Document:

exv4wd

Exhibit 4(d)

 

 

Execution Copy

LOAN AGREEMENT

(2010 SERIES A)

BETWEEN

COCONINO COUNTY, ARIZONA

POLLUTION CONTROL CORPORATION

AND

TUCSON ELECTRIC POWER COMPANY

 

DATED AS OF DECEMBER 1, 2010

 

RELATING TO

COCONINO COUNTY, ARIZONA

POLLUTION CONTROL CORPORATION

POLLUTION CONTROL REVENUE BONDS,

2010 SERIES A

(TUCSON ELECTRIC POWER COMPANY NAVAJO PROJECT)

 

 

 

 

TABLE OF CONTENTS*

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I
	 	 	 	 
	 
	 	 	 	 
	DEFINITIONS
	 	 	 	 
	 
	 	 	 	 
	SECTION 1.01. Definitions
	 	 	2	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	 
	 	 	 	 
	SECTION 2.01. Representations and Warranties of the Pollution Control Corporation
	 	 	2	 
	SECTION 2.02. Representations and Warranties of the Company
	 	 	3	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	 
	 	 	 	 
	THE FACILITIES
	 	 	 	 
	 
	 	 	 	 
	SECTION 3.01. Facilities; Property of the Company
	 	 	3	 
	SECTION 3.02. Maintenance of Facilities; Remodeling
	 	 	4	 
	SECTION 3.03. Insurance
	 	 	4	 
	SECTION 3.04. Condemnation
	 	 	4	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	 
	 	 	 	 
	ISSUANCE OF THE BONDS; THE LOAN; DISPOSITION OF PROCEEDS OF THE BONDS
	 	 	 	 
	 
	 	 	 	 
	SECTION 4.01. Issuance of the Bonds
	 	 	4	 
	SECTION 4.02. Issuance of Other Obligations
	 	 	4	 
	SECTION 4.03. The Loan; Disposition of Bond Proceeds
	 	 	5	 
	SECTION 4.04. Investment of Moneys in Funds and Accounts
	 	 	5	 
	 
	 	 	 	 
	ARTICLE V
	 	 	 	 
	 
	 	 	 	 
	LOAN PAYMENTS; PURCHASE PAYMENTS; OTHER OBLIGATIONS
	 	 	 	 
	 
	 	 	 	 
	SECTION 5.01. Loan Payments
	 	 	5	 
	SECTION 5.02. Purchase Payments
	 	 	5	 
	SECTION 5.03. Loan Payments Assigned; Obligation Absolute
	 	 	6	 
	SECTION 5.04. Payment of Expenses
	 	 	6	 
	SECTION 5.05. Indemnification
	 	 	6	 
	SECTION 5.06. Payment of Taxes; Discharge of Liens
	 	 	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.

i

 

	 	 	 	 	 
	 	 	Page	 
	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 
	SPECIAL COVENANTS
	 	 	 	 
	 
	 	 	 	 
	SECTION 6.01. Maintenance of Legal Existence
	 	 	7	 
	SECTION 6.02. Permits or Licenses
	 	 	8	 
	SECTION 6.03. Pollution Control Corporation’s Access to Facilities
	 	 	8	 
	SECTION 6.04. Tax-Exempt Status of Interest on Bonds
	 	 	9	 
	SECTION 6.05. Use of Facilities
	 	 	10	 
	SECTION 6.06. Financing Statements
	 	 	10	 
	 
	 	 	 	 
	ARTICLE VII
	 	 	 	 
	 
	 	 	 	 
	ASSIGNMENT, LEASING AND SELLING
	 	 	 	 
	 
	 	 	 	 
	SECTION 7.01. Conditions
	 	 	10	 
	SECTION 7.02. Instrument Furnished to the Pollution Control Corporation and Trustee
	 	 	12	 
	SECTION 7.03. Limitation
	 	 	12	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	 
	 	 	 	 
	EVENTS OF DEFAULT AND REMEDIES
	 	 	 	 
	 
	 	 	 	 
	SECTION 8.01. Events of Default
	 	 	13	 
	SECTION 8.02. Force Majeure
	 	 	13	 
	SECTION 8.03. Remedies
	 	 	14	 
	SECTION 8.04. No Remedy Exclusive
	 	 	14	 
	SECTION 8.05. Reimbursement of Attorneys’ and Agents’ Fees
	 	 	14	 
	SECTION 8.06. Waiver of Breach
	 	 	15	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	 	 
	 
	 	 	 	 
	REDEMPTION OF BONDS
	 	 	 	 
	 
	 	 	 	 
	SECTION 9.01. Redemption of Bonds
	 	 	15	 
	SECTION 9.02. Compliance with the Indenture
	 	 	15	 
	 
	 	 	 	 
	ARTICLE X
	 	 	 	 
	 
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	 
	 	 	 	 
	SECTION 10.01. Term of Agreement
	 	 	15	 
	SECTION 10.02. Notices
	 	 	16	 
	SECTION 10.03. Parties in Interest
	 	 	16	 
	SECTION 10.04. Amendments
	 	 	16	 
	SECTION 10.05. Counterparts
	 	 	16	 
	SECTION 10.06. Severability
	 	 	16	 
	SECTION 10.07. Governing Law
	 	 	17	 
	SECTION 10.08. Notice Regarding Cancellation of Contracts
	 	 	17	 
	 
	 	 	 	 
	 
	 	 	 	 
	Signatures
	 	 	 	 
	 
	 	 	 	 
	Exhibit A — Description of the Facilities
	 	 	A-1	 

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LOAN AGREEMENT

          THIS LOAN AGREEMENT (2010 SERIES A), dated as of December 1, 2010 (this “Agreement”), between
COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION, an Arizona nonprofit corporation and a
political subdivision of the State of Arizona (hereinafter called the “Pollution Control
Corporation”), 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 Pollution Control Corporation is authorized and empowered under Title 35, Chapter
6, 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 pollution control facilities consisting of real and
personal properties, including but not limited to machinery and equipment, whether or not now in
existence or under construction, which are used in whole or in part to control, prevent, abate,
alter, dispose or store, solid waste, thermal, noise, atmospheric or water pollutants, contaminants
or products therefrom, whether such facilities serve one or more purposes or functions in addition
to controlling, preventing, abating, altering, disposing or storing such pollutants, contaminants
or the products therefrom, 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 Pollution Control Corporation and any agreements made in
connection therewith, whenever the Board of Directors of the Pollution Control Corporation finds
such loans to be in furtherance of the purposes of the Pollution Control Corporation;

          WHEREAS, the Pollution Control Corporation has heretofore issued and sold $36,700,000
aggregate principal amount of Coconino County, Arizona Pollution Control Corporation Pollution
Control Revenue Bonds, 1997 Series A (Tucson Electric Power Company Navajo Project) (the “1997
Bonds”), all of which are currently outstanding, the proceeds of which were loaned to the Company
to finance and refinance the costs to the Company of constructing, improving and equipping certain
air pollution control facilities described in Exhibit A hereto (hereinafter collectively referred
to as the “Facilities”), located at an electric generating station operated within Coconino County,
which is known as the Navajo Generating Station;

          WHEREAS, the Pollution Control Corporation proposes to issue and sell its revenue bonds,
pursuant to an Indenture of Trust, dated as of December 1, 2010 (the “Indenture”), between the
Pollution Control Corporation and U.S. Bank Trust National Association, as trustee (the “Trustee”),
for the purpose of refinancing, by the payment or redemption of the 1997 Bonds, or provision
therefor, the portion of the costs of the Facilities previously financed and refinanced from the
proceeds of the 1997 Bonds;

          WHEREAS, the Company has elected to cause and is causing to be delivered to the Trustee an
irrevocable direct pay letter of credit issued by JP Morgan Chase Bank, N.A. (the “Initial Letter
of Credit), however, nothing herein shall require the Company to maintain the Initial Letter of
Credit or any other credit facility;

 

 

          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 Pollution Control Corporation. The
Pollution Control Corporation makes the following representations and warranties as the basis for
the undertakings on the part of the Company contained herein:

     (a) The Pollution Control Corporation is an Arizona nonprofit corporation and a political
subdivision of the State of Arizona created and existing under the Constitution and laws of the
State of Arizona;

     (b) The Pollution Control Corporation 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 Pollution Control
Corporation do not, and consummation of the transactions contemplated hereby and fulfillment of
the terms hereof and thereof by the Pollution Control Corporation 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 Pollution Control Corporation is now
a party or by which it is now bound, or any order, rule or regulation applicable to the
Pollution Control Corporation of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction over the Pollution Control Corporation or over any
of its properties, or the Constitution or laws of the State of Arizona;

     (d) With the exception of the approval of the Coconino County Board of Supervisors obtained
on November 16, 2010, no consent, approval, authorization or other order of any regulatory body
or administrative agency or other governmental body is legally required for the Pollution
Control Corporation’s participation in the transactions contemplated by this Agreement, except
such as may have been obtained or may be required under the securities laws of any jurisdiction;
and

2

 

     (e) The Pollution Control Corporation has found and determined that all requirements of the
Act with respect to the issuance of the Bonds and the execution and delivery of the Indenture
and this Agreement have been complied with and that the entering into of the Indenture and this
Agreement will be in furtherance of the purposes of the Act.

          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 Pollution
Control Corporation 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;

     (e) The Facilities to be refinanced constitute “pollution control facilities” as such
term is defined in the Act; and

     (f) All of the proceeds of the Bonds will be expended to refinance the Facilities
through the payment or redemption of the 1997 Bonds, or provisions therefor.

ARTICLE III

THE FACILITIES

          SECTION 3.01. Facilities; Property of the Company. An undivided interest in the Facilities
shall be the property of the Company and the Pollution Control Corporation shall have no right,
title or interest in the Facilities.

3

 

          SECTION 3.02. 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 the same and within
a reasonable time shall endeavor to effectuate such sale or disposition.

          The Company may, subject to the provisions of Section 6.05 hereof, at its own expense consent
to the remodeling of the Facilities or to the making of 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 3.03. 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 3.04. 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 Pollution Control Corporation shall issue the Bonds
under and in accordance with the Indenture, subject to the provisions of the bond purchase
agreement among the Pollution Control Corporation, 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 Pollution Control Corporation 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 Pollution Control Corporation, under an indenture or indentures other than the
Indenture, of obligations to provide additional funds to pay the cost of construction

4

 

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 Pollution Control Corporation shall
cause the proceeds of the Bonds to be deposited with the trustee for the 1997 Bonds to be applied
to the payment of the 1997 Bonds upon the redemption thereof.

          The Pollution Control Corporation shall establish the Bond Fund with the Trustee in accordance
with Section 4.01 of the Indenture.

          SECTION 4.04. Investment of Moneys in Funds and Accounts. The Company and the Pollution
Control Corporation 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; PURCHASE 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 Pollution Control Corporation 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 premium, if any, and 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 Pollution Control Corporation to cause amounts to be deposited in
the Bond Fund for the payment of the principal of and premium, if any, 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 Pollution Control Corporation thereunder.

          Notwithstanding the foregoing, while any Credit Facility is in effect with respect to the
Bonds, the Company’s obligation to make Loan Payments hereunder in respect of the principal of, and
premium, if any, and accrued interest on the Bonds shall be deemed to have been satisfied to the
extent that moneys shall have been paid by a Credit Facility Issuer to the Trustee for such payment
in respect of the Bonds, and no Event of Default shall occur hereunder by reason of any failure of
the Company to make any such Loan Payment to the Trustee under the preceding paragraph.

          SECTION 5.02. Purchase Payments. To the extent that moneys on deposit in the Remarketing
Proceeds Account of the Purchase Fund established under the Indenture are insufficient to pay the
full purchase price of Bonds payable pursuant to Section 5.03 of the Indenture on the applicable
Purchase Date, the Company shall promptly pay to the Trustee as Purchase Payments for deposit in
the Company Fund established under Section 5.07 of the Indenture amounts sufficient to cover such
shortfalls in sufficient time to enable the Trustee to deliver the purchase price of Bonds payable
pursuant to Section 5.03 of the Indenture; provided, however, that the obligation of the Company to
make any Purchase Payment hereunder shall be

5

 

deemed to have been satisfied to the extent that moneys shall have been paid by a Credit
Facility Issuer to the Trustee for such payment in respect of the Bonds.

          SECTION 5.03. Loan Payments Assigned; Obligation Absolute. It is understood and agreed that
all Loan Payments are, by the Indenture, to be pledged by the Pollution Control Corporation to the
Trustee, and that all rights and interest of the Pollution Control Corporation hereunder (except
for the Pollution Control Corporation’s rights under Section 5.04, Section 5.05, Section 6.03 and
Section 8.05 hereof and any rights of the Pollution Control Corporation 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 and the Purchase 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 Pollution Control Corporation 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 Pollution Control Corporation, the Trustee or any other party, and, further,
that the Loan Payments and Purchase 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 5.04. 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 IX 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 the Trustee.

          SECTION 5.05. Indemnification. The Company releases the Pollution Control Corporation, the
Trustee and the County of Coconino and their respective directors, officers, employees and agents
from, agrees that the Pollution Control Corporation, the County of Coconino and the Trustee shall
not be liable for, and agrees to indemnify and hold the Pollution Control Corporation, the County
of Coconino, the Trustee and any predecessor Trustee 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 in any
case as a result of the negligence or willful misconduct of the party otherwise to be indemnified.

          The Company will indemnify and hold the Pollution Control Corporation, the Trustee and any
predecessor Trustee, free and harmless from any loss, claim, damage, tax, penalty, liability,
disbursement, litigation expenses, attorneys’ and other agents’ fees and expenses or

6

 

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 in any case as a result of the negligence or
willful misconduct of the party otherwise to be indemnified.

          The Company will indemnify and hold the Pollution Control Corporation and its 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 5.06. 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 Pollution Control Corporation with respect to the Loan Payments and Purchase 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 Purchase 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 Pollution Control Corporation
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
Pollution Control Corporation 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

7

 

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 Pollution
Control Corporation 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 and Section 5.02 hereof. Upon such an assumption following any such
consolidation or merger or 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 and Section 5.02
hereof, and the transferee shall not be required to assume any obligations hereunder other than the
obligations under Section 5.01 and Section 5.02 hereof; provided, however, that the transferee
shall be required to assume all such other obligations unless the Company shall have delivered to
the Pollution Control Corporation 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, in and of itself, adversely affect the exclusion from gross income
for federal tax purposes of interest on the Bonds.

          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 Pollution Control Corporation 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 Pollution Control Corporation, the
Company and the Pollution Control Corporation each shall, upon the request of either, execute such
application or applications.

          SECTION 6.03. Pollution Control Corporation’s Access to Facilities. The Pollution Control
Corporation 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.

8

 

          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 excluded from gross income for federal income
tax purposes, and to that end the covenants and agreements of the Pollution Control Corporation and
the Company in this Section 6.04 and the Tax Agreement are for the benefit of the beneficial owners
from time to time of the Bonds.

          (b) Each of the Company and the Pollution Control Corporation covenants and agrees for the
benefit of the beneficial 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 1986 Code or otherwise subject interest on the Bonds to federal
income taxation by reason of failing to qualify under Section 103 of the 1986 Code or 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 Pollution Control Corporation 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 Pollution Control Corporation 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 Pollution Control
Corporation or the Company shall so notify the Trustee in writing.

          Without limiting the generality of the foregoing, the Company and the Pollution Control
Corporation 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 Pollution Control Corporation certifies and represents that it has not taken, and the
Pollution Control Corporation 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 beneficial owners of the Bonds
for federal tax purposes by failing to qualify under Section 103 of the 1986 Code or 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 Pollution Control Corporation 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 other facilities treated as
financed or refinanced by the Bonds for federal income tax purposes or a “related person” within
the meaning of Section 103(b)(13) of the 1954 Code or Section 147(a) of the 1986 Code; and
provided, further, that none of the covenants and agreements herein contained shall require either
the Company or the Pollution Control Corporation 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

9

 

on the Bonds. The Company acknowledges having read Section 8.08 of the Indenture and agrees
to perform all duties imposed on it by such Section 8.08, by this Section and by the Tax Agreement.
Insofar as Section 8.08 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 8.08 of the Indenture or
the Tax Agreement, if the Company shall provide to the Pollution Control Corporation and the
Trustee an opinion of Bond Counsel to the effect that any specified action required under this
Section 6.04 or Section 8.08 of the Indenture or the Tax Agreement 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 Pollution
Control Corporation 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.

          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 8.07 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, 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 and Section 5.02 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 Pollution Control Corporation, 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 and Section 5.02 hereof for the remaining term

10

 

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 Pollution Control Corporation 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.

          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 Pollution Control Corporation 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 Pollution Control Corporation 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

11

 

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 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 Pollution Control Corporation and Trustee. The
Company shall, within fifteen (15) days after the delivery thereof, furnish to the Pollution
Control Corporation 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 5.03 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.

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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 or Purchase Payment, which
failure shall have resulted in an “Event of Default” under clause (a), (b) or (c) of Section
10.01 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 Pollution
Control Corporation or the Trustee, unless the Pollution Control Corporation and the Trustee
shall agree in writing to an extension of such period prior to its expiration; provided,
however, that the Pollution Control Corporation 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).

          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 5.02, Section 5.04, Section 5.06, and Section 6.01 hereof, the Company

13

 

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. (b) 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.

     (a) Upon the occurrence and continuance of any Event of Default, the Pollution Control
Corporation, or the Trustee with respect to the rights of the Pollution Control Corporation
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.

     (b) 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 Pollution
Control Corporation 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 Pollution
Control Corporation 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 Pollution Control Corporation 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 Pollution
Control Corporation or the Trustee and any predecessor Trustee,

14

 

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 Pollution Control Corporation’s
rights and interest hereunder to the Trustee, the Pollution Control Corporation 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 the rights of the Pollution Control
Corporation hereunder.

ARTICLE IX

REDEMPTION OF BONDS

          SECTION 9.01. Redemption of Bonds. The Pollution Control Corporation 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 Pollution Control Corporation 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 (30) 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 IX of the Indenture. The Company shall furnish any moneys or Government
Obligations required by the Indenture to be deposited with the Trustee or otherwise paid by the
Pollution Control Corporation in connection with any of the foregoing purposes.

          SECTION 9.02. Compliance with the Indenture. Anything in this Agreement to the contrary
notwithstanding, the Pollution Control Corporation 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 shall
have ceased, terminated and become void in accordance with Article IX of the Indenture and until
all payments required under this Agreement shall have been made.

15

 

Notwithstanding the foregoing, the covenants contained in Section 5.04, Section 5.05, 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 Pollution Control Corporation, Mangum, Wall, Stoops &
Warden P.L.L.C., 100 North Elden Street, P.O. Box 10, Flagstaff, Arizona 86002-0010, Attention:
President; 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 Pollution Control Corporation, the Company, or the Trustee shall also be given to the others.
The Pollution Control Corporation, 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 Notice.

          SECTION 10.03. Parties in Interest. This Agreement shall inure to the benefit of and shall be
binding upon the Pollution Control Corporation, 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 rights and remedies granted to the Pollution
Control Corporation in Article VIII hereof, shall inure to the benefit of the Trustee, on behalf of
the beneficial 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 Pollution Control Corporation; and provided, further,
that neither the County of Coconino, 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 Pollution Control Corporation shall be construed to constitute an indebtedness
of the County of Coconino, Arizona or the State of Arizona within the meaning of any constitutional
or statutory provisions whatsoever, but shall be limited obligations of the Pollution Control
Corporation 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.

          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,

16

 

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 Pollution Control Corporation 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 15.09 of the Indenture,
construed as provided in Section 15.07 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 Pollution Control
Corporation within three (3) years from the execution hereof, unless a waiver is provided by the
Pollution Control Corporation.

[Remainder of Page Intentionally Left Blank]

17

 

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

	 	 	 	 	 
	 	COCONINO COUNTY, ARIZONA

POLLUTION CONTROL CORPORATION

 	 
	 	By:  	/s/ Ken Sweet
 	 
	 	 	Name:  	Ken Sweet 	 
	 	 	Title:  	President 	 
	 
	 	TUCSON ELECTRIC POWER COMPANY

 	 
	 	By:  	/s/ Kentton C. Grant
 	 
	 	 	Name:  	Kentton C. Grant 	 
	 	 	Title:  	Vice President and Treasurer 	 

18

 

	 	 	 	 	 

EXHIBIT A

          A portion of the costs of the construction, improvement or equipping of the following
Facilities will be financed or refinanced with the proceeds of the Coconino County, Arizona
Pollution Control Corporation Pollution Control Revenue Bonds, 2010 Series A (Tucson Electric
Power Company Navajo Project) issued by Coconino County, Arizona Pollution Control Corporation and
referred to in the foregoing Loan Agreement.

____________________

          SO2 Removal System. This system consists of the Basic Removal and Disposal System,
and other additional features for in-plant SO2 removal. The Basic Removal and Disposal
System includes several five-chamber alkaline scrubbing modules which may be of either a vertical
or horizontal design, and associated equipment and piping. The other additional in-plant features
include by-pass dampers’ and ductwork modifications, connections for steam extraction, induced
draft fans sized to overcome the loss of velocity of the flue gas caused by the Basic Removal and
Disposal System, chimney coating to protect the stack from corrosion due to lower exit gas
temperatures caused by the Basic Removal and Disposal System, miscellaneous electrical equipment
and building space needed to accommodate the other SO2 removal equipment, and a
supplementary SO2 monitoring system.exv10w1

Exhibit 10.1

GENERAL MILLS, INC.

EXECUTIVE INCENTIVE PLAN

	1.	 	PURPOSE OF THE PLAN
	 
	 	 	The purpose of the General Mills, Inc., Executive Incentive Plan (the “Plan”) is to provide
financial rewards to key executives of General Mills, Inc. (“General Mills”), its
subsidiaries and affiliates (defined as entities in which General Mills, Inc., has a
significant equity or other interest) (collectively with General Mills, the “Company”) in
recognition of their contributions to the success of the Company, and to align the interests
of such executives with the interests of the stockholders of the Company. Awards under this
Plan are intended to constitute “qualified performance-based compensation” for purposes of
Internal Revenue Code section 162(m), and the Plan shall be construed consistently therewith.
	 
	2.	 	EFFECTIVE DATE
	 
	 	 	This Plan shall become effective as of September 27, 2010, subject to the approval of the
stockholders of General Mills at the Annual Meeting of Stockholders on that date. This Plan
is a successor to and replaces the Executive Incentive Plan, amended and approved by
stockholders on September 25, 2000. Definitions used in the Plan can be found in Section 11.
	 
	3.	 	ELIGIBLE PERSONS
	 
	 	 	All officers of the Company shall be “Participants” eligible to receive Awards under the Plan
to the extent and pursuant to the discretion of the Committee.
	 
	4.	 	AWARD TYPE
	 
	 	 	Under this Plan, the Committee may award Participants cash bonuses. Bonus compensation
payable under this Plan is intended to be exempt from the requirements of section 409A of the
Internal Revenue Code, and applicable Treasury Regulations thereunder, pursuant to the
exemption for certain short-term deferral compensation provided under the Treasury
Regulations. Notwithstanding the foregoing, to the extent such bonus compensation is subject
to the requirements of section 409A, the terms of the Plan applicable to such compensation
are intended to comply with the requirements of section 409A and shall be interpreted and
administered in accordance with that intent. If any provision of the Plan would otherwise
conflict with or frustrate this intent, that provision will be interpreted and deemed amended
so as to avoid the conflict. Further, for purposes of the limitations on nonqualified
deferred compensation under section 409A, each payment of compensation under this Plan shall
be treated as a separate payment of compensation for purposes of applying the section 409A
deferral election rules and the exclusion from section 409A for certain short-term deferral
amounts.
	 
	5.	 	AWARDS OF CASH BONUSES

	 	(a)	 	Performance Goal. In order for any Participant to receive an Award
for a Performance Period, the Net Earnings of the Company must be greater than zero.
	 
	 	(b)	 	Awards. At the end of the Performance Period, if the Committee
certifies that the requirement of Section 5(a) has been met, and subject to Section
5(f), each Participant shall be deemed to have earned a cash Award equal in value to
the Maximum Amount, or such lesser amount as the Committee shall determine in its
absolute discretion to be appropriate; provided, however, that the exercise of such
discretion with respect to any Participant shall not have the effect of increasing an
Award payable to any other Participant.
	 
	 	(c)	 	Maximum Amount. Notwithstanding any other provision of this Plan, in
no event shall the total Award value earned by any Participant for any one Performance
Period exceed 0.5 percent of the Company’s Net Earnings for that Performance Period
(“Maximum Amount”). Furthermore, in no event shall the Maximum Amount exceed $10
million for any 12 month Performance Period, prorated for Performance Periods of
different lengths. All Awards under this Plan shall be subject to the General Mills
1933 Shareholder Resolution on Profit Sharing, as modified.

 

 

	 	(d)	 	Payment Timing. Awards shall be payable in a lump sum following the
conclusion of the Company’s fiscal year and in no event later than two and one-half
months following the end of the Company’s fiscal year.
	 
	 	(e)	 	Employment Requirements. Participants must be employed by the Company as
of the last business day of the Company’s fiscal year in order to receive an Award, if
any, subject to the following:

	 	(i)	 	Participants who, during a fiscal year, receive benefits (including but
not limited to all or a portion of an incentive award) under the General Mills
Separation Pay and Benefits Program for Officers are not eligible for Awards under
this Plan.
	 
	 	(ii)	 	Participants who, during a fiscal year, “retire” on or after age 55
with 5 or more years of service with the Company shall receive an Award equal in
amount to what would have been earned for the fiscal year during which the
Participant retires had such Participant remained employed through the conclusion
of such fiscal year (based on actual performance), adjusted to take into account
only the portion of the fiscal year during which the Participant remained actively
employed by the Company, payable in a lump sum following the conclusion of such
fiscal year but in no event later than two and one-half months following such
conclusion.
	 
	 	(iii)	 	If a Participant dies during a fiscal year an Award shall be paid to
the Participant’s estate in an amount equal to the Award that otherwise would have
been paid had the Participant remained employed by the Company through the end of
the fiscal year (based on actual performance), adjusted to take into account only
the portion of the fiscal year during which the Participant remained actively
employed by the Company, payable in a lump sum following the conclusion of such
fiscal year but in no event later than two and one-half months following such
conclusion.
	 
	 	 	 	Nothing in this Section 5(e) in any way limits the Committee’s discretionary
authority to determine the amount of an Award, or to reduce or eliminate a
Participant’s Award, under this Plan. Furthermore, nothing in this Section shall
be construed in a manner that would cause any Award which is intended to be a
qualified performance-based award under Code section 162(m) to fail to qualify for
the section 162(m) exemption from the limitation on deductibility imposed by
section 162(m), as amended from time to time.

	 	(f)	 	Awards subject to Clawback Policy. All Awards are specifically made
subject to the Company’s Executive Compensation Clawback Policy.

	6.	 	CHANGE OF CONTROL
	 
	 	 	Upon a Change of Control the Committee may make such adjustments and/or settlements of Awards
for the Performance Period within which the Change of Control occurs as it deems appropriate
and consistent with the Plan’s purposes; provided, however, that any such additional
adjustments and/or settlements shall be in compliance with section 409A. “Change of Control”
as used in this Plan has the meaning provided at Section 2.4 of Plan B of the General Mills
Separation Pay and Benefits Program for Officers.
	 
	7.	 	ADMINISTRATION OF THE PLAN

	 	(a)	 	Administration. The authority to control and manage the operations
and administration of the Plan shall be vested in the Committee in accordance with
this Section 7, subject to the following:

	 	(i)	 	Subject to the provisions of the Plan, the Committee shall have the
authority and discretion to select from among the eligible Company employees those
persons who shall receive Awards, to determine the time or times of receipt, to
determine the amounts covered by the Awards, to establish the terms, conditions,
restrictions, and other provisions of such Awards, to determine whether objectives
and conditions for earning Awards have been met, and to cancel or suspend Awards.
In making such determinations, the Committee may take into account the nature of
services rendered by the individual, the individual’s present and potential
contribution to the Company’s success, and such other factors as the Committee
deems relevant.

 

 

	 	(ii)	 	The Committee shall have the authority and discretion to establish
terms and conditions of Awards as the Committee determines to be necessary or
appropriate to conform to applicable requirements or practices of jurisdictions
outside the United States.
	 
	 	(iii)	 	The Committee shall have the authority and discretion to interpret
the Plan, to establish, amend and rescind any rules and regulations relating to
the Plan, to determine the terms and provisions of any agreements made pursuant to
the Plan, and to make all other determinations that may be necessary or advisable
for the administration of the Plan. There is no obligation for uniformity of
treatment of Participants under the Plan.
	 
	 	(iv)	 	Any interpretation of the Plan by the Committee and any decision made
by it under the Plan shall be final and binding.

	 	(b)	 	Delegation by Committee. Except to the extent prohibited by
applicable law, the Committee may delegate all or any portion of its responsibilities
and powers to any one or more of its members and may delegate all or any part of its
responsibilities and powers to any person or persons selected by it. Any such
allocation or delegation may be revoked by the Committee at any time.
	 
	 	(c)	 	Withholding Taxes. The Company shall have the right to deduct from all
payments hereunder any federal, state, local or foreign taxes or social contributions
required by law to be withheld with respect to such Awards. The Participant shall be
solely responsible for the satisfaction of any federal, state, local or foreign taxes on
payments under the Plan.
	 
	 	(d)	 	No Rights to Awards. Except as set forth herein, no Company employee or
other person shall have any claim or right to be granted an Award under the Plan, or to
be granted an Award in any particular amount. Neither the Plan nor any action taken
hereunder shall be construed as giving any individual any right to be retained in the
employ of the Company or to interfere with the ability of the Company to terminate any
employee’s employment relationship at any time.
	 
	 	(e)	 	No Funding of Plan. The Plan shall be unfunded, and the Awards shall be
paid solely from the general assets of the Company. The Company shall not be required to
establish any special or separate fund or to make any other segregation of assets to
assure the payment of any Award under the Plan. To the extent that any person acquires a
right to receive payments under the Plan, the right is no greater than the right of any
other unsecured general creditor.
	 
	 	(f)	 	Offset for Monies Owed. Any payments made under the Plan will be offset
for any monies that are owed to the Company to the extent permitted by applicable law.
	 
	 	(g)	 	Severability. If any provision of the Plan or any Award is or becomes or
is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify
the Plan or any Award under any law deemed applicable by the Committee, such provision
shall be construed or deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the Committee, materially
altering the purpose or intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, and the remainder of the Plan or Award shall remain in full
force and effect.
	 
	 	(h)	 	Governing Law. The Plan and all rights and Awards hereunder shall be
construed in accordance with and governed by the laws of the State of Minnesota.
	 
	 	(i)	 	Non-alienation. No amounts payable under the Plan shall be subject in any
manner to alienation, anticipation, or assignment, nor may they be transferred, pledged,
hypothecated or otherwise disposed of during any time before an Award is paid.

	8.	 	AMENDMENTS OF THE PLAN
	 
	 	 	The Committee may from time to time prescribe, amend and rescind rules and regulations
relating to the Plan. Subject to the approval of the Board, where required, the Committee
may at any time terminate, amend or suspend the operation of

 

 

	 	 	the Plan, provided that no action shall be taken by the Board or the Committee without the
approval of the stockholders of General Mills which would amend the Maximum Amount that may
be granted to any single Participant.
	 
	9.	 	FOREIGN JURISDICTIONS
	 
	 	 	The Committee may adopt, amend and terminate arrangements, not inconsistent with the intent
of the Plan, as it may deem necessary or desirable to make available tax or other benefits of
the laws of any foreign jurisdiction, to employees of the Company who are subject to such
laws and who receive Awards under the Plan.
	 
	10.	 	NOTICE
	 
	 	 	All notices to the Company regarding the Plan shall be in writing, effective as of actual
receipt by the Company, and shall be sent to:

General Mills, Inc.

Number One General Mills Boulevard

Minneapolis, Minnesota 55426

Attention: Corporate Compensation

	11.	 	DEFINITIONS
	 
	 	 	For purposes of this Plan, the following terms shall have the meanings set forth below.
	 
	 	 	“1934 Act” means the Securities Exchange Act of 1934.
	 
	 	 	“Award” is defined in Section 4.
	 
	 	 	“Board” means the Board of Directors of General Mills.
	 
	 	 	“Committee” means the Compensation Committee of the Board, or such other committee as
the Board may from time to time select, provided that the Committee must at all times be
composed of two or more members of the Board, each of whom qualifies as an “outside director”
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.
	 
	 	 	“Company” is defined in Section 1.
	 
	 	 	“General Mills” is defined in Section 1.
	 
	 	 	“Maximum Amount” is defined in Section 5(c).
	 
	 	 	“Net Earnings” means the Company’s earnings from continuing operations excluding items
identified and disclosed by the Company as non-recurring or special costs and after taxes.
	 
	 	 	“Participant” is defined in Section 3.
	 
	 	 	“Performance Period” means a fiscal year of the Company, or such other period as the
Committee may from time to time establish.

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