 5.02.
	  	        Payments Assigned; Obligation Absolute 	  	 	6	  
	 Section 5.03.
	  	        Payment of Expenses 	  	 	6	  
	 Section 5.04.
	  	        Indemnification 	  	 	7	  
	 Section 5.05.
	  	        Payment of Taxes; Discharge of Liens 	  	 	7	  
			
	 ARTICLE VI
	  	SPECIAL COVENANTS 	  	 	8	  
			
	 Section 6.01.
	  	        Maintenance of Legal Existence 	  	 	8	  
	 Section 6.02.
	  	        Permits or Licenses 	  	 	9	  
	 Section 6.03.
	  	        Authority’s Access to Facilities 	  	 	9	  
	 Section 6.04.
	  	        Tax-Exempt Status of Interest on Bonds 	  	 	9	  
	 Section 6.05.
	  	        Use of Facilities 	  	 	10	  
	 Section 6.06.
	  	        Financing Statements 	  	 	11	  


  
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	 ARTICLE VII
	  	ASSIGNMENT, LEASING AND SELLING 	  	 	11	  
			
	 Section 7.01.
	  	        Conditions 	  	 	11	  
	 Section 7.02.
	  	        Instrument Furnished to the Authority and Trustee 	  	 	13	  
	 Section 7.03.
	  	        Limitation 	  	 	13	  
	 Section 7.04.
	  	        Certain Matters Relating to the Leases 	  	 	13	  
			
	 ARTICLE VIII
	  	EVENTS OF DEFAULT AND REMEDIES 	  	 	14	  
			
	 Section 8.01.
	  	        Events of Default 	  	 	14	  
	 Section 8.02.
	  	        Force Majeure 	  	 	15	  
	 Section 8.03.
	  	        Remedies 	  	 	15	  
	 Section 8.04.
	  	        No Remedy Exclusive 	  	 	15	  
	 Section 8.05.
	  	        Reimbursement of Attorneys’ and Agents’ Fees 	  	 	16	  
	 Section 8.06.
	  	        Waiver of Breach 	  	 	16	  
			
	 ARTICLE IX
	  	REDEMPTION OF BONDS 	  	 	16	  
			
	 Section 9.01.
	  	        Redemption of Bonds 	  	 	16	  
	 Section 9.02.
	  	        Compliance with the Indenture 	  	 	16	  
			
	 ARTICLE X
	  	MISCELLANEOUS 	  	 	17	  
			
	 Section 10.01.
	  	        Term of Agreement 	  	 	17	  
	 Section 10.02.
	  	        Notices 	  	 	17	  
	 Section 10.03.
	  	        Parties in Interest 	  	 	17	  
	 Section 10.04.
	  	        Amendments 	  	 	17	  
	 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	  


  
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 LOAN AGREEMENT 

THIS LOAN AGREEMENT (2012 Series A), dated as of March 1, 2012 (this “Agreement”), between THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF APACHE, 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 but not limited to machinery and equipment, whether or not now in existence or under construction, whether located within or without Apache County, which shall be suitable for,
among other things, facilities for the furnishing of electric energy, gas or water, air and water pollution control facilities and sewage and solid waste disposal facilities, 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 any 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 such loans to further advance the interest of the Authority or the public and in the public interest; and 

WHEREAS, the Authority has heretofore issued and sold (a) $83,700,000 aggregate principal amount of The Industrial Development
Authority of the County of Apache Pollution Control Revenue Bonds, 1998 Series A (Tucson Electric Power Company Project) all of which remain outstanding (the “1998 Series A Bonds”), (b) $99,800,000 aggregate principal amount of The
Industrial Development Authority of the County of Apache Pollution Control Revenue Bonds, 1998 Series B (Tucson Electric Power Company Project) all of which remain outstanding (the “1998 Series B Bonds”), and (c) $16,500,000 aggregate
principal amount of The Industrial Development Authority of the County of Apache Industrial Development Revenue Bonds, 1998 Series C (Tucson Electric Power Company Project) all of which remain outstanding (the “1998 Series C Bonds,” and,
together with the 1998 Series A Bonds and the 1998 Series B Bonds, the “1998 Bonds”); and 
 WHEREAS, the Authority
loaned proceeds of the 1998 Bonds to Tucson Electric Power Company, an Arizona corporation (the “Company”), to refinance a portion of the costs of (a) the acquisition, construction, improvement and equipping of certain air and water
pollution control facilities and sewage and solid waste disposal facilities at Unit No. 1 of the Springerville Generating Station (the “Unit No. 1 Environmental Facilities”), (b) the acquisition, construction and equipping
of certain air and water pollution control facilities and sewage and solid waste disposal facilities at Unit No. 2 of the Springerville Generating Station (the “Unit No. 2 Environmental Facilities,” and, together with the Unit
No. 1 Environmental Facilities, collectively, the “Facilities”), and (c) certain facilities for furnishing electric energy, all as more fully described in Exhibit A hereto; and 







 WHEREAS, at least $177,000,000 aggregate principal amount of the 1998 Bonds are allocable to
refinancing costs of the Facilities; and 
 WHEREAS, the Authority proposes to issue and sell $177,000,000 aggregate principal
amount of The Industrial Development Authority of the County of Apache Pollution Control Revenue Bonds, 2012 Series A (Tucson Electric Power Company Project) (the “Bonds”), pursuant to an Indenture of Trust, dated as of March 1, 2012
(the “Indenture”), between the Authority and U.S. Bank Trust National Association, as trustee (the “Trustee”), for the purpose of refinancing the Facilities; and 

WHEREAS, the proceeds of the Bonds, together with $6,535,000 provided by the Company, will be applied to redeem, (a) $76,810,000
aggregate principal amount of 1998 Series A Bonds (hereinafter referred to as the “1998 Series A Redeemed Bonds”), $74,075,000 of which will be funded from the proceeds of the Bonds, and $2,735,000 of which will be funded by the Company,
(b) $91,585,000 aggregate principal amount of 1998 Series B Bonds (hereinafter referred to as the “1998 Series B Redeemed Bonds”), $88,325,000 of which will be funded from the proceeds of the Bonds and $3,260,000 of which will be
funded by the Company, and (c) $15,140,000 aggregate principal amount of 1998 Series C Bonds (hereinafter referred to as the “1998 Series C Redeemed Bonds” and, together with the 1998 Series A Redeemed Bonds and the 1998 Series B
Redeemed Bonds, the “Redeemed Bonds”), $14,600,000 of which will be funded from the proceeds of the Bonds, and $540,000 of which will be funded by the Company. 
 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;


  
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 (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; 
 (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; and 

(d) No consent, approval, authorization or other order of any regulatory body or administrative agency or other
governmental body is legally required for the Authority’s participation in the transactions contemplated by this Agreement, except such as may have been obtained or as may be required under the securities laws of any jurisdiction. 

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; 
 (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; 

  
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 (e) The Facilities are to be used solely for purposes contemplated by the
Act and are located or to be located within the State of Arizona; and 
 (f) All of the proceeds of the Bonds
will be expended to refinance a portion of the Facilities through the redemption of the Redeemed Bonds. 
 ARTICLE III

 THE FACILITIES 
 SECTION 3.01. Ownership of the Facilities. The Facilities subject to the Leases are the property of the respective Lessors in undivided interests, subject to
the rights of the Company and/or San Carlos to reacquire the same pursuant to the terms of the respective Leases; and the balance of Facilities are the property of San Carlos. The Authority shall have no right, title or interest in the Facilities.

 SECTION 3.02. Revision of Plans and Specifications. The Company may make, or
exercise its rights, powers, elections and options under the Plant Agreements to cause to be made one or more revisions 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 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 3.02 shall not constitute an amendment, change or modification of this Agreement within the meaning of
Article XII of the Indenture. 
 SECTION 3.03. Maintenance of Facilities;
Remodeling. The Company shall at all times exercise all of its rights, powers, elections and options under the Plant Agreements to cause the Facilities, and every element and unit thereof, to be maintained, preserved and kept in thorough repair,
working order and condition and to cause all needful and proper repairs and renewals thereto to be made; provided, however, that the Company may exercise all of its rights, powers, elections and options under the Plant Agreements to 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 its interests in the same, or cause
San Carlos to sell or dispose of the same, and within a reasonable time shall endeavor to effectuate such sale or disposition. 

  
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 The Company may, subject to the provisions of Section 6.05 hereof, at its own expense
remodel, or cause San Carlos to remodel, as appropriate, 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 3.04. Insurance. The Company shall exercise all of its rights, powers, elections and options under the Plant Agreements to 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. 
 SECTION 3.05. 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. 
 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 cause the proceeds
of the Bonds to be deposited with the trustee for the Redeemed Bonds to be applied to the partial payment of the Redeemed Bonds upon the redemption thereof. 
 The Authority shall establish the Bond Fund with the Trustee in accordance with Section 4.01 of the Indenture. 

  
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 SECTION 4.04. 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 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 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. In addition the Company shall pay, when due, the Authority Administration Fee. 

  
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 SECTION 5.04. Indemnification. The Company
releases the Authority, the Trustee, the County of Apache, Arizona and their directors, officers, employees and agents from, agrees that the Authority, the Trustee and the County of Apache, Arizona, shall not be liable for, and agrees to indemnify
and hold the Authority, the Trustee, the County of Apache, 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 or the Plant, 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 Apache, Arizona, as a result of the gross negligence or willful misconduct of the Authority or the County of
Apache, Arizona or their respective directors, officers, employees and agents. 
 The Company will indemnify and hold the
Authority, the Trustee and the County of Apache, 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 or the Plant, 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 Apache, Arizona, as a result of the gross negligence or willful misconduct of the Authority or the County
of Apache, Arizona. 
 The Company will indemnify and hold the Authority and the County of Apache, 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. 
 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, 

  
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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, each of the Company and San Carlos 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 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 all of the Company’s investment in San
Carlos or interests in the Facilities, the Company shall remain liable in respect of all obligations under this Agreement to the extent of the interests retained other than the obligations under Section 5.01 hereof, and the transferee shall not
be required to assume any obligations hereunder to such extent 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. 
 The Company may cause San Carlos to
consolidate with or merge with or into another entity organized under the laws of the United States of America, any state thereof or the District of Columbia, or to sell, transfer or otherwise dispose of all of its assets, as or substantially as an
entirety, to any entity; provided, however, that (a) if, in connection with any such transaction, the Company shall engage in any transaction contemplated in Section 7.01, all the conditions set forth in said Section 7.01 shall have
been satisfied; or (b) if otherwise, the surviving or resulting entity (if other than San Carlos or the Company) or the transferee entity (if other than the Company), as the case may be, prior to or simultaneously with such merger,
consolidation, sale, transfer or other disposition, assumes all obligations of San Carlos under the Plant Agreements. 

  
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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 Company shall exercise all of its
rights, powers, elections and options under the Plant Agreements to provide to the Authority, upon appropriate prior notice to the Company, 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. 
 (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 of the 1954 Code and Title XIII of the Tax Reform Act of 1986, as applicable, and any
applicable regulations promulgated thereunder. To such ends, the Authority and the 

  
 9 








 
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 by failing to qualify under Section 103 of the 1954 Code and Title XIII of the Tax Reform Act of 1986, as applicable, and any regulations thereunder; 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; 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 103(b)(13) of the 1954 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 and by the Tax Agreement. Insofar as Section 7.08 of the Indenture and the Tax Agreement 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 or the Tax
Agreement, 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 tax status of interest on the Bonds, 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 exercise all of its rights, powers, elections and options under
the Plant Agreements to cause the Facilities to be used for purposes contemplated by the Act and in the Tax Agreement. 

  
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 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. 
 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, the Company’s investment in San Carlos may be sold, transferred or otherwise disposed of as a whole or in part and the interest of either San Carlos or (to the extent that the Facilities shall have become
property of the Company) the Company in the Facilities may be assigned, leased, subleased, sold, transferred or otherwise disposed of 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, sublease, 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, sublessee, purchaser or other transferee, as the case may be, prior to or simultaneously with such assignment, lease, sublease, 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, subleased, 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 investment in San Carlos
shall be sold, transferred, or otherwise disposed of as a whole or in part or (iii)(A) the Company’s interest in the Facilities shall be leased or subleased, as a whole or in undivided part and the term of such leasehold or subleasehold 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 (B) the Company’s interest in the Facilities shall be assigned, sold, transferred or otherwise disposed of as a
whole or in undivided part, and (b) in the event that the assignee, lessee, sublessee, 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, sublease, 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, subleased, sold, transferred or otherwise disposed of, together with all other rights, interests, assets and/or properties assigned, leased, subleased, 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 

  
 11 









 
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, sublessee, purchaser or
other transferee shall be released from and discharged of all liability in respect of such obligations. 
 Anything herein to
the contrary notwithstanding, the Company shall not make any assignment, lease, sublease 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 assignment, lease, sublease, 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, subleased, sold, transferred or otherwise disposed of (but, in the case of a lease or
sublease, only to the extent of such lease) as may be determined by reference to (i) except in the case of a lease or sublease, 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 or sublease, the amount (discounted to present value at a
rate not lower than the taxable equivalent of the yield to 

  
 12 









 
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 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, sublessee 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, sublease, sale, transfer or other disposition.

 SECTION 7.03. Limitation. This Agreement shall not be assigned nor shall the
Company’s interest in the Facilities be assigned, leased, subleased, 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. 
 SECTION 7.04. Certain Matters Relating to the Leases. 
 (a) It is understood that, as of the date of this Agreement, the Company’s interest in the Unit No. 1 Environmental Facilities is that of the lessee under the related Leases (the “Unit 1
Leases”) and the Company’s interest in the Unit No. 2 Environmental Facilities which are used, or are designed to be used, in common with Unit No. 1 and Unit No. 2 of the Springerville Generation Station is that of a
co-lessee under the related Leases (the “Common Facilities Leases”). The primary term of the Unit 1 Leases are scheduled to expire on January 1, 2015 subject to various options in the Company, as lessee, for renewal or purchase. The
primary term for one of the Common Facilities Leases is scheduled to expire December 31, 2017 subject to various options in the Company and San Carlos, as lessee, for renewal or purchase. The primary term of the other two Common Facilities
Leases is scheduled to expire on January 1, 2021 subject to various options in the Company and San Carlos, as lessee, for renewal or purchase. Each Lease is subject to termination by the Lessor thereunder prior to the expiration of the primary
or any renewal term in certain circumstances. Nothing in this Agreement shall be construed (i) to require or limit the 

  
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exercise by the Company or San Carlos of any such renewal or purchase options under any one or more of the respective Leases, (ii) to prevent the expiration or termination of any Lease in
accordance with its terms or (iii) to require the Company or San Carlos to remain a party to any of the other Plant Agreements after any such expiration or termination. 

(b) The expiration or termination of any one or more of the Leases in accordance with their respective terms shall not
relieve the Company from its primary liability for its obligations under Section 5.01. After any such expiration or termination, if and to the extent that the Company shall remain a party to any of the other Plant Agreements, the Company shall
exercise all of its rights, powers, elections and options under such other Plant Agreements to cause the other obligations of the Company under this Agreement to be satisfied. 
 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 
 (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). 

  
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 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. 
 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 

  
 15 









 
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 thirty-five (35) 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. 

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. 

  
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 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,
5.04, Section 6.04 and 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 Ryley, Carlock & Applewhite PC, One North Central Avenue, Suite 1200, Phoenix, Arizona 85004, Attention: William Wilder; if to
the Company, at 88 East Broadway Boulevard, Tucson, Arizona 85702, 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 Apache 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 Apache 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.

 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. 

  
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 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. 

  
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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 APACHE
		
	By:	 	   /s/ John V. Lang

		 	Name: John V. Lang
		 	Title: Authorized Officer of the Authority
	
	TUCSON ELECTRIC POWER COMPANY
		
	By:	 	   /s/ Kentton C. Grant

		 	Name: Kentton C. Grant
		 	Title: Vice President and Treasurer


 Signature Page to Loan Agreement (2012 Series A) 







 EXHIBIT A 
 Exhibit A to the Loan Agreement, dated as of March 1, 1998 (the “1998 Series A Loan Agreement”), between the Authority* and the Company, entered into in connection with the 1998 Series A Bonds, states that proceeds of the 1998 Series A
Bonds were to be used to refinance costs of Unit No. 1 Environmental Facilities located in Apache County. Exhibit A to the Loan Agreement, dated as of March 1, 1998 (the “1998 Series B Loan Agreement”), between the Authority and
the Company, entered into in connection with the 1998 Series B Bonds, states that proceeds of the 1998 Series B Bonds were to be used to refinance costs of Unit No. 2 Environmental Facilities located in Apache County. Exhibit A to the Loan
Agreement, dated as of March 1, 1998 (the “1998 Series C Loan Agreement”), between the Authority and the Company, entered into in connection with the 1998 Series C Bonds, states that proceeds of the 1998 Series C Bonds were to be used
to refinance costs of transmission and distribution facilities and related properties located in Pima and Cochise Counties. 

The Bonds are being issued to refinance facilities which, for federal income tax purposes, are Environmental Facilities (as such term is
defined in the Tax Agreement) located at the Springerville Generating Station in Apache County, as described in Section 3.3 of the Tax Agreement. As described in Section 3.4 of the Tax Agreement, this includes a pro rata share of the 1998
Series A Bonds, a pro rata share of the 1998 Series B Bonds, and a pro rata share of the 1998 Series C Bonds. 
 In connection
with the issuance of the Bonds, other moneys of the Company are being used to redeem Series 1998 Series A Bonds, Series 1998 Series B Bonds and 1998 Series C Bonds which, for federal income tax purposes, are treated as refinancing facilities located
at the Springerville Generating Station which are not Environmental Facilities, all as described in the last paragraph of Section 3.4 of the Tax Agreement. 

 

	* 	All capitalized terms used and not otherwise defined in this Exhibit A shall have the meanings assigned to such terms in the Agreement to which this Exhibit A is
attached or in the Indenture referred to in the Agreement. 


  
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