________________________________________________________________________________
AMENDMENT NO. 3
dated as of June 1, 2003
to
TAX INDEMNITY AGREEMENT
dated as of December 1, 1985
between
PHILIP MORRIS CAPITAL CORPORATION
beneficiary under a Trust Agreement
dated as of December 1, 1985
with Wilmington Trust Company
and
William J. Wade,
as Owner Trustee and Cotrustee, respectively,
Lessor
and
TUCSON ELECTRIC POWER COMPANY,
and
SAN CARLOS RESOURCES INC.,
Lessee
_______________________________________
Common Plant
Springerville Generating Station
________________________________________________________________________________
AMENDMENT NO. 3
to
TAX INDEMNITY AGREEMENT
This AMENDMENT NO. 3 (this "Amendment"), dated as of June 1, 2003 to TAX
INDEMNITY AGREEMENT, dated as of December 1, 1985, between TUCSON ELECTRIC POWER
COMPANY, an Arizona corporation, and SAN CARLOS RESOURCES INC., an Arizona
corporation, as Lessee (the "Lessee"), and PHILIP MORRIS CAPITAL CORPORATION a
Delaware corporation (the "Owner Participant"), beneficiary under a Trust
Agreement, dated as of December 1, 1985, with Wilmington Trust Company and
William J. Wade, as Owner Trustee and Cotrustee, respectively (the "Lessor").
W I T N E S S E T H
WHEREAS, the Owner Participant (or its predecessor in interest) and the
Lessee entered into a Tax Indemnity Agreement, dated as of December 1, 1985, as
amended by Amendment No. 1, dated as of December 15, 1992, to Tax Indemnity
Agreement dated as of December 1, 1985 and by Amendment No. 2, dated as of
December 1, 1999, to Tax Indemnity Agreement dated as of December 1, 1985 (such
Tax Indemnity Agreement, as so amended and as further amended, modified or
supplemented from time to time, being referred to herein as the "Tax Indemnity
Agreement);
WHEREAS, the Lessee, the Lessor, the Owner Participant and certain other
parties have agreed pursuant to a Refunding Agreement, dated as of June 1, 2003
(as amended, modified or supplemented from time to time, the "Refunding
Agreement") to participate in refinancing the outstanding Secured Notes on the
Refunding Date (as defined in the Refunding Agreement);
WHEREAS, the Owner Participant and the Lessee wish to amend the Tax
Indemnity Agreement as contemplated herein in order to reflect agreements and
amendments contemplated by the Refunding Agreement;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. General. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings specified in the Tax
Indemnity Agreement.
Section 2. Changed Definition. The definition of "Refunding Agreement"
and all references to such Refunding Agreement shall be modified to refer to the
Refunding Agreement dated as of June 1, 2003, among Lessee, Philip Morris
Capital Corporation, Lessor and certain parties (as such Refunding Agreement may
be amended, modified or supplemented from time to time). "1999 Refunding
Agreement" shall mean the Refunding Agreement dated as of December 1, 1999,
among Lessee, Philip Morris Capital Corporation, Lessor and certain parties.
Section 3. Indemnified Losses. (a) Section 3.1(c) is hereby amended to
read in its entirety as set forth below:
"(c) if, as a result of the Lessee paying any Transaction
Expenses (as defined in the Refunding Agreement) or
Transaction Expenses (as defined in the 1999 Refunding
Agreement) the Owner Participant shall be required to
include any amount in its gross income; or".
(b) Section 3.1(d) is hereby amended by replacing the phrase "the Refunding
Date (as defined in the Refunding Agreement)" with the following:
"December 16, 1999,".
(c) Section 3.1 is hereby amended by adding at the end of subsection (d)
(i.e. prior to the phrase "(any of the events)") the following:
"; or (e) if, as a result of the Lessee paying any
Supplemental Rent under Section 3(c) of the Lease with
respect to payments contemplated by Section 2(h) of the
Supplemental Indenture No. 3, dated as of June 1, 2003, to
the Indenture the Owner Participant shall be required to
include any amount in its gross income".
(d) Section 3.1 is hereby amended by replacing the phrase "(any of the
events described in these subsections (a)(2), (b), (c) or (d) being referred to
hereinafter as a "Loss")" with the following:
"(any of the events described in these subsections (a)(2),
(b), (c), (d) or (e) being referred to hereinafter as a
"Loss")".
Section 4. Counterpart Execution. This Amendment may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 5. Ratification of the Tax Indemnity Agreement. As amended by
this Amendment, the Tax Indemnity Agreement is in all respects ratified,
approved and confirmed, and the Tax Indemnity Agreement and this Amendment shall
together constitute one and the same instrument.
Section 6. Governing Law. This Amendment has been delivered in, and
shall in all respects be governed by, construed in accordance with, the laws of
the State of New York applicable to agreements made and to be performed entirely
within such State, including such laws applicable to matters of construction,
validity and performance.
Section 7. No Duplication of Payment. Section 21 is hereby amended to
read in its entirety as set forth below:
"Section 21. No Duplication of Payment. Nothing contained
in the terms of this Tax Indemnity Agreement shall be
construed to require the Lessee or the Owner Participant to
to pay any Loss or savings arising out of any event
indemnified hereunder more than once or to make any payments
hereunder to the extent previously reflected in (x) a
rental adjustment pursuant to Section 3 (g) of the
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Lease Agreement, or (y) a payment made pursuant to Section
2.01(d) of the 1999 Refunding Agreement (with respect to the
income attributable to the payment pursuant to Section
2.01(c) of the 1999 Refunding Agreement), except as set
forth in Section 7 hereof. For the avoidance of doubt, the
parties confirm that Section 4 hereof shall have no
application to any payments made pursuant to the 1999
Refunding Agreement or any tax benefits arising therefrom."
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IN WITNESS WHEREOF, the Owner Participant and the Lessee have caused this
Amendment to be duly executed by their respective officers hereunto duly
authorized as of the date set forth above.
TUCSON ELECTRIC POWER COMPANY
By ____________________________________
Name:
Title:
SAN CARLOS RESOURCES INC.
By ____________________________________
Name:
Title:
PHILIP MORRIS CAPITAL CORPORATION
By ____________________________________
Name:
Title:
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