Exhibit 4a
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LOAN AGREEMENT
(1997 SERIES A)
BETWEEN
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
AND
TUCSON ELECTRIC POWER COMPANY
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DATED AS OF SEPTEMBER 15, 1997
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Relating To
Industrial Development Revenue Bonds,
1997 Series A
(Tucson Electric Power Company Project)
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TABLE OF CONTENTS*
Page
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LOAN AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions . . . . . . . . . . . . . . . 1
SECTION 1.02 Incorporation of Certain Definitions by
Reference . . . . . . . . . . . . . . . . 5
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 Representations and Warranties of the
Authority . . . . . . . . . . . . . . . . 5
SECTION 2.02 Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . 5
ARTICLE III
THE FACILITIES
SECTION 3.01 Construction of the Facilities . . . . . . 6
SECTION 3.02 Insufficient Moneys in Construction Fund . 6
SECTION 3.03 Revision of Plans and Specifications . . . 7
SECTION 3.04 Certification of Completion Date . . . . . 7
SECTION 3.05 Maintenance of Facilities; Remodeling . . . 7
SECTION 3.06 Insurance . . . . . . . . . . . . . . . . . 7
SECTION 3.07 Condemnation . . . . . . . . . . . . . . . 7
SECTION 3.08 Termination of Construction . . . . . . . . 8
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
SECTION 4.01 Issuance of the Bonds . . . . . . . . . . . 8
SECTION 4.02 Issuance of Other Obligations . . . . . . . 8
SECTION 4.03 The Loans; Disposition of Bond Proceeds . . 8
SECTION 4.04 Disbursements from Construction Fund . . . 9
SECTION 4.05 Investment of Moneys in Funds and
Accounts. . . . . . . . . . . . . . . . . 10
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01 Loan Payments. . . . . . . . . . . . . . 10
SECTION 5.02 Payments Assigned; Obligation Absolute . 10
SECTION 5.03 Payment of Expenses . . . . . . . . . . . 10
SECTION 5.04 Indemnification . . . . . . . . . . . . . 11
SECTION 5.05 Payment of Taxes; Discharge of Liens . . 11
____________________
* 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.
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01 Maintenance of Corporate Existence . . . 11
SECTION 6.02 Permits or Licenses . . . . . . . . . . . 12
SECTION 6.03 Authority's Access to Facilities . . . . 12
SECTION 6.04 Tax-Exempt Status of Interest on Bonds. . 12
SECTION 6.05 Use of Facilities . . . . . . . . . . . . 13
SECTION 6.06 Financing Statements . . . . . . . . . . 13
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01 Conditions . . . . . . . . . . . . . . . 14
SECTION 7.02 Instrument Furnished to the Authority and
Trustee . . . . . . . . . . . . . . . . . 15
SECTION 7.03 Limitation . . . . . . . . . . . . . . . 15
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default . . . . . . . . . . . . 16
SECTION 8.02 Force Majeure . . . . . . . . . . . . . . 16
SECTION 8.03 Remedies . . . . . . . . . . . . . . . . 16
SECTION 8.04 No Remedy Exclusive . . . . . . . . . . . 17
SECTION 8.05 Reimbursement of Attorneys' and Agents'
Fees . . . . . . . . . . . . . . . . . . 17
SECTION 8.06 Waiver of Breach . . . . . . . . . . . . 17
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01 Redemption of Bonds . . . . . . . . . . . 17
SECTION 9.02 Compliance with the Indenture . . . . . . 18
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Term of Agreement . . . . . . . . . . . . 18
SECTION 10.02 Notices . . . . . . . . . . . . . . . . . 18
SECTION 10.03 Parties in Interest . . . . . . . . . . . 18
SECTION 10.04 Amendments . . . . . . . . . . . . . . . 18
SECTION 10.05 Counterparts . . . . . . . . . . . . . . 19
SECTION 10.06 Severability . . . . . . . . . . . . . . 19
SECTION 10.07 Governing Law . . . . . . . . . . . . . . 19
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exhibit A - Description of the Facilities . . . . . . . . . A-1
LOAN AGREEMENT
THIS LOAN AGREEMENT (1997 Series A), dated as of September
15, 1997 (this "Agreement"), between THE INDUSTRIAL DEVELOPMENT
AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona (hereinafter called the "Authority"), and TUCSON ELECTRIC
POWER COMPANY, a corporation organized and existing under the
laws of the State of Arizona (hereinafter called the "Company"),
W I T N E S S E T H :
WHEREAS, the Authority is authorized and empowered under
Title 35, Chapter 5, Arizona Revised Statutes, as amended (the
"Act"), to issue its bonds in accordance with the Act and to make
secured or unsecured loans for the purpose of financing or
refinancing the acquisition, construction, improvement or
equipping of projects consisting of land, any building or other
improvement, and all real and personal properties, including but
not limited to machinery and equipment, whether or not now in
existence or under construction, whether located within or
without Pima 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
bonds, or designated issues of bonds, issued by the Authority and
any agreements made in connection therewith, whenever the Board
of Directors of the Authority finds such loans to be in
furtherance of the purposes of the Authority or in the public
interest;
WHEREAS, the Authority has heretofore issued and sold
$20,000,000 aggregate principal amount of its Industrial
Development Revenue Bonds, 1990 Series A (Tucson Electric Power
Company Project), all of which remain outstanding (the "1990
Bonds"), the proceeds of which were loaned to the Company to
finance a portion of the costs of the acquisition, construction,
improvement and equipping of certain of the facilities for
furnishing electric energy described in Exhibit A hereto (the
"Facilities");
WHEREAS, the Authority proposes to issue and sell its
revenue bonds for the purpose of financing a portion of the costs
of the acquisition, construction, improvement and equipping of
certain additional items of the Facilities and for the purpose of
refinancing, by the payment or redemption of the 1990 Bonds, or
provision therefor, the portion of the costs of the acquisition,
construction, improvement and equipping of the Facilities
previously financed with the proceeds of the 1990 Bonds; and
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 defined in this
Article I shall for all purposes of this Agreement have the
meanings herein specified, unless the context clearly requires
otherwise:
Act:
"Act" shall mean Title 35, Chapter 5, Arizona Revised
Statutes, and all acts supplemental thereto or amendatory
thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Authority with respect to this Agreement, the
Indenture and any transaction or event contemplated by this
Agreement or the Indenture, including the compensation and
reimbursement of expenses and advances payable to the Trustee, to
the paying agent, any co-paying agent and the registrar under the
Indenture and a pro rata share of the Authority's annual
operating expenses in accordance with the provisions of paragraph
XII.D. of the Authority's Procedural Pamphlet.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of
September 15, 1997, between the Authority and the Company, and
any and all modifications, alterations, amendments and
supplements hereto.
Authority:
"Authority" shall mean The Industrial Development Authority
of the County of Pima, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona incorporated for and with the approval of Pima County,
Arizona, pursuant to the provisions of the Constitution of the
State of Arizona and the Act, its successors and their assigns.
Authorized Company Representative:
"Authorized Company Representative" shall mean each person
at the time designated to act on behalf of the Company by written
certificate furnished to the Authority and the Trustee containing
the specimen signature of such person and signed on behalf of the
Company by its President, any Vice President or its Treasurer,
together with its Secretary or any Assistant Secretary.
Bond Counsel:
"Bond Counsel" shall mean any firm or firms of nationally
recognized bond counsel experienced in matters pertaining to the
validity of, and exclusion from gross income for federal tax
purposes of interest on bonds issued by states and political
subdivisions, selected by the Company and acceptable to the
Authority.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01 of
the Indenture.
Bonds:
"Bond" or "Bonds" shall mean the Industrial Development
Revenue Bonds, 1997 Series A (Tucson Electric Power Company
Project) of the Authority.
Capital Account:
"Capital Account" shall mean any of the accounts so named
established under Sections 4.01 and 5.01 of the Indenture.
Code:
"Code" shall mean the Internal Revenue Code of 1986 or any
successor statute thereto. Each reference to a section of the
Code herein shall be deemed to include the United States Treasury
Regulations proposed or in effect thereunder and applicable to
the Bonds or the use of the proceeds thereof, unless the context
clearly requires otherwise. Reference to any particular Code
section shall, in the event of a successor Code, be deemed to be
a reference to the successor to such Code section.
Company:
"Company" shall mean Tucson Electric Power Company, a
corporation organized and existing under the laws of the State of
Arizona, its successors and their assigns, including, without
limitation, any successor obligor under Section 6.01 or 7.01 to
the extent of the obligations assumed thereunder.
Completion Date:
"Completion Date" shall mean the date specified in Section
3.04 hereof.
Construction (and other forms of the word "construct"):
"Construction" (and other forms of the word "construct")
shall mean, when used with respect to the Facilities, the
construction of the Facilities and shall include, without
limitation, the acquisition, construction, improvement and
equipping of the Facilities, all as contemplated by the Act.
Construction Fund:
"Construction Fund" shall mean the fund created by Section
5.01 of the Indenture.
Cost of Construction:
"Cost of Construction" shall embrace all costs paid or
incurred by the Company with respect to the Facilities and the
financing thereof for the payment of which the Authority is
authorized to issue bonds under the Act, and shall include
without limitation (a) obligations paid or incurred by the
Company for labor, materials and other expenses and to
contractors, builders and materialmen in connection with the
construction of the Facilities; (b) the costs paid or incurred by
the Company for contract bonds and for insurance of all kinds
that may be deemed by the Company to be desirable or necessary
during the course of construction of the Facilities; (c) the
expenses paid or incurred by the Company for test borings,
surveys, estimates, plans and specifications, and preliminary
investigations therefor, with respect to the Facilities and for
supervising construction, as well as for the performance of all
other duties required by or reasonably necessary for the proper
construction, of the Facilities; (d) Administration Expenses paid
or incurred prior to the Completion Date and legal, accounting,
financial, underwriting, advertising, recording and printing
expenses and all other fees and expenses paid or incurred by the
Company in connection with the issuance and sale of the Bonds;
(e) amounts in respect of interest (exclusive of accrued interest
paid by the initial purchasers upon delivery thereof) accruing
upon the Bonds until the Completion Date; (f) all other costs
that the Company shall be required to pay under the terms of any
contract or contracts for the construction of the Facilities; (g)
any other costs or expenses paid or incurred by the Company, and
any sums required to reimburse the Company for work done by it,
with respect to the Facilities which are properly chargeable to
the capital account of the Company with respect to the Facilities
or would be so chargeable for federal income tax purposes either
with a proper election or but for a proper election to deduct the
same; and (h) amounts required to be paid to the United States by
the Company (on behalf of the Authority) in respect of the Bonds
pursuant to Section 148 of the Code. For purposes of the
application of the proceeds of the Bonds, the Cost of
Construction shall be deemed to include the payment or
redemption, or provision therefor, of any obligations, other than
the Bonds, issued to finance or refinance any of the costs listed
above. The Cost of Construction shall also be deemed to include
all costs paid or incurred with respect to the Facilities by any
Person to whom the Facilities have been leased or sold as a whole
or in part, provided that such costs, had they been paid or
incurred by the Company, would otherwise constitute a portion of
the Cost of Construction.
Facilities:
"Facilities" shall mean the real and personal properties,
machinery and equipment currently existing, under construction
and to be constructed which are described in Exhibit A hereto, as
revised from time to time to reflect any changes therein,
additions thereto, substitutions therefor and deletions therefrom
permitted by the terms hereof, subject, however, to the
provisions of Section 7.01 hereof.
Indenture:
"Indenture" shall mean the Indenture of Trust, dated as of
September 15, 1997, between the Authority and the Trustee
relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.
Investment Account:
"Investment Account" shall mean any of the accounts so named
established under Sections 4.01 and 5.01 of the Indenture.
Loan Payments:
"Loan Payments" shall mean the payments required to be made
by the Company pursuant to Section 5.01 hereof.
1990 Bonds:
"1990 Bonds" shall mean the $20,000,000 aggregate principal
amount of the Authority's Industrial Development Revenue Bonds,
1990 Series A (Tucson Electric Power Company Project).
Outstanding:
"Outstanding", when used in reference to the Bonds, shall
mean, as at any particular date, the aggregate of all Bonds
authenticated and delivered under the Indenture except:
(a) those canceled by the Trustee at or prior to such
date or delivered to or acquired by the Trustee at or prior
to such date for cancellation;
(b) those deemed to be paid in accordance with Article
VIII of the Indenture; and
(c) those in lieu of or in exchange or substitution
for which other Bonds shall have been authenticated and
delivered pursuant to the Indenture, unless proof
satisfactory to the Trustee and the Company is presented
that such Bonds are held by a bona fide holder in due
course.
Person:
"Person" means (i) any corporation, limited liability
company, partnership, joint venture, association, joint-stock
company, business trust or unincorporated organization, in each
case formed or organized under the laws of the United States of
America, any state thereof or the District of Columbia, or (ii)
the United States of America or any state thereof, or any
political subdivision of either thereof, or any agency, authority
or other instrumentality of any of the foregoing.
Tax Agreement:
"Tax Agreement" shall mean that tax certificate and
agreement, dated the date of the initial authentication and
delivery of the Bonds, between the Authority and the Company,
relating to the requirements of the Code, and any and all
modifications, alterations, amendments and supplements thereto.
Trustee:
"Trustee" shall mean First Trust of New York, National
Association, as trustee under the Indenture, its successors in
trust and their assigns.
SECTION 1.02 Incorporation of Certain Definitions by
Reference. Each capitalized term used herein and not otherwise
defined herein shall have the meaning set forth in the Indenture.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01 Representations and Warranties of the
Authority. The Authority makes the following representations and
warranties as the basis for the undertakings on the part of the
Company contained herein:
(a) The Authority is an Arizona nonprofit corporation
designated by law as a political subdivision of the State of
Arizona created and existing under the Constitution and laws
of the State of Arizona;
(b) The Authority has the power to enter into this
Agreement and the Indenture and to perform and observe the
agreements and covenants on its part contained herein and
therein, including without limitation the power to issue and
sell the Bonds as contemplated herein and in the Indenture,
and by proper action has duly authorized the execution and
delivery hereof and thereof; and
(c) The execution and delivery of this Agreement and
the Indenture by the Authority do not, and consummation of
the transactions contemplated hereby and fulfillment of the
terms hereof and thereof by the Authority will not, result
in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which the
Authority is now a party or by which it is now bound, or, to
the best knowledge of the Authority, any order, rule or
regulation applicable to the Authority of any court or of
any regulatory body or administrative agency or other
governmental body having jurisdiction over the Authority or
over any of its properties, or the Constitution or laws of
the State of Arizona.
SECTION 2.02 Representations and Warranties of the Company.
The Company makes the following representations and warranties as
the basis for the undertakings on the part of the Authority
contained herein:
(a) The Company is a corporation duly organized and
existing in good standing under the laws of the State of
Arizona and duly qualified as a foreign corporation in the
State of New Mexico;
(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
by-laws 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 are to be used solely for purposes
contemplated by the Act and are located or are to be located
within the State of Arizona; and
(f) The Company estimates that all of the proceeds of
the Bonds (exclusive of accrued interest, if any, paid by
the initial purchasers of such Bonds upon delivery thereof)
will be expended to pay the Cost of Construction.
ARTICLE III
THE FACILITIES
SECTION 3.01 Construction of the Facilities. The Company
shall cause the Facilities to be constructed with all reasonable
dispatch in order to effectuate the purposes of the Act. The
Company shall have the sole responsibility under this Agreement
for the construction of the Facilities and may perform the same
itself or through its agents, and may make or issue such
contracts, orders, receipts and instructions, and in general do
or cause to be done all such other things as it may in its sole
discretion consider requisite or advisable for the construction
of the Facilities and for fulfilling its obligations under this
Article III. The Company shall have full authority and the sole
right under this Agreement to supervise and control, directly or
indirectly, all aspects of the construction of the Facilities.
The Authority shall have no right, title or interest in the
Facilities, nor any obligation regarding the facilities.
SECTION 3.02 Insufficient Moneys in Construction Fund. If
the moneys in the Construction Fund, together with any other
moneys made available to pay the Cost of Construction, shall not
be sufficient to pay the Cost of Construction in full, then the
Company shall pay all that portion of the Cost of Construction in
excess of the moneys available therefor.
The Authority does not make any warranty, either express or
implied, that the moneys which will be paid into the Construction
Fund will be sufficient to pay the Cost of Construction in full.
If the Company makes any payments pursuant to this Section
3.02, it shall not be entitled to any reimbursement therefor from
the Authority (except from the proceeds of any obligations
subsequently issued by the Authority in respect of the
Facilities), the Trustee or the Owners of the Bonds, nor shall it
be entitled to any diminution in or postponement of the payment
of the Loan Payments or the payment of any other amounts payable
under this Agreement.
SECTION 3.03 Revision of Plans and Specifications. The
Company may cause one or more revisions to be made to the plans
and specifications for the Facilities (including without
limitation any changes therein, additions thereto, substitutions
therefor and deletions therefrom), at any time and from time to
time prior to the Completion Date in any respect; provided,
however, that, if any such revision shall render inaccurate the
description of the Facilities contained in Exhibit A hereto, the
Company shall deliver to the Authority and the Trustee (a) a
revised Exhibit A containing a description of the Facilities as
revised, the accuracy of which shall have been certified by an
Authorized Company Representative, and (b) an opinion of Bond
Counsel to the effect that the Facilities as described in the
revised Exhibit A are such that the expenditure of the proceeds
of the Bonds pursuant to this Agreement will not, in and of
itself, impair the validity of the Bonds under the Act or the
exclusion from gross income for federal tax purposes of interest
on the Bonds. A revision of Exhibit A hereto pursuant to this
Section 3.03 shall not constitute an amendment, change or
modification of this Agreement within the meaning of Article XII
of the Indenture.
SECTION 3.04 Certification of Completion Date. The
Completion Date shall be the date on which the Facilities are
completed in their entirety and ready to be placed in service and
operated, all as determined by the Company. Promptly after the
Completion Date, the Company shall submit to the Authority and
the Trustee a certificate, executed by an Authorized Company
Representative, which shall specify the Completion Date and shall
state that (a) construction of the Facilities has been completed
and the Cost of Construction has been paid, except for any
portion thereof which has been incurred but is not then due and
payable, or the liability for the payment of which is being
contested or disputed by the Company, and for the payment of
which the Trustee is directed to retain specified amounts of
moneys in specified accounts within the Construction Fund, and
(b) the Facilities are suitable for operation for the purposes
for which they were designed. Notwithstanding the foregoing,
such certificate may state that it is given without prejudice to
any rights against third parties which exist at the date thereof
or which may subsequently come into being.
SECTION 3.05 Maintenance of Facilities; Remodeling. The
Company shall at all times to cause the Facilities, and every
element and unit thereof, to be maintained, preserved and kept in
thorough repair, working order and condition and cause all
needful and proper repairs and renewals thereto to be made;
provided, however, that the Company may cause the operation of
the Facilities, or any element or unit thereof, to be
discontinued if, in the judgment of the Company, it is no longer
advisable to operate the same, or if the Company intends to sell
or dispose of the same and within a reasonable time shall
endeavor to effectuate such sale or disposition.
After the Completion Date, the Company may, subject to the
provisions of Section 6.05 hereof, at its own expense remodel the
Facilities or make such substitutions, modifications and
improvements to the Facilities from time to time as it, in its
discretion, may deem to be desirable for its uses and purposes,
which remodeling, substitutions, modifications and improvements
shall be included under the terms of this Agreement as part of
the Facilities.
SECTION 3.06 Insurance. The Company shall keep the
Facilities insured against fire and other risks to the extent
usually insured against by companies owning and operating similar
property, by reputable insurance companies or, at the Company's
election, with respect to all or any element or unit of the
Facilities, by means of an adequate insurance fund set aside and
maintained by it out of its own earnings or in conjunction with
other companies through an insurance fund, trust or other
agreement or, by means of unfunded self-insurance as may be
reasonable and customary by companies owning and operating
similar property. All proceeds of such insurance shall be for
the account of the Company.
SECTION 3.07 Condemnation. The Company shall be entitled
to the entire proceeds of any condemnation award or portion
thereof made for damages to or takings of the Facilities or other
property of the Company.
SECTION 3.08 Termination of Construction. (a) Anything
in this Agreement to the contrary notwithstanding, the Company
shall have the right at any time to terminate the construction of
the Facilities, in whole, if the Company shall have determined
that the continued construction or operation of the Facilities,
in whole, is impracticable, uneconomical or undesirable for any
reason.
(b) Promptly after the termination of the construction of
the Facilities, the Company shall submit to the Authority and the
Trustee a certificate, executed by an Authorized Company
Representative, which shall state the reasons for such
termination and shall state that the Cost of Construction, to the
extent of the construction of the Facilities as of the date of
such termination, has been paid, except for any Costs of
Construction which have been incurred but are not then due and
payable, or the liability for the payment of which is being
contested or disputed by the Company, and for the payment of
which the Trustee is directed to retain specified amounts of
moneys in specified accounts within the Construction Fund.
Notwithstanding the foregoing, such certificate may state that it
is given without prejudice to any rights against third parties
which exist at the date thereof or which may subsequently come
into being.
ARTICLE IV
ISSUANCE OF THE BONDS; THE LOANS; 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 Loans; Disposition of Bond Proceeds. The
Authority and the Company shall enter into escrow arrangements
with the trustee for the 1990 Bonds and shall cause $20,000,000
of the proceeds of the Bonds to be deposited in escrow with such
trustee to be applied to the payment of the 1990 Bonds upon the
redemption thereof. The Authority shall from time to time lend
to the Company the remaining proceeds of the issuance and sale of
the Bonds, other than accrued interest, if any, paid by the
initial purchaser or purchasers thereof, for the purposes
specified in this Agreement, such proceeds to be applied as
hereinafter and in the Indenture provided.
The Authority shall establish the Bond Fund and the
Construction Fund with the Trustee in accordance with Sections
4.01 and 5.01 of the Indenture. The proceeds of the issuance and
sale of the Bonds, other than the $20,000,000 deposited in escrow
with the trustee for the 1990 Bonds as hereinabove provided and
accrued interest, if any, paid by the initial purchaser or
purchasers thereof, shall be deposited into the Construction
Fund, and any such accrued interest shall be deposited into the
Bond Fund, all in accordance with the provisions of the
Indenture.
The moneys on deposit in the Construction Fund shall be
applied by the Trustee as provided in Section 4.04 hereof and as
otherwise provided in Article V of the Indenture. Until the
moneys on deposit in the Construction Fund are so applied, such
moneys shall be and remain the property of the Authority, subject
to the lien of the Indenture, and the Company shall have no
right, title or interest therein except as expressly provided in
this Agreement and the Indenture. However, in order to secure
the payment by the Company of the Loan Payments, and the payment
by the Authority of the principal of and premium, if any, and
interest on the Bonds, and the performance and observance by the
Company and the Authority of all covenants and conditions
expressed herein and in the Indenture and contained in the Bonds,
the Company hereby mortgages, pledges, assigns, creates and
grants a security interest in and confirms to the Trustee such
right, title and interest as the Company may be deemed to have or
hereafter acquire in the proceeds of the issuance and sale of the
Bonds to be deposited into the Construction Fund and the proceeds
from the investment and reinvestment thereof, upon terms and
conditions co-extensive with those set forth in the Indenture
with respect to the lien and security interest of the Trustee in
the Trust Estate (as defined in the Indenture).
SECTION 4.04 Disbursements from Construction Fund. (a) To
the extent that moneys on deposit in the Construction Fund shall
not otherwise have been applied in accordance with the provisions
of Article V of the Indenture, such moneys shall be loaned to the
Company from time to time to reimburse the Company for portions
of the Cost of Construction paid by it or to make payments to
persons designated by the Company in respect of portions of the
Cost of Construction, upon receipt by the Trustee of requisitions
executed by, or communications by telegram, telex or facsimile
transmission from, an Authorized Company Representative, which
requisitions or communications shall state with respect to each
payment to be made: (i) the requisition number, (ii) the name and
address of the person, firm or corporation to whom payment is due
or has been made (or, in the case of payments to the Bond Fund,
instructions to make such payments thereto), (iii) the amount
paid or to be paid, (iv) the account or accounts within the
Construction Fund from which payment of such requisition, or any
portion thereof, shall be made, (v) (A) that each obligation,
item of cost or expense with respect to which such requisition is
being made has been properly incurred and has been paid or is
then due and payable as an item of the Cost of Construction, is a
proper charge against the Construction Fund, and has not been the
basis of any previous final payment therefrom or from the
proceeds of any other obligations issued by the Authority or (B)
in the event that a portion of the Bonds shall have been paid,
redeemed or deemed to have been paid within the meaning of
Article VIII of the Indenture by reason of the application of the
proceeds of the sale of any obligations issued under an indenture
other than the Indenture and if the payment of such requisition
is to be made into the construction, acquisition or other similar
fund created under such other indenture, that upon disbursement
from such construction, acquisition or other similar fund, each
obligation, item of cost or expense mentioned in the requisition
for such disbursement will have been properly incurred and will
have been paid or will then be due and payable as an item of the
Cost of Construction, will be a proper charge against the
construction, acquisition or other similar fund under such
indenture, and will not have been the basis of any previous final
payment therefrom or from the proceeds of any other revenue bonds
issued by the Authority, (vi) that the payment of such
requisition will not result in a breach of any of the covenants
of the Company contained in subsection (c) or (d) of this Section
4.04 and (vii) that, to the best of the knowledge of such
Authorized Company Representative, there shall not have occurred
and be continuing any Event of Default described in Section 8.01
hereof. Any such communication by telegram, telex or facsimile
transmission shall be promptly confirmed by a requisition
executed by an Authorized Company Representative. The Company
shall furnish to the Authority a copy of each requisition
delivered to the Trustee promptly upon request therefor.
(b) In paying any requisition under this Section 4.04, the
Trustee shall be entitled to conclusively rely as to the
completeness and accuracy of all statements in such requisition
upon the approval of such requisition by an Authorized Company
Representative, execution thereof to be conclusive evidence of
such approval, and the Company shall indemnify and save harmless
the Authority and the Trustee from any liability incurred in
connection with any requisition so executed by an Authorized
Company Representative.
(c) The Company shall submit requisitions for Costs of
Construction in compliance with the requirements therefor
contained in the Tax Agreement, which on a cumulative aggregate
basis, if paid, would result in less than 97% of the sum of the
total amount of the proceeds of the Bonds expended, for any
purpose, being used to provide facilities for the local
furnishing of electric energy or other exempt facilities,
including facilities functionally related or subordinate thereto,
within the meaning of Section 142 of the Code; provided, however,
that the moneys paid from the Investment Account within the
Construction Fund shall be disregarded for purposes of the
foregoing covenant and all computations made in accordance
therewith if the Company shall have furnished to the Authority
and the Trustee an opinion of Bond Counsel to the effect that
such moneys may be so disregarded without impairing the exclusion
from gross income for federal tax purposes of interest on the
Bonds.
(d) The Company shall not submit or cause to be
submitted to the Trustee any requisition pursuant to this Section
4.04, and shall have no claim upon any moneys in the Construction
Fund, so long as there shall have occurred and be continuing any
Event of Default described in Section 8.01 hereof.
SECTION 4.05 Investment of Moneys in Funds and Accounts.
The Company and the Authority agree that any moneys held in any
fund or account created by the Indenture shall be invested as
provided in the Indenture.
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01 Loan Payments. In consideration of the
issuance of the Bonds and the disposition of the proceeds thereof
as contemplated in Section 4.03 hereof, the Company shall pay, or
cause to be paid, to the Trustee for the account of the Authority
an amount equal to the aggregate principal amount of the Bonds
from time to time Outstanding and, as interest on its obligation
to pay such amount, an amount equal to 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 Authority 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 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 Sections 5.03, 5.04, 6.03 and
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 Sections 6.01 and 7.01 hereof.
SECTION 5.03 Payment of Expenses. The Company shall pay,
or, to the extent permitted by this Agreement, cause to be paid
out of the Construction Fund, all Administration Expenses,
including, without limitation, Administration Expenses incurred
at and subsequent to the time the Bonds are deemed to have been
paid in accordance with Article VIII of the Indenture. The
payment of the compensation and the reimbursement of expenses and
advances of the Trustee, of the paying agent, any co-paying agent
and the registrar under the Indenture shall be made directly to
such entities.
SECTION 5.04 Indemnification. The Company releases the
Authority, the Trustee and their directors, officers, employees
and agents from, agrees that the Authority and the Trustee shall
not be liable for, and agrees to indemnify and hold the
Authority, the 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 (i) in the case
of the Trustee, as a result of the negligence or bad faith or
willful misconduct of the Trustee or its directors, officers,
employees and agents; and (ii) in the case of the Authority, as
a result of the gross negligence or bad faith of the Authority or
its directors, officers, employees and agents.
The Company shall indemnify and hold the Authority and the
Trustee, free and harmless from any loss, claim, damage, tax,
penalty, liability, disbursement, litigation expenses, attorneys'
and other agents' fees and expenses or court costs arising out
of, or in any way relating to, the execution or performance of
this Agreement, the issuance or sale of the Bonds, actions taken
under the Indenture or any other cause whatsoever pertaining to
the Facilities, except (i) in the case of the Trustee, as a
result of the negligence or bad faith or willful misconduct of
the Trustee; and (ii) in the case of the Authority, as a result
of the gross negligence or bad faith of the Authority.
The Company shall indemnify and hold the Authority 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 5.05 Payment of Taxes; Discharge of Liens. The
Company shall: (a) pay, or make provision for payment of, all
lawful taxes and assessments, including income, profits, property
or excise taxes, if any, or other municipal or governmental
charges, levied or assessed by any federal, state or municipal
government or political body upon the Facilities or any part
thereof or upon the Authority with respect to the Loan Payments,
when the same shall become due; and (b) pay or cause to be
satisfied and discharged or make adequate provision to satisfy
and discharge, within sixty (60) days after the same shall
accrue, any lien or charge upon the Loan Payments, and all lawful
claims or demands for labor, materials, supplies or other charges
which, if unpaid, might be or become a lien upon such amounts;
provided, that, if the Company shall first notify the Authority
and the Trustee of its intention so to do, the Company may in
good faith contest any such lien or charge or claims or demands
in appropriate legal proceedings, and in such event may permit
the items so contested and identified as such by the Company to
remain undischarged and unsatisfied during the period of such
contest and any appeal therefrom, unless the Trustee shall notify
the Company in writing that, in the opinion of counsel to the
Trustee based upon material facts disclosed to the Trustee
without any duty of investigation, by nonpayment of any such
items the lien of the Indenture as to the Loan Payments will be
materially endangered, in which event the Company shall promptly
pay and cause to be satisfied and discharged all such unpaid
items. The Authority shall cooperate fully with the Company in
any such contest.
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01 Maintenance of Corporate Existence. Except as
permitted in this Section 6.01, the Company shall maintain its
corporate 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
corporation. The Company may consolidate with or merge into
another corporation incorporated 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 corporation (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, obligations of the Company under Section 5.01
hereof. Upon such an assumption following any such sale, transfer
or other disposition of assets, the Company shall be released and
discharged from all liability in respect of all obligations under
this Agreement. Notwithstanding the foregoing, in the case of
any such sale, transfer or other disposition of assets, which do
not include the Facilities, the Company shall remain liable in
respect of obligations under this Agreement other than the
obligations under Section 5.01 hereof, and the transferee shall
not be required to assume any obligations hereunder other than
the obligations under Section 5.01 hereof; provided, however,
that the transferee shall be required to assume all such other
obligations unless the Company shall have delivered to the
Authority and the Trustee an opinion of Bond Counsel to the
effect that the non-assumption by the transferee of such other
obligations will not impair the validity under the Act of the
Bonds and will not adversely affect the exclusion from gross
income for federal tax purposes of interest on the Bonds.
If consolidation, merger or sale, transfer or other
disposition is made as permitted by this Section 6.01, the
provisions of this Section 6.01 shall continue in full force and
effect and no further consolidation, merger or sale or other
transfer shall be made except in compliance with the provisions
of this Section 6.01.
Anything in this Agreement to the contrary notwithstanding,
the sale, transfer or other disposition by the Company of all of
its facilities (a) for the generation of electric energy, (b) for
the transmission of electric energy or (c) for the distribution
of electric energy, in each case considered alone, or all of its
facilities described in clauses (a) and (b), considered together,
or all of its facilities described in clauses (b) and (c),
considered together, shall in no event be deemed to constitute a
sale, transfer or other disposition of all the properties of the
Company, as or substantially as an entirety, unless, immediately
following such sale, transfer or other disposition, the Company
shall own no properties in the other such categories of property
not so sold, transferred or otherwise disposed of. The character
of particular facilities shall be determined by reference to the
Uniform System of Accounts prescribed for public utilities and
licensees subject to the Federal Power Act, as amended, to the
extent applicable.
SECTION 6.02 Permits or Licenses. In the event that it may
be necessary for the proper performance of this Agreement on the
part of the Company or the Authority that any application or
applications for any permit or license to do or to perform
certain things be made to any governmental or other agency by the
Company or the Authority, the Company and the Authority each
shall, upon the request of either, execute such application or
applications.
SECTION 6.03 Authority's Access to Facilities. The
Authority shall have the right, upon appropriate prior notice to
the Company, to have reasonable access to the Facilities during
normal business hours for the purpose of making examinations and
inspections of the same.
SECTION 6.04 Tax-Exempt Status of Interest on Bonds. (a)
It is the intention of the parties hereto that interest on the
Bonds shall be and remain tax-exempt, and to that end the
covenants and agreements of the Authority and the Company in this
Section 6.04 and the Tax Agreement are for the benefit of the
Owners from time to time of the Bonds.
(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 Section 103 and
141 through 150 of the Code and any applicable regulations
promulgated thereunder. To such ends, the Authority and the
Company shall comply with all requirements of such Section 148 to
the extent applicable to the Bonds. In the event that at any
time the Authority or the Company is of the opinion that for
purposes of this Section 6.04(b) it is necessary to restrict or
limit the yield on the investment of any moneys held by the
Trustee under the Indenture, the Authority or the Company shall
so notify the Trustee in writing.
Without limiting the generality of the foregoing, the
Company and the Authority agree that there shall be paid from
time to time all amounts required to be rebated to the United
States of America pursuant to Section 148(f) of the Code and any
applicable Treasury Regulations. This covenant shall survive
payment in full or defeasance of the Bonds and the satisfaction
and discharge of the Indenture. The Company specifically
covenants to pay or cause to be paid, the Rebate Requirement as
defined and described in the Tax Agreement.
(c) The Authority certifies and represents that it has
not taken, and the Authority covenants and agrees that it will
not take, any action which results in interest paid on the Bonds
being included in gross income of the Owners of the Bonds for
federal tax purposes pursuant to Sections 103 and 141 of the Code
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 147(a) of the Code; and provided, further, that none of
the covenants and agreements herein contained shall require
either the Company or the Authority to enter an appearance or
intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws,
rules or regulations or in connection with any decisions of any
court or administrative agency or other governmental body
affecting the taxation of interest on the Bonds. The Company
acknowledges having read Section 7.08 of the Indenture and agrees
to perform all duties imposed on it by such Section 7.08, by this
Section 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, 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-exempt 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 cause the Facilities to be used
for purposes contemplated by the Act and in the Tax Agreement.
SECTION 6.06 Financing Statements. The Company shall file
and record, or cause to be filed and recorded, all financing
statements and continuation statements referred to in Section
7.07 of the Indenture.
ARTICLE VII
ASSIGNMENT, LEASING AND SELLING
SECTION 7.01 Conditions. The Company's interest in this
Agreement may be assigned as a whole or in part, and its interest
in the Facilities may be leased, sold, transferred or otherwise
disposed of by the Company as a whole or in part (whether an
interest in a specific element or unit or an undivided interest),
to any Person; provided, however, that no such assignment, lease,
sale, transfer or other disposition (a) shall relieve the Company
from its primary liability for its obligations under Section 5.01
hereof or (b) shall be made unless the assignee, lessee,
purchaser or other transferee, as the case may be, prior to or
simultaneously with such assignment, lease, sale, transfer or
other disposition, assumes, by delivery of an instrument in
writing satisfactory in form to the Trustee and the Authority,
all other obligations of the Company hereunder to the extent of
the interest assigned, leased, sold, transferred or otherwise
disposed of, and the Company shall be released of and discharged
from such obligations to the extent so assumed. Notwithstanding
the foregoing, (a) if (i) the Company's interest in this
Agreement shall be assigned as a whole or in undivided part, (ii)
the Company's interest in the Facilities shall be leased as a
whole or in undivided part and the term of such leasehold or the
term of any extension or extensions thereof at the option of the
Company shall extend beyond the maturity date of the Bonds or
(iii) the Company's interest in the Facilities shall be sold,
transferred or otherwise disposed of as a whole or in undivided
part, and (b) in the event that the assignee, lessee, purchaser
or other transferee shall assume the obligations of the Company
under Section 5.01 hereof for the remaining term of this
Agreement, to the extent of such assignment, lease, sale,
transfer or other disposition, the Company shall be released from
and discharged of all liability in respect of such obligations to
the extent so assumed (but only to such extent); provided,
however, that the release and discharge of the Company pursuant
to clause (b) shall be conditioned upon the delivery by the
Company to the Authority and the Trustee of a certificate of an
Independent Expert (as hereinafter defined) describing the
interests so assigned, leased, sold, transferred or otherwise
disposed of, together with all other rights, interests, assets
and/or properties assigned, leased, sold, transferred or
otherwise disposed of by the Company to the same Person in the
same or a related transaction, stating that such rights,
interests, assets and/or properties so described constitute
facilities for the generation, transmission and/or distribution
of electric energy and stating that, in the opinion of such
Independent Expert, the Fair Value (as hereinafter defined) of
such rights, interests, assets and/or properties to the Person
acquiring the same is not less than an amount equal to 10/7 of
the sum of (x) the aggregate principal amount of the Bonds then
Outstanding and (y) the outstanding principal amount of all other
obligations of the Company representing indebtedness for borrowed
money or for the deferred purchase price of property which are
being assumed by such Person; provided, further, that after any
such assumption, release and discharge as aforesaid, the Company
may again assume such obligations under Section 5.01 hereof, in
whole or in part, at any time and from time to time, and, to the
extent of any such assumption by the Company (but only to such
extent), the aforesaid assignee, lessee, purchaser or other
transferee shall be released from and discharged of all liability
in respect of such obligations.
Anything herein to the contrary notwithstanding, the Company
shall not make any assignment, lease or sale as provided in the
immediately preceding paragraph unless it shall have furnished to
the Authority and the Trustee an opinion of Bond Counsel to the
effect that the proposed assignment, lease or sale will not
impair the validity under the Act of the Bonds and will not
adversely affect the exclusion of interest on the Bonds from
gross income for federal tax purposes.
After any lease, sale, transfer or other disposition of any
element or unit of the Facilities, or any interest therein, the
Company may, at its option, cause such element or unit, or
interest therein, to no longer be deemed to be part of the
Facilities for the purposes of this Agreement by delivering to
the Authority and the Trustee the agreements or other documents
required pursuant to Section 7.02 hereof together with an
instrument signed by an Authorized Company Representative stating
that such element or unit, or interest therein, shall no longer
be deemed to be part of the Facilities for the purposes of this
Agreement.
For purposes of this Section 7.01:
(a) "Independent Expert" means a Person which (i) is
an engineer, appraiser or other expert and which, with
respect to any certificate to be delivered pursuant to this
Section, is qualified to pass upon the matter set forth in
such certificate and (ii)(A) is in fact independent, (B)
does not have any direct material financial interest in the
transferee or in any obligor upon the Bonds or under this
Agreement or in any affiliate of the transferee or any such
obligor, (C) is not connected with the transferee or any
such obligor as an officer, employee, promoter, underwriter,
trustee, partner, director or any person performing similar
functions and (D) is approved by the Trustee in the exercise
of reasonable care; for purposes of this definition
"engineer" means a Person engaged in the engineering
profession or otherwise qualified to pass upon engineering
matters (including, but not limited to, a Person licensed as
a professional engineer, whether or not then engaged in the
engineering profession); and for purposes of this definition
"appraiser" means a Person engaged in the business of
appraising property or otherwise qualified to pass upon the
Fair Value or fair market value of property.
(b) "Fair Value" means the fair value of the
interests, rights, assets and/or properties assigned,
leased, sold, transferred or otherwise disposed of (but, in
the case of a lease, only to the extent of such lease) as
may be determined by reference to (i) except in the case of
a lease, the amount which would be likely to be obtained in
an arm's-length transaction with respect to such interests,
rights, assets and/or properties between an informed and
willing buyer and an informed and willing seller, under no
compulsion, respectively, to buy or sell, (ii) in the case
of a lease, the amount (discounted to present value at a
rate not lower than the taxable equivalent of the yield to
maturity of the Bonds based on prevailing market prices
immediately prior to the first public announcement of the
proposed transaction) which would be likely to be obtained
in an arm's-length transaction with respect to such
interests, rights, assets and/or properties between an
informed and willing lessee and an informed and willing
lessor, neither under any compulsion to lease; (iii) the
amount of investment with respect to such interests, rights,
assets and/or properties which, together with a reasonable
return thereon, would be likely to be recovered through
ordinary business operations or otherwise, (iv) the cost,
accumulated depreciation and replacement cost with respect
to such interests, rights, assets and/or properties and/or
(v) any other relevant factors; provided, however, that (x)
Fair Value shall be determined without deduction for any
mortgage, deed of trust, pledge, security interest,
encumbrance, lease, reservation, restriction, servitude,
charge or similar right or any other lien of any kind and
(y) the Fair Value to the transferee of any property shall
not reflect any reduction relating to the fact that such
property may be of less value to a Person which is not the
owner, lessee or operator of the property or any portion
thereof than to a Person which is such owner, lessee or
operator. Fair Value may be determined, without physical
inspection, by the use of accounting and engineering records
and other data maintained by the Company or the transferee
or otherwise available to the Independent Expert certifying
the same.
SECTION 7.02 Instrument Furnished to the Authority and
Trustee. The Company shall, within fifteen (15) days after the
delivery thereof, furnish to the Authority and the Trustee a true
and complete copy of the agreements or other documents
effectuating any such assignment, lease, sale, transfer or other
disposition.
SECTION 7.03 Limitation. This Agreement shall not be
assigned nor shall the Facilities be leased, sold, transferred or
otherwise disposed of, in whole or in part, except as provided in
this Article VII or in Section 6.01 or 5.02 hereof. This Article
VII shall not apply to any sale, transfer or other disposition by
the Company of all of its assets, as or substantially as an
entirety, as contemplated in Section 6.01.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default. Each of the following
events shall constitute and is referred to in this Agreement as
an "Event of Default":
(a) a failure by the Company to make any Loan Payment,
which failure shall have resulted in an "Event of Default"
under clause (a) or (b) of Section 9.01 of the Indenture;
(b) a failure by the Company to pay when due any
amount required to be paid under this Agreement or to
observe and perform any covenant, condition or agreement on
its part to be observed or performed (other than a failure
described in clause (a) above), which failure shall continue
for a period of sixty (60) days after written notice,
specifying such failure and requesting that it be remedied,
shall have been given to the Company by the Authority or the
Trustee, unless the Authority and the Trustee shall agree in
writing to an extension of such period prior to its
expiration; provided, however, that the Authority and the
Trustee shall be deemed to have agreed to an extension of
such period if corrective action is initiated by the Company
within such period and is being diligently pursued; or
(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 corporation 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
Sections 5.01, 5.03, 5.05 and 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 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 45 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.
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 Russo, Cox & Russo, P.C., 1820 East River Road,
Suite 230, Tucson, Arizona 85718; if to the Company, at 220 West
Sixth Street, 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.
SECTION 10.03 Parties in Interest. This Agreement shall
inure to the benefit of and shall be binding upon the Authority,
the Company and their respective successors and assigns, and no
other person, firm or corporation shall have any right, remedy or
claim under or by reason of this Agreement; provided, however,
that the lien and security interest granted to the Trustee in
Section 4.03 hereof, as well as the rights and remedies granted
to the Authority in Article VIII hereof, shall inure to the
benefit of the Trustee, on behalf of the Owners from time to time
of the Bonds, and shall be enforceable by the Trustee as a third
party beneficiary or as assignee of the Authority; and provided,
further, that neither Pima County, Arizona nor the State of
Arizona shall in any event be liable for the payment of the
principal of or premium, if any, or interest on the Bonds or for
the performance of any pledge, mortgage, obligation or agreement
created by or arising out of this Agreement or the issuance of
the Bonds, and further that neither the Bonds nor any such
obligation or agreement of the Authority shall be construed to
constitute an indebtedness of Pima County, Arizona or the State
of Arizona within the meaning of any constitutional or statutory
provisions whatsoever, but shall be limited obligations of the
Authority payable solely out of the revenues derived from this
Agreement, or from the sale of the Bonds, or from the investment
or reinvestment of any of the foregoing, as provided herein and
in the Indenture.
SECTION 10.04 Amendments. This Agreement may be amended
only by written agreement of the parties hereto, subject to the
limitations set forth herein and in the Indenture.
SECTION 10.05 Counterparts. This Agreement may be executed
in any number of counterparts, each of which, when so executed
and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Agreement.
SECTION 10.06 Severability. If any clause, provision or
section of this Agreement shall, for any reason, be held illegal
or invalid by any court, the illegality or invalidity of such
clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this
Agreement shall be construed and enforced as if such illegal or
invalid clause, provision or section had not been contained
herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement
or obligation shall be deemed to be the agreement or obligation
of the Authority or the Company, as the case may be, to the full
extent permitted by law.
SECTION 10.07 Governing Law. The laws of the State of
Arizona shall govern the construction and enforcement of this
Agreement, except that the provisions of Section 13.09 of the
Indenture, construed as provided in Section 13.07 of the
Indenture, shall apply to this Agreement as if contained herein.
SECTION 10.08 Notice Regarding Cancellation of Contracts.
As required by the provisions of Section 38-511, Arizona Revised
Statutes, as amended, notice is hereby given that political
subdivisions of the State of Arizona or any of their departments
or agencies may, within three (3) years of its execution, cancel
any contract, without penalty or further obligation, made by the
political subdivisions or any of their departments or agencies on
or after September 30, 1988, if any person significantly involved
in initiating, negotiating, securing, drafting or creating the
contract on behalf of the political subdivisions or any of their
departments or agencies is, at any time while the contract or any
extension of the contract is in effect, an employee or agent of
any other party to the contract in any capacity or a consultant
to any other party of the contract with respect to the subject
matter of the contract. The cancellation shall be effective when
written notice from the chief executive officer or governing body
of the political subdivision is received by all other parties to
the contract unless the notice specifies a later time.
The Company covenants and agrees not to employ as an
employee, agent or, with respect to the subject matter of this
Agreement, a consultant, any person significantly involved in
initiating, negotiating, securing, drafting or creating such
Agreement on behalf of the Authority within three (3) years from
the execution hereof, unless a waiver is provided by the
Authority.
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed as of the day and year first above
written.
THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA
By: /s/ Stanley Lehman
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President
TUCSON ELECTRIC POWER COMPANY
By: /s/ Kevin Larson
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Vice President
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 Industrial Development
Revenue Bonds, 1997 Series A (Tucson Electric Power Company
Project) issued by The Industrial Development Authority of the
County of Pima and referred to in the foregoing Loan Agreement.
_____________
Certain additions and improvements to the Company's lower
voltage electric transmission and distribution system of the City
of Tucson and environs in Pima County and to Fort Huachuca in
adjacent Cochise County, Arizona and additions and improvements
to the Irvington Generating Station located in the City of
Tucson, more particularly described in the Tax Certificate and
Agreement, dated as of October 1, 1997, between The Industrial
Development Authority of the County of Pima and Tucson Electric
Power Company.