Common use of TAX-EXEMPT FINANCING Clause in Contracts

TAX-EXEMPT FINANCING. (a) Seller represents that: (i) The Exempt Facilities have been financed, and refinanced, in whole or in part, with the proceeds of the issuance and sale by various governmental authorities of industrial development revenue bonds or private activity bonds the interest on which, with certain exceptions, is excluded from gross income for purposes of Federal income taxation (such bonds, as currently outstanding, the "Revenue Bonds"); and Seller is the economic obligor in respect of such Revenue Bonds; (ii) The Revenue Bonds are described in Schedule 6.14(a); (iii) The basis for the exclusion of interest on the Revenue Bonds from gross income for Federal income tax purposes is the use of the Exempt Facilities for (A) "the local furnishing of electric energy or gas" under Sections 142(a)(8) and 142(f) of the Code or, if applicable, Section 103(b)(4)(E) of the Internal Revenue Code of 1954, as amended (the "1954 Code"), and in either case the applicable Treasury Regulations (the "Regulations") thereunder, or (B) "the furnishing of water" or "sewage facilities" under Sections 142(a)(4) and 142(a)(5) of the Code or, if applicable, Sections 103(b)(4)(G) or 103(b)(4)(E) of the 1954 Code, and in either case the applicable Regulations. Seller acknowledges and agrees that Buyer has and shall have no responsibility or obligation hereunder for the Exempt Facilities described in clause (B); (iv) The use of the Exempt Facilities for a purpose other than a qualifying purpose indicated in subsection (iii) above could impair (A) such exclusion from gross income of the interest on the Revenue Bonds, possibly with retroactive effect, unless appropriate remedial action were taken (which could include prompt defeasance or redemption of the Revenue Bonds) and/or (B) the deductibility of payments by Seller or Buyer of interest based on the restrictions in Section 150(b) of the Code; (v) After August 20, 1996, at least the following bonds exempt from tax under Section 103 of the Code and in whole or in part described in Section 142(a)(8) of the Code have been issued with respect to facilities of Seller for the "local furnishing of electric energy or gas": The Industrial Development Authority of the County of Navajo, Industrial Development Revenue Bonds (Citizens Utilities Company Project) 1997 Series B ($12,380,000), and The Industrial Development Authority of the County of Yavapai, Industrial Development Revenue Bonds (Citizens Utilities Company Project) 1998 Series ($20,000,000); and (vi) Any breach by Buyer of its obligations under this Section 6.14 could result in the incurrence by Seller of additional costs and expenses with respect to the Revenue Bonds, including, without limitation, increased interest costs, loss of the interest deduction for tax purposes and transaction costs relating to any refinancing, redemption and/or defeasance of all or part of the Revenue Bonds (cumulatively, the "Tax Impact"). (b) Buyer agrees that Buyer will indemnify Seller for costs incurred by Seller in respect of any Tax Impact that would not have arisen but for Buyer's breach of its obligations under Section 6.14(c) (except as excused elsewhere in this Section 6.14), provided that Buyer's agreements and representations as set out in this Section 6.14 shall be limited to and apply solely to those Exempt Facilities described by Section 6.14(a)(iii)(A). (c) After August 20, 1996, at least the following bonds exempt from tax under Section 103 of the Code and described in whole or in part in Section 142(a)(8) of the Code have been issued with respect to facilities of Buyer for the "local furnishing of electric energy": The Industrial Development Authority of the County of Pima, Industrial Development Revenue Bonds (Tucson Electric Power Company Project) 1997 Series A, B and C ($247,460,000), and The Industrial Development Authority of the County of Apache, Pollution Control Revenue Bonds (Tucson Electric Power Company Project) 1998 Series A, B and C ($200,000,000). So long as any Revenue Bonds remain outstanding with respect to electric Exempt Facilities in any county, Buyer agrees that it shall not use, or take any deliberate act to permit the use of, or fail to take any act within its control that would prevent the use of, the electric Exempt Facilities within that county for any purpose or in any manner other than as shall be consistent with the Exempt Facility Operating Protocols (as such Exempt Facility Operating Protocols may have been updated, amended or corrected by Seller for the purpose of their accuracy on or before the Closing Date; provided that such changes do not materially impact Buyer's operation of the Assets) delivered by Seller to Buyer on or before the date of this Agreement, unless Buyer: (i) has obtained at its own expense an opinion addressed to Seller of nationally recognized bond counsel reasonably acceptable to Seller ("Bond Counsel") that such use will not impair (x) the exclusion from gross income of the interest on any issue of Revenue Bonds for Federal income tax purposes and (y) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code; or (ii) has provided written notice to Seller of any act or failure to act either (x) not later than 45 days after the effective date of such action, or (y) if any of such affected Revenue Bonds are not then eligible for optional or mandatory redemption by the terms thereof, sufficiently in advance of such act or failure to act to permit Seller to request from the IRS a private letter ruling to the effect that such action does not constitute an event that would adversely affect the exclusion of the interest on such Revenue Bonds from gross income for Federal income tax purposes, to receive a final ruling to such effect from the IRS, and to dispose of the Revenue Bonds in a manner not inconsistent with such ruling ("Sufficient Notice"). (Reference is made to Schedule 6.14(a) for a listing of the respective optional redemption dates of the Revenue Bonds.) (d) Notwithstanding any other provision of this Agreement, it is expressly understood and agreed that the provisions of Section 6.14(c) shall not prohibit Buyer from (and Buyer shall incur no liability to Seller for or in connection with Buyer) suspending the operation of the Exempt Facilities (in whole or in part) on a temporary basis, or from terminating the operation of the Exempt Facilities (in whole or in part) on a permanent basis and shutting down, retiring, abandoning and/or decommissioning the Exempt Facilities (in whole or in part); provided, however, that if the Exempt Facilities, in whole or in part, are dismantled and sold, including any sale for scrap, at any time when any Revenue Bonds remain outstanding, then the proceeds of such sale of Exempt Facilities shall within six months from the date of sale be expended to acquire replacement property to be used as described in the related Exempt Facility Operating Protocol, unless (I) Buyer has obtained at its own expense an opinion addressed to Seller of Bond Counsel that the failure to take this action will not impair (x) the exclusion from gross income of the interest on any issue of Revenue Bonds for Federal income tax purposes and (y) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code; (II) the proceeds of such sales are less than $50,000 in a calendar year; or (III) Buyer has provided Sufficient Notice of such action to Seller. (e) Buyer agrees that it shall not issue, or have issued on its behalf, any tax-exempt bonds to finance or refinance its acquisition of the Exempt Facilities, provided that it is expressly understood and agreed that this clause (e) shall not prohibit Buyer's use of tax-exempt bonds to finance or refinance any improvement to the Exempt Facilities made after the date of acquisition or to any assets other than the Exempt Facilities. (f) Buyer agrees to provide prompt written notice to Seller of any condemnation of, or casualty loss with respect to, the Exempt Facilities, in whole or in substantial part, to cooperate in good faith with Seller in Seller's efforts to ascertain the consequences of any such eminent domain proceeding or casualty loss for the (A) exclusion of interest on the Revenue Bonds from gross income for Federal income tax purposes and (B) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code. (g) Seller agrees that the Revenue Bonds shall be redeemed no later than the earlier of (I) their respective stated maturity dates, and (II) their respective first optional redemption dates on or after the Closing Date. Seller also agrees that none of the Revenue Bonds shall be refunded. (h) Seller hereby represents that it has performed all duties and obligations of "Company" under the documents relating to the Revenue Bonds, that the representations and warranties under the documents relating to the Revenue Bonds remain true and correct, and that there has been no breach of any covenant or agreement by Seller under the documents relating to the Revenue Bonds. Seller hereby covenants that, until all of the Revenue Bonds have been redeemed, Seller will perform all duties and obligations of "Company" under the documents relating to the Revenue Bonds, that Seller's representations and warranties under such documents will remain true and correct and that Seller will not breach any covenant or agreement of Seller under such documents; provided that Seller's covenant in this sentence shall not extend to any such duties, obligations, representations, warrantees, covenants or agreements the necessary predicate for which is Seller's actual ownership, possession or control of the Exempt Facilities from and after the Closing Date. Seller acknowledges and agrees that although Seller from and after the Closing Date will not own, possess or control the Exempt Facilities, Seller shall remain primarily obligated under the documents relating to the Revenue Bonds and, as between itself and each issuer of the Revenue Bonds, shall remain subject to each of Seller's representations, warranties, covenants and agreements thereunder. Buyer shall have no liability under this Section 6.14 unless interest on the Revenue Bonds would be excluded from gross income for Federal income tax purposes absent an act or failure to act by Buyer in contravention of the terms of Section 6.14(c). (i) In any case where Buyer has provided notice to Seller under this Section 6.14, Buyer agrees that it will join and cooperate with Seller with respect to any request by Seller to the Internal Revenue Service to obtain a private letter ruling regarding any Tax Impacts of the act or failure to act by Buyer that prompted such notice. Seller will join and cooperate with Buyer with respect to any request by Buyer to the Internal Revenue Service to obtain a private letter ruling regarding any Tax Impacts. The Party seeking the private letter ruling shall bear all costs of the filing, legal and related out-of-pocket expenses incurred in the course of such request. (j) Seller agrees that it has sole responsibility to make any required payments of principal and interest on the Revenue Bonds and that Buyer has no responsibility to make such payments. Seller agrees that it will indemnify, protect, defend and hold harmless Buyer from and against any claim that Buyer owes any payment of principal or interest on the Revenue Bonds. Seller agrees that Buyer shall retain any payments with respect to any casualty event or any condemnation of the Exempt Facilities and that, except as Buyer has otherwise agreed under Section 6.14(c), Buyer shall not be restricted in its use of any such proceeds. (k) If Buyer shall sell, exchange, transfer or otherwise dispose of the Exempt Facilities in whole or substantial part (aggregate price of $500,000 or more in a calendar year) to one or more third parties, Buyer shall cause to be included in the documentation relating to such transaction covenants and agreements on the part of such third party substantially identical to those on the part of Buyer contained in this Section 6.14. (l) The covenants and agreements on the part of Buyer and Seller contained in this Section 6.14 shall continue in effect so long as any of the Revenue Bonds shall remain outstanding. Seller shall notify Buyer promptly when there shall be no Revenue Bonds outstanding. (m) Buyer acknowledges and agrees that Seller's bond counsel may rely on Buyer's representations, warranties and covenants as hereinabove provided for the purpose of rendering legal opinions, as required by the Indentures of Trust, the Loan Agreements and the Tax Regulatory Agreements relating to the Revenue Bonds ("IDRB Documents") as a precondition to the sale by Seller of such Exempt Facilities, to the effect that the sale of such Exempt Facilities will not result in (I) the inclusion of the interest on the Revenue Bonds in the gross income of the recipient for purposes of Federal income taxation, and (II) disallowance of interest expense to Seller under Section 150(b) of the Code. Seller acknowledges and agrees that Buyer shall be an addressee of the above-described opinion letters of Seller's bond counsel or shall receive a reliance letter from Seller's bond counsel authorizing Buyer to rely on such opinion letters. (n) Nothing in this Agreement is intended to nor shall it be interpreted as (i) an assignment to, and assumption by, Buyer of any of the IDRB Documents, or (ii) as an undertaking or agreement by Buyer to assume, guarantee or pay any of Seller's loan or other payment obligations pursuant to the IDRB Documents. Other than as stated in this Section 6.14, Buyer shall have no liability in respect of the Revenue Bonds. (o) Each of Buyer and Seller shall use its Commercially Reasonable Efforts, and shall cooperate with the other Party in the other Party's efforts, to obtain all Consents, bond counsel opinions and IRS rulings as may be required under the IDRB Documents and the Code to enable Seller to defease, prepay, redeem or retain until the first possible redemption date the IDRB Indebtedness and to sell the Assets to Buyer without the result that the interest on the Revenue Bonds will be included in the gross income of the recipient for purposes of Federal income taxation; provided, however, that Buyer shall have no obligation in respect of its ownership or operation of the Exempt Facilities (including but not limited to rates imposed by Buyer in respect of utility service provided by the Exempt Facilities or by any other facilities of Buyer or affiliates of Buyer) other than to comply with the Exempt Facility Operating Protocols.

TAX-EXEMPT FINANCING. (a) Seller represents that: (i) The Exempt Facilities have been financed, and refinanced, in whole or in part, with the proceeds of the issuance and sale by various governmental authorities of industrial development revenue bonds or private activity bonds the interest on which, with certain exceptions, is excluded from gross income for purposes of Federal income taxation (such bonds, as currently outstanding, the "Revenue Bonds"); and Seller is the economic obligor in respect of such Revenue Bonds; (ii) The Revenue Bonds are described in Schedule 6.14(a); (iii) The basis for the exclusion of interest on the Revenue Bonds from gross income for Federal income tax purposes is the use of the Exempt Facilities for (A) "the local furnishing of electric energy or gas" under Sections 142(a)(8) and 142(f) of the Code or, if applicable, Section 103(b)(4)(E) of the Internal Revenue Code of 1954, as amended (the "1954 Code"), and in either case the applicable Treasury Regulations (the "Regulations") thereunder, or (B) "the furnishing of water" or "sewage facilities" under Sections 142(a)(4) and 142(a)(5) of the Code or, if applicable, Sections 103(b)(4)(G) or 103(b)(4)(E) of the 1954 Code, and in either case the applicable Regulations. Seller acknowledges and agrees that Buyer has and shall have no responsibility or obligation hereunder for the Exempt Facilities described in clause (B); (iv) The use of the Exempt Facilities for a purpose other than a qualifying purpose indicated in subsection (iii) above could impair (A) such exclusion from gross income of the interest on the Revenue Bonds, possibly with retroactive effect, unless appropriate remedial action were taken (which could include prompt defeasance or redemption of the Revenue Bonds) and/or (B) the deductibility of payments by Seller or Buyer of interest based on the restrictions in Section 150(b) of the Code; (v) After August 20, 1996, at least the following bonds exempt from tax under Section 103 of the Code and in whole or in part described in Section 142(a)(8) of the Code have been issued with respect to facilities of Seller for the "local furnishing of electric energy or gas": The Industrial Development Authority of the County of Navajo, Industrial Development Revenue Bonds (Citizens Utilities Company Project) 1997 Series B ($12,380,000), and The Industrial Development Authority of the County of Yavapai, Industrial Development Revenue Bonds (Citizens Utilities Company Project) 1998 Series ($20,000,000); and (vi) Any breach by Buyer of its obligations under this Section 6.14 could result in the incurrence by Seller of additional costs and expenses with respect to the Revenue Bonds, including, without limitation, increased interest costs, loss of the interest deduction for tax purposes and transaction costs relating to any refinancing, redemption and/or defeasance of all or part of the Revenue Bonds (cumulatively, the "Tax Impact"). (b) Buyer agrees that Buyer will indemnify Seller for costs incurred by Seller in respect of any Tax Impact that would not have arisen but for Buyer's breach of its obligations under Section 6.14(c) (except as excused elsewhere in this Section 6.14), provided that Buyer's agreements and representations as set out in this Section 6.14 shall be limited to and apply solely to those Exempt Facilities described by Section 6.14(a)(iii)(A). (c) After August 20, 1996, at least the following bonds exempt from tax under Section 103 of the Code and described in whole or in part in Section 142(a)(8) of the Code have been issued with respect to facilities of Buyer for the "local furnishing of electric energy": The Industrial Development Authority of the County of Pima, Industrial Development Revenue Bonds (Tucson Electric Power Company Project) 1997 Series A, B and C ($247,460,000), and The Industrial Development Authority of the County of Apache, Pollution Control Revenue Bonds (Tucson Electric Power Company Project) 1998 Series A, B and C ($200,000,000). So long as any Revenue Bonds remain outstanding with respect to electric gas Exempt Facilities in any county, Buyer agrees that it shall not use, or take any deliberate act to permit the use of, or fail to take any act within its control that would prevent the use of, the electric gas Exempt Facilities within that county for any purpose or in any manner other than as shall be consistent with the Exempt Facility Operating Protocols (as such Exempt Facility Operating Protocols may have been updated, amended or corrected by Seller for the purpose of their accuracy on or before the Closing Date; provided that such changes do not materially impact Buyer's operation of the Assets) delivered by Seller to Buyer on or before the date of this Agreement, unless Buyer: (i) has obtained at its own expense an opinion addressed to Seller of nationally recognized bond counsel reasonably acceptable to Seller ("Bond Counsel") that such use will not impair (x) the exclusion from gross income of the interest on any issue of Revenue Bonds for Federal income tax purposes and (y) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code; or (ii) has provided written notice to Seller of any act or failure to act either (x) not later than 45 days after the effective date of such action, or (y) if any of such affected Revenue Bonds are not then eligible for optional or mandatory redemption by the terms thereof, sufficiently in advance of such act or failure to act to permit Seller to request from the IRS a private letter ruling to the effect that such action does not constitute an event that would adversely affect the exclusion of the interest on such Revenue Bonds from gross income for Federal income tax purposes, to receive a final ruling to such effect from the IRS, and to dispose of the Revenue Bonds in a manner not inconsistent with such ruling ("Sufficient Notice"). (Reference is made to Schedule 6.14(a) for a listing of the respective optional redemption dates of the Revenue Bonds.) (d) Notwithstanding any other provision of this Agreement, it is expressly understood and agreed that the provisions of Section 6.14(c) shall not prohibit Buyer from (and Buyer shall incur no liability to Seller for or in connection with Buyer) suspending the operation of the Exempt Facilities (in whole or in part) on a temporary basis, or from terminating the operation of the Exempt Facilities (in whole or in part) on a permanent basis and shutting down, retiring, abandoning and/or decommissioning the Exempt Facilities (in whole or in part); provided, however, that if the Exempt Facilities, in whole or in part, are dismantled and sold, including any sale for scrap, at any time when any Revenue Bonds remain outstanding, then the proceeds of such sale of Exempt Facilities shall within six months from the date of sale be expended to acquire replacement property to be used as described in the related Exempt Facility Operating Protocol, unless (I) Buyer has obtained at its own expense an opinion addressed to Seller of Bond Counsel that the failure to take this action will not impair (x) the exclusion from gross income of the interest on any issue of Revenue Bonds for Federal income tax purposes and (y) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code; (II) the proceeds of such sales are less than $50,000 in a calendar year; or (III) Buyer has provided Sufficient Notice of such action to Seller. (e) Buyer agrees that it shall not issue, or have issued on its behalf, any tax-exempt bonds to finance or refinance its acquisition of the Exempt Facilities, provided that it is expressly understood and agreed that this clause (e) shall not prohibit Buyer's use of tax-exempt bonds to finance or refinance any improvement to the Exempt Facilities made after the date of acquisition or to any assets other than the Exempt Facilities. (f) Buyer agrees to provide prompt written notice to Seller of any condemnation of, or casualty loss with respect to, the Exempt Facilities, in whole or in substantial part, to cooperate in good faith with Seller in Seller's efforts to ascertain the consequences of any such eminent domain proceeding or casualty loss for the (A) exclusion of interest on the Revenue Bonds from gross income for Federal income tax purposes and (B) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code. (g) Seller agrees that the Revenue Bonds shall be redeemed no later than the earlier of (I) their respective stated maturity dates, and (II) their respective first optional redemption dates on or after the Closing Date. Seller also agrees that none of the Revenue Bonds shall be refunded. (h) Seller hereby represents that it has performed all duties and obligations of "Company" under the documents relating to the Revenue Bonds, that the representations and warranties under the documents relating to the Revenue Bonds remain true and correct, and that there has been no breach of any covenant or agreement by Seller under the documents relating to the Revenue Bonds. Seller hereby covenants that, until all of the Revenue Bonds have been redeemed, Seller will perform all duties and obligations of "Company" under the documents relating to the Revenue Bonds, that Seller's representations and warranties under such documents will remain true and correct and that Seller will not breach any covenant or agreement of Seller under such documents; provided that Seller's covenant in this sentence shall not extend to any such duties, obligations, representations, warrantees, covenants or agreements the necessary predicate for which is Seller's actual ownership, possession or control of the Exempt Facilities from and after the Closing Date. Seller acknowledges and agrees that although Seller from and after the Closing Date will not own, possess or control the Exempt Facilities, Seller shall remain primarily obligated under the documents relating to the Revenue Bonds and, as between itself and each issuer of the Revenue Bonds, shall remain subject to each of Seller's representations, warranties, covenants and agreements thereunder. Buyer shall have no liability under this Section 6.14 unless interest on the Revenue Bonds would be excluded from gross income for Federal income tax purposes absent an act or failure to act by Buyer in contravention of the terms of Section 6.14(c). (i) In any case where Buyer has provided notice to Seller under this Section 6.14, Buyer agrees that it will join and cooperate with Seller with respect to any request by Seller to the Internal Revenue Service to obtain a private letter ruling regarding any Tax Impacts of the act or failure to act by Buyer that prompted such notice. Seller will join and cooperate with Buyer with respect to any request by Buyer to the Internal Revenue Service to obtain a private letter ruling regarding any Tax Impacts. The Party seeking the private letter ruling shall bear all costs of the filing, legal and related out-of-pocket expenses incurred in the course of such request. (j) Seller agrees that it has sole responsibility to make any required payments of principal and interest on the Revenue Bonds and that Buyer has no responsibility to make such payments. Seller agrees that it will indemnify, protect, defend and hold harmless Buyer from and against any claim that Buyer owes any payment of principal or interest on the Revenue Bonds. Seller agrees that Buyer shall retain any payments with respect to any casualty event or any condemnation of the Exempt Facilities and that, except as Buyer has otherwise agreed under Section 6.14(c), Buyer shall not be restricted in its use of any such proceeds. (k) If Buyer shall sell, exchange, transfer or otherwise dispose of the Exempt Facilities in whole or substantial part (aggregate price of $500,000 or more in a calendar year) to one or more third parties, Buyer shall cause to be included in the documentation relating to such transaction covenants and agreements on the part of such third party substantially identical to those on the part of Buyer contained in this Section 6.14. (l) The covenants and agreements on the part of Buyer and Seller contained in this Section 6.14 shall continue in effect so long as any of the Revenue Bonds shall remain outstanding. Seller shall notify Buyer promptly when there shall be no Revenue Bonds outstanding. (m) Buyer acknowledges and agrees that Seller's bond counsel may rely on Buyer's representations, warranties and covenants as hereinabove provided for the purpose of rendering legal opinions, as required by the Indentures of Trust, the Loan Agreements and the Tax Regulatory Agreements relating to the Revenue Bonds ("IDRB Documents") as a precondition to the sale by Seller of such Exempt Facilities, to the effect that the sale of such Exempt Facilities will not result in (I) the inclusion of the interest on the Revenue Bonds in the gross income of the recipient for purposes of Federal income taxation, and (II) disallowance of interest expense to Seller under Section 150(b) of the Code. Seller acknowledges and agrees that Buyer shall be an addressee of the above-described opinion letters of Seller's bond counsel or shall receive a reliance letter from Seller's bond counsel authorizing Buyer to rely on such opinion letters. (n) Nothing in this Agreement is intended to nor shall it be interpreted as (i) an assignment to, and assumption by, Buyer of any of the IDRB Documents, or (ii) as an undertaking or agreement by Buyer to assume, guarantee or pay any of Seller's loan or other payment obligations pursuant to the IDRB Documents. Other than as stated in this Section 6.14, Buyer shall have no liability in respect of the Revenue Bonds. (o) Each of Buyer and Seller shall use its Commercially Reasonable Efforts, and shall cooperate with the other Party in the other Party's efforts, to obtain all Consents, bond counsel opinions and IRS rulings as may be required under the IDRB Documents and the Code to enable Seller to defease, prepay, redeem or retain until the first possible redemption date the IDRB Indebtedness and to sell the Assets to Buyer without the result that the interest on the Revenue Bonds will be included in the gross income of the recipient for purposes of Federal income taxation; provided, however, that Buyer shall have no obligation in respect of its ownership or operation of the Exempt Facilities (including but not limited to rates imposed by Buyer in respect of utility service provided by the Exempt Facilities or by any other facilities of Buyer or affiliates of Buyer) other than to comply with the Exempt Facility Operating Protocols.

TAX-EXEMPT FINANCING. (a) Seller represents that: (i) The Exempt Facilities have been financed, and refinanced, in whole or in part, with the proceeds of the issuance and sale by various governmental authorities the Department of industrial development revenue bonds or Budget and Finance of the State of Hawaii of private activity bonds the interest on which, with certain exceptions, is excluded from gross income for purposes of Federal income taxation (such bonds, as currently outstanding, the "Revenue Bonds"); and Seller is the economic obligor in respect of such Revenue Bonds; (ii) The Revenue Bonds are described in Schedule 6.14(a); (iii) The basis for the exclusion of interest on the Revenue Bonds from gross income for Federal income tax purposes is the use of the Exempt Facilities for (A) "the local furnishing of electric energy or gas" under Sections 142(a)(8) and 142(f) of the Code or, if applicable, Section 103(b)(4)(E) of the Internal Revenue Code of 1954, as amended (the "1954 Code"), and in either case the applicable Treasury Regulations (the "Regulations") thereunder, or (B) "the furnishing of water" or "sewage facilities" under Sections 142(a)(4) and 142(a)(5) of the Code or, if applicable, Sections 103(b)(4)(G) or 103(b)(4)(E) of the 1954 Code, and in either case the applicable Regulations. Seller acknowledges and agrees that Buyer has and shall have no responsibility or obligation hereunder for the Exempt Facilities described in clause (B); (iv) The use of the Exempt Facilities for a purpose other than a qualifying purpose indicated in subsection (iii) above could impair (A) such exclusion from gross income of the interest on the Revenue Bonds, possibly with retroactive effect, unless appropriate remedial action were taken (which could include prompt defeasance or redemption of the Revenue Bonds) and/or (B) the deductibility of payments by Seller or Buyer of interest based on the restrictions in Section 150(b) of the Code; (v) After August 20, 1996, at least the following bonds exempt from tax under Section 103 of the Code and in whole or in part described in Section 142(a)(8) of the Code have been issued with respect to facilities of Seller for the "local furnishing of electric energy or gas": The Industrial Development Authority $19,600,000 Department of Budget and Finance of the County State of Navajo, Industrial Development Hawaii Special Purpose Revenue Bonds (Citizens Utilities The Gas Company Project) 1997 Series B ($12,380,000), and The Industrial Development Authority of the County of Yavapai, Industrial Development Revenue Bonds (Citizens Utilities Company Project) 1998 Series ($20,000,000)2000; and (vi) Any breach by Buyer of its obligations under this Section 6.14 could result in the incurrence by Seller of additional costs and expenses with respect to the Revenue Bonds, including, without limitation, increased interest costs, loss of the interest deduction for tax purposes and transaction costs relating to any refinancing, redemption and/or defeasance of all or part of the Revenue Bonds (cumulatively, the "Tax Impact"). (b) Buyer agrees that Buyer will indemnify Seller for costs incurred by Seller in respect of any Tax Impact that would not have arisen but for Buyer's breach of its obligations under Section 6.14(c) (except as excused elsewhere in this Section 6.14), provided that Buyer's agreements and representations as set out in this Section 6.14 shall be limited to and apply solely to those Exempt Facilities described by Section 6.14(a)(iii)(A). (c) After August 20, 1996, at least the following bonds exempt from tax under Buyer represents that it has not made an election pursuant to Section 103 142(f)(4)(B) of the Code and to terminate tax exempt bond financing by Buyer of facilities described in whole or in part in by Section 142(a)(8) of the Code have been issued with respect to facilities of Buyer for the "local furnishing of electric energy": The Industrial Development Authority of the County of Pima, Industrial Development Revenue Bonds (Tucson Electric Power Company Project) 1997 Series A, B and C ($247,460,000), and The Industrial Development Authority of the County of Apache, Pollution Control Revenue Bonds (Tucson Electric Power Company Project) 1998 Series A, B and C ($200,000,000)Code. So long as any Revenue Bonds remain outstanding with respect to electric Exempt Facilities in any county, Buyer agrees that it shall not (I) use, or take any deliberate act to permit the use of, or fail to take any act within its control that would prevent the use of, the electric Exempt Facilities within that county for any purpose or in any manner other than as shall be consistent with the Exempt Facility Operating Protocols Protocol (as such Exempt Facility Operating Protocols Protocol may have been updated, amended or corrected by Seller for the purpose of their its accuracy on or before the Closing Date; provided that such changes do not materially impact Buyer's operation of the Assets) delivered by Seller to Buyer on or before the date of this Agreement, or (II) make an election pursuant to Section 142(f)(4)(B) of the Code to terminate tax exempt bond financing by Buyer of facilities described by Section 142(a)(8) of the Code, unless in either case Buyer: (i) has obtained at its own expense an opinion addressed to Seller of nationally recognized bond counsel reasonably acceptable to Seller ("Bond Counsel") that such use will not impair (x) the exclusion from gross income of the interest on any issue of Revenue Bonds for Federal income tax purposes and (y) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code; or (ii) has provided written notice to Seller of any election, act or failure to act either (x) not later than 45 days after the effective date of such action, or (y) if any of such affected Revenue Bonds are not then eligible for optional or mandatory redemption by the terms thereof, sufficiently in advance of such act or failure to act to permit Seller to request from the IRS a private letter ruling to the effect that such action does not constitute an event that would adversely affect the exclusion of the interest on such Revenue Bonds from gross income for Federal income tax purposes, to receive a final ruling to such effect from the IRS, and to dispose of the Revenue Bonds in a manner not inconsistent with such ruling ("Sufficient Notice"). (Reference is made to Schedule 6.14(a) for a listing of the respective optional redemption dates of provisions applicable to the Revenue Bonds.) (d) Notwithstanding any other provision of this Agreement, it is expressly understood and agreed that the provisions of Section 6.14(c) shall not prohibit Buyer from (and Buyer shall incur no liability to Seller for or in connection with Buyer) suspending the operation of the Exempt Facilities (in whole or in part) on a temporary basis, or from terminating the operation of the Exempt Facilities (in whole or in part) on a permanent basis and shutting down, retiring, abandoning and/or decommissioning the Exempt Facilities (in whole or in part); provided, however, that if the Exempt Facilities, in whole or in part, are dismantled and sold, including any sale for scrap, at any time when any Revenue Bonds remain outstanding, then the proceeds of such sale of Exempt Facilities shall within six months from the date of sale be expended to acquire replacement property to be used as described in the related Exempt Facility Operating Protocol, unless (I) Buyer has obtained at its own expense an opinion addressed to Seller of Bond Counsel that the failure to take this action will not impair (x) the exclusion from gross income of the interest on any issue of Revenue Bonds for Federal income tax purposes and (y) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code; (II) the proceeds of such sales are less than $50,000 in a calendar year; or (III) Buyer has provided Sufficient Notice of such action to Seller. (e) Buyer agrees that it shall not issue, or have issued on its behalf, any tax-exempt bonds to finance or refinance its acquisition of the Exempt Facilities, provided that it is expressly understood and agreed that this clause (e) shall not prohibit Buyer's use of tax-exempt bonds to finance or refinance any improvement to the Exempt Facilities made after the date of acquisition or to any assets other than the Exempt Facilities. (f) Buyer agrees to provide prompt written notice to Seller of any condemnation of, or casualty loss with respect to, the Exempt Facilities, in whole or in substantial part, to cooperate in good faith with Seller in Seller's efforts to ascertain the consequences of any such eminent domain proceeding or casualty loss for the (A) exclusion of interest on the Revenue Bonds from gross income for Federal income tax purposes and (B) the deductibility of Seller's payments of interest based on the restrictions in Section 150(b) of the Code. (g) Seller agrees that the Revenue Bonds shall be redeemed no later than the earlier of (I) their respective stated maturity dates, and (II) their respective first optional redemption dates on or after the Closing Date. Seller also agrees that none of the Revenue Bonds shall be refunded. (h) Seller hereby represents that it has performed all duties and obligations of "Company" under the documents relating to the Revenue Bonds, that the representations and warranties under the documents relating to the Revenue Bonds remain true and correct, and that there has been no breach of any covenant or agreement by Seller under the documents relating to the Revenue Bonds. Seller hereby covenants that, until all of the Revenue Bonds have been redeemedpaid upon the stated maturity thereof or have been redeemed in advance of the stated maturity date, Seller will perform all duties and obligations of "Company" under the documents relating to the Revenue Bonds, that Seller's representations and warranties under such documents will remain true and correct and that Seller will not breach any covenant or agreement of Seller under such documents; provided that Seller's covenant in this sentence shall not extend to any such duties, obligations, representations, warrantees, covenants or agreements the necessary predicate for which is Seller's actual ownership, possession or control of the Exempt Facilities from and after the Closing Date. Seller acknowledges and agrees that although Seller from and after the Closing Date will not own, possess or control the Exempt Facilities, Seller shall remain primarily obligated under the documents relating to the Revenue Bonds and, as between itself and each issuer of the Revenue Bonds, shall remain subject to each of Seller's representations, warranties, covenants and agreements thereunder. Buyer shall have no liability under this Section 6.14 unless interest on the Revenue Bonds would be excluded from gross income for Federal income tax purposes absent an act or failure to act by Buyer in contravention of the terms of Section 6.14(c). (ih) In any case where Buyer has provided notice to Seller under this Section 6.14, Buyer agrees that it will join and cooperate with Seller with respect to any request by Seller to the Internal Revenue Service to obtain a private letter ruling regarding any Tax Impacts of the act or failure to act by Buyer that prompted such notice. Seller will join and cooperate with Buyer with respect to any request by Buyer to the Internal Revenue Service to obtain a private letter ruling regarding any Tax Impacts. The Party seeking the private letter ruling shall bear all costs of the filing, legal and related out-of-pocket expenses incurred in the course of such request. (ji) Seller agrees that it has sole responsibility to make any required payments of principal and interest on the Revenue Bonds and that Buyer has no responsibility to make such payments. Seller agrees that it will indemnify, protect, defend and hold harmless Buyer from and against any claim that Buyer owes any payment of principal or interest on the Revenue Bonds. Seller agrees that Buyer shall retain any payments with respect to any casualty event or any condemnation of the Exempt Facilities and that, except as Buyer has otherwise agreed under Section 6.14(c), Buyer shall not be restricted in its use of any such proceeds. (kj) If Buyer shall sell, exchange, transfer or otherwise dispose of the Exempt Facilities in whole or substantial part (aggregate price of $500,000 or more in a calendar year) to one or more third parties, Buyer shall cause to be included in the documentation relating to such transaction covenants and agreements on the part of such third party substantially identical to those on the part of Buyer contained in this Section 6.14, and effective upon the consummation of such disposition Buyer shall have no further obligations under this Section 6.14 with respect to the Exempt Facilities which have been so disposed. (lk) The covenants and agreements on the part of Buyer and Seller contained in this Section 6.14 shall continue in effect so long as any of the Revenue Bonds shall remain outstanding. Seller shall notify Buyer promptly when there shall be no Revenue Bonds outstanding. (ml) Buyer acknowledges and agrees that Seller's bond counsel may rely on Buyer's representations, warranties and covenants as hereinabove provided for the purpose of rendering a legal opinion or opinions, as required by the Indentures Indenture of Trust, the Loan Agreements Agreement and the Tax Regulatory Agreements Agreement relating to the Revenue Bonds ("IDRB Documents") as a precondition to the sale by Seller of such Exempt Facilities, to the effect that the sale of such Exempt Facilities will not result in (I) the inclusion of the interest on the Revenue Bonds in the gross income of the recipient for purposes of Federal income taxation, and (II) disallowance of interest expense to Seller under Section 150(b) of the Code. Seller acknowledges and agrees that Buyer shall be an addressee of the above-described opinion letters of Seller's bond counsel or shall receive a reliance letter from Seller's bond counsel authorizing Buyer to rely on such opinion letters. (nm) Nothing in this Agreement is intended to nor shall it be interpreted as (i) an assignment to, and assumption by, Buyer of any of the IDRB Documents, or (ii) as an undertaking or agreement by Buyer to assume, guarantee or pay any of Seller's loan or other payment obligations pursuant to the IDRB Documents. Other than as stated in this Section 6.14, Buyer shall have no liability in respect of the Revenue Bonds. (on) Each of Buyer and Seller shall use its Commercially Reasonable Efforts, and shall cooperate with the other Party in the other Party's efforts, to obtain all Consentsconsents, bond counsel opinions and IRS rulings as may be required under the IDRB Documents and the Code to enable Seller Seller, at its option, to defease, prepay, redeem or retain until the first possible redemption stated maturity date the IDRB Indebtedness and to sell the Assets to Buyer without the result that the interest on the Revenue Bonds will be included in the gross income of the recipient for purposes of Federal income taxation; provided, however, that Buyer shall have no obligation in respect of its ownership or operation of the Exempt Facilities (including but not limited to rates imposed by Buyer in respect of utility service provided by the Exempt Facilities or by any other facilities of Buyer or affiliates of Buyer) other than to comply with the Exempt Facility Operating ProtocolsProtocol.