EXHIBIT 4c
=================================================================
LOAN AGREEMENT
BETWEEN
COCONINO COUNTY, ARIZONA
POLLUTION CONTROL CORPORATION
AND
TUCSON ELECTRIC POWER COMPANY
--------------------
DATED AS OF APRIL 1, 1997
---------------------
RELATING TO
POLLUTION CONTROL REVENUE BONDS,
1997 SERIES A
(TUCSON ELECTRIC POWER COMPANY NAVAJO PROJECT)
================================================================
TABLE OF CONTENTS
Page
-----
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
Pollution Control Corporation . . . . . . . 5
SECTION 2.02 Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . 6
ARTICLE III
THE FACILITIES
SECTION 3.01 Construction of the Facilities . . . . . . 7
SECTION 3.02 Insufficient Moneys in Construction Fund . 7
SECTION 3.03 Revision of Plans and Specifications . . . 7
SECTION 3.04 Certification of Completion Date . . . . . 7
SECTION 3.05 Maintenance of Facilities; Remodeling . . 8
SECTION 3.06 Insurance . . . . . . . . . . . . . . . . 8
SECTION 3.07 Condemnation . . . . . . . . . . . . . . . 8
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 . . . . . . . . . . 9
SECTION 4.02 Issuance of Other Obligations . . . . . . 9
SECTION 4.03 The Loans; Disposition of Bond Proceeds . 9
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. . . . . . . . . . . . . . . 11
SECTION 5.02 Payments Assigned; Obligation Absolute . . 11
SECTION 5.03 Payment of Expenses . . . . . . . . . . . 11
SECTION 5.04 Indemnification . . . . . . . . . . . . . 11
SECTION 5.05 Payment of Taxes; Discharge of Liens . . . 12
-------------------
* 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 . . . . 12
SECTION 6.02 Permits or Licenses . . . . . . . . . . . 13
SECTION 6.03 Pollution Control Corporation's Access to
Facilities . . . . . . . . . . . . . . . . 13
SECTION 6.04 Tax-Exempt Status of Interest on Bonds. . 13
SECTION 6.05 Use of Facilities . . . . . . . . . . . . 14
SECTION 6.06 Financing Statements . . . . . . . . . . . 14
SECTION 7.01 Conditions . . . . . . . . . . . . . . . . 14
SECTION 7.02 Instrument Furnished to the Pollution
Control Corporation and Trustee . . . . . . 16
SECTION 7.03 Limitation . . . . . . . . . . . . . . . . 16
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
SECTION 8.01 Events of Default . . . . . . . . . . . . 16
SECTION 8.02 Force Majeure . . . . . . . . . . . . . . 17
SECTION 8.03 Remedies . . . . . . . . . . . . . . . . . 17
SECTION 8.04 No Remedy Exclusive . . . . . . . . . . . 18
SECTION 8.05 Reimbursement of Attorneys' and Agents'
Fees . . . . . . . . . . . . . . . . . . . 18
SECTION 8.06 Waiver of Breach . . . . . . . . . . . . . 18
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01 Redemption of Bonds . . . . . . . . . . . 18
SECTION 9.02 Compliance with the Indenture . . . . . . 18
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Term of Agreement . . . . . . . . . . . . 19
SECTION 10.02 Notices . . . . . . . . . . . . . . . . . 19
SECTION 10.03 Parties in Interest . . . . . . . . . . . 19
SECTION 10.04 Amendments . . . . . . . . . . . . . . . 19
SECTION 10.05 Counterparts . . . . . . . . . . . . . . 19
SECTION 10.06 Severability . . . . . . . . . . . . . . 19
SECTION 10.07 Governing Law . . . . . . . . . . . . . . 20
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 21
Exhibit A - Description of the Facilities . . . . . . . . . A-1
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of April 1, 1997 (this
"Agreement"), between COCONINO COUNTY, ARIZONA POLLUTION CONTROL
CORPORATION, an Arizona nonprofit corporation and a political
subdivision of the State of Arizona (hereinafter called the
"Pollution Control Corporation"), and TUCSON ELECTRIC POWER
COMPANY, a corporation organized and existing under the laws of
the State of Arizona formerly known as Tucson Gas & Electric
Company (hereinafter called the "Company"),
W I T N E S S E T H :
WHEREAS, the Pollution Control Corporation is authorized and
empowered under Title 35, Chapter 6, Arizona Revised Statutes, as
amended (the "Act"), to issue its bonds in accordance with the
Act and to make secured or unsecured loans for the purpose of
financing or refinancing the acquisition, construction,
improvement or equipping of pollution control facilities
consisting of real and personal properties, including but not
limited to machinery and equipment whether or not now in
existence or under construction, which are used in whole or in
part to control, prevent, abate, alter, dispose or store, solid
waste, thermal, noise, atmospheric or water pollutants,
contaminants or products therefrom, whether such facilities serve
one or more purposes or functions in addition to controlling,
preventing, abating, altering, disposing or storing such
pollutants, contaminants or the products therefrom, and to charge
and collect interest on such loans and pledge the proceeds of
loan agreements as security for the payment of the principal of
and interest on bonds, or designated issues of bonds, issued by
the Pollution Control Corporation and any agreements made in
connection therewith, whenever the Board of Directors of the
Pollution Control Corporation finds such loans to be in
furtherance of the purposes of the Pollution Control Corporation;
WHEREAS, the Pollution Control Corporation has heretofore
issued and sold $16,700,000 aggregate principal amount of its
Pollution Control Revenue Bonds, 1996 Series A (Tucson Electric
Power Company Project), all of which remain outstanding (the
"1996 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 a portion of the
pollution control facilities described in Exhibit A hereto (the
"Facilities");
WHEREAS, the Pollution Control Corporation 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 an additional portion of the Facilities and for the
purpose of refinancing, by the payment or redemption of the 1996
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 1996
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 6, Arizona Revised
Statutes, and all acts supplemental thereto or amendatory
thereof.
Administration Expenses:
"Administration Expenses" shall mean the reasonable expenses
incurred by the Pollution Control Corporation 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.
Agreement:
"Agreement" shall mean this Loan Agreement, dated as of April
1, 1997, between the Pollution Control Corporation and the
Company, and any and all modifications, alterations, amendments
and supplements hereto.
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 Pollution Control Corporation 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
Pollution Control Corporation.
Bond Fund:
"Bond Fund" shall mean the fund created by Section 4.01 of the
Indenture.
Bonds:
"Bond" or "Bonds" shall mean the Pollution Control Revenue
Bonds, 1997 Series A (Tucson Electric Power Company Navajo
Project) of the Pollution Control Corporation.
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 Pollution Control
Corporation 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 Pollution Control Corporation) 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
April 1, 1997, between the Pollution Control Corporation 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.
1954 Code:
"1954 Code" shall mean the Internal Revenue Code of 1954, as
amended.
1996 Bonds:
"1996 Bonds" shall mean the $16,700,000 aggregate principal
amount of the Pollution Control Corporation's Pollution Control
Revenue Bonds, 1996 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.
Plant:
"Plant" shall mean the Navajo Generating Station, an electric
power generating plant near Page, Arizona, in Coconino County,
Arizona, and any additions or improvements thereto or
replacements thereof.
Plant Agreements:
"Plant Agreements" shall mean all contracts relating to the
ownership, construction and operation of the Plant, including the
Facilities, as from time to time amended or supplemented.
Pollution Control Corporation:
"Pollution Control Corporation" shall mean Coconino County,
Arizona Pollution Control Corporation, an Arizona nonprofit
corporation and a political subdivision of the State of Arizona
incorporated for and with the approval of the County of Coconino,
Arizona, pursuant to the provisions of the Constitution of the
State of Arizona and the Act, its successors and their assigns.
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 Pollution Control Corporation 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 Pollution
Control Corporation. The Pollution Control Corporation makes the
following representations and warranties as the basis for the
undertakings on the part of the Company contained herein:
(a) The Pollution Control Corporation is an Arizona
nonprofit corporation and a political subdivision of the State
of Arizona created and existing under the Constitution and
laws of the State of Arizona;
(b) The Pollution Control Corporation has the power to
enter into this Agreement and the Indenture and to perform and
observe the agreements and covenants on its part contained
herein and therein, including without limitation the power to
issue and sell the Bonds as contemplated herein and in the
Indenture, and by proper action has duly authorized the
execution and delivery hereof and thereof;
(c) The execution and delivery of this Agreement and the
Indenture by the Pollution Control Corporation do not, and
consummation of the transactions contemplated hereby and
fulfillment of the terms hereof and thereof by the Pollution
Control Corporation will not, result in a breach of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or
instrument to which the Pollution Control Corporation is now a
party or by which it is now bound, or any order, rule or
regulation applicable to the Pollution Control Corporation of
any court or of any regulatory body or administrative agency
or other governmental body having jurisdiction over the
Pollution Control Corporation or over any of its properties,
or the Constitution or laws of the State of Arizona;
(d) No consent, approval, authorization or other order of
any regulatory body or administrative agency or other
governmental body is legally required for the Pollution
Control Corporation's participation in the transactions
contemplated by this Agreement, except such as may have been
obtained or may be required under the securities laws of any
jurisdiction; and
(e) The Pollution Control Corporation has found and
determined that all requirements of the Act with respect to
the issuance of the Bonds and the execution and delivery of
the Indenture and this Agreement have been complied with and
that the financing and refinancing of the Cost of Construction
of the Facilities by issuing the Bonds and entering into the
Indenture and this Agreement will be in furtherance of the
purposes of the Act.
SECTION 2.02 Representations and Warranties of the Company.
The Company makes the following representations and warranties as
the basis for the undertakings on the part of the Pollution
Control Corporation contained herein:
(a) The Company is a corporation duly organized and
existing in good standing under the laws of the State of
Arizona 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;
(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 to be financed and refinanced shall
constitute "pollution control facilities" as such term is
defined in the Act; 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 exercise all of its rights, powers, elections and options
under the Plant Agreements to 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 Pollution Control
Corporation shall have no right, title or interest in 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 Pollution Control Corporation 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 Pollution Control Corporation (except from the proceeds of
any obligations subsequently issued by the Pollution Control
Corporation 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 consent to one or more revisions to the plans and
specifications for the Facilities (including without limitation
any changes therein, additions thereto, substitutions therefor
and deletions therefrom), at any time and from time to time 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 Pollution Control Corporation 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 Pollution
Control Corporation 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 exercise all of its rights, powers,
elections and options under the Plant Agreements to cause the
Facilities, and every element and unit thereof, to be maintained,
preserved and kept in thorough repair, working order and
condition and to cause all needful and proper repairs and
renewals thereto to be made; provided, however, that the Company
may exercise all of its rights, powers, elections and options
under the Plant Agreements to cause the operation of the
Facilities, or any element or unit thereof, to be discontinued
if, in the judgment of the Company, it is no longer advisable to
operate the same, or if the Company intends to sell or dispose of
the same and within a reasonable time shall endeavor to
effectuate such sale or disposition.
After the Completion Date, the Company may, subject to the
provisions of Section 6.05 hereof, at its own expense consent to
the remodeling of the Facilities or to the making of such
substitutions, modifications and improvements to the Facilities
from time to time as it, in its discretion, may deem to be
desirable for its uses and purposes, which remodeling,
substitutions, modifications and improvements shall be included
under the terms of this Agreement as part of the Facilities.
SECTION 3.06 Insurance. The Company shall exercise all of
its rights, powers, elections and options under the Plant
Agreements to keep the Facilities insured against fire and other
risks to the extent usually insured against by companies owning
and operating similar property, by reputable insurance companies
or, at the Company's election, with respect to all or any element
or unit of the Facilities, by means of an adequate insurance fund
set aside and maintained by it out of its own earnings or in
conjunction with other companies through an insurance fund, trust
or other agreement or, by means of unfunded self-insurance as may
be reasonable and customary by companies owning and operating
similar property. All proceeds of such insurance shall be for
the account of the Company.
SECTION 3.07 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 exercise all of its rights, powers,
elections and options under the Plant Agreements 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 Pollution Control
Corporation 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 Pollution Control
Corporation shall issue the Bonds under and in accordance with
the Indenture, subject to the provisions of the bond purchase
agreement among the Pollution Control Corporation, the initial
purchaser or purchasers of the Bonds and the Company. The
Company hereby approves the issuance of the Bonds and all terms
and conditions thereof.
SECTION 4.02 Issuance of Other Obligations. The Pollution
Control Corporation and the Company expressly reserve the right
to enter into, to the extent permitted by law, but shall not be
obligated to enter into, an agreement or agreements other than
this Agreement with respect to the issuance by the Pollution
Control Corporation, under an indenture or indentures other than
the Indenture, of obligations to provide additional funds to pay
the Cost of Construction 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
Pollution Control Corporation and the Company shall enter into
escrow arrangements with the trustee for the 1996 Bonds and shall
cause $16,700,000 of the proceeds of the Bonds to be deposited in
escrow with such trustee to be applied to the payment of the 1996
Bonds upon the redemption thereof. The Pollution Control
Corporation 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 Pollution Control Corporation 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 $16,700,000
deposited in escrow with the trustee for the 1996 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 Pollution Control
Corporation, 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 Pollution Control Corporation of
the principal of and premium, if any, and interest on the Bonds,
and the performance and observance by the Company and the
Pollution Control Corporation 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 Pollution Control
Corporation 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 Pollution Control Corporation, (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 Pollution Control Corporation 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 Pollution Control Corporation and the Trustee from any
liability incurred in connection with any requisition so executed
by an Authorized Company Representative.
(c) The Company shall not submit requisitions for Costs of
Construction 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 air or water pollution control or sewage or solid
waste disposal facilities or other exempt facilities, including
facilities functionally related or subordinate thereto, within
the meaning of Section 141 of the Code or Section 103(b)(4) of
the 1954 Code, as applicable; 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 Pollution Control Corporation 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 Pollution Control Corporation agree that any
moneys held in any fund or account created by the Indenture shall
be invested as provided in the Indenture.
ARTICLE V
LOAN PAYMENTS; OTHER OBLIGATIONS
SECTION 5.01 Loan Payments. In consideration of the issuance
of the Bonds and the disposition of the proceeds thereof as
contemplated in Section 4.03 hereof, the Company shall pay, or
cause to be paid, to the Trustee for the account of the Pollution
Control Corporation an amount equal to the aggregate principal
amount of the Bonds from time to time Outstanding and, as
interest on its obligation to pay such amount, an amount equal to
premium, if any, and interest on such Bonds, such amounts to be
paid in installments due on the dates, in the amounts and in the
manner provided in the Indenture for the Pollution Control
Corporation to cause amounts to be deposited in the Bond Fund for
the payment of the principal of and premium, if any, and interest
on the Bonds whether at stated maturity, upon redemption or
acceleration or otherwise; provided, however, that the obligation
of the Company to make any such payment hereunder shall be
reduced by the amount of any reduction under the Indenture of the
amount of the corresponding payment required to be made by the
Pollution Control Corporation thereunder.
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 Pollution Control Corporation to
the Trustee, and that all rights and interest of the Pollution
Control Corporation hereunder (except for the Pollution Control
Corporation's rights under Sections 5.03, 5.04, 6.03 and 8.05
hereof and any rights of the Pollution Control Corporation to
receive notices, certificates, requests, requisitions and other
communications hereunder) are to be pledged and assigned to the
Trustee. The Company assents to such pledge and assignment and
agrees that the obligation of the Company to make the Loan
Payments shall be absolute, irrevocable and unconditional and
shall not be subject to cancellation, termination or abatement,
or to any defense other than payment or to any right of set-off,
counterclaim or recoupment arising out of any breach by the
Pollution Control Corporation or the Trustee or any other party
under this Agreement, the Indenture or otherwise, or out of any
obligation or liability at any time owing to the Company by the
Pollution Control Corporation, the Trustee or any other party,
and, further, that the Loan Payments and 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
Pollution Control Corporation and the Trustee and their
directors, officers, employees and agents from, agrees that the
Pollution Control Corporation and the Trustee shall not be liable
for, and agrees to indemnify and hold the Pollution Control
Corporation, the Trustee and any predecessor Trustee and their
directors, officers, employees and agents free and harmless from,
any liability (including, without limitation, attorneys' and
other agents' fees and expenses) for any loss or damage to
property or any injury to or death of any person that may be
occasioned by any cause whatsoever pertaining to the Facilities,
except in any case as a result of the negligence or bad faith or
willful misconduct of the party otherwise to be indemnified.
The Company will indemnify and hold the Pollution Control
Corporation, the Trustee and any predecessor Trustee, free and
harmless from any loss, claim, damage, tax, penalty, liability,
disbursement, litigation expenses, attorneys' and other agents'
fees and expenses or court costs arising out of, or in any way
relating to, the execution or performance of this Agreement, the
issuance or sale of the Bonds, actions taken under the Indenture
or any other cause whatsoever pertaining to the Facilities,
except in any case as a result of the negligence or bad faith or
willful misconduct of the party otherwise to be indemnified.
The Company will indemnify and hold the Pollution Control
Corporation and its directors, officers, employees and agents
free and harmless from any loss, claim, damage, tax, penalty,
liability, disbursement, litigation expenses, attorney's fees and
expenses or court costs arising out of or in any way relating to
any untrue statements 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 Pollution Control Corporation 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
Pollution Control Corporation and the Trustee of its intention so
to do, the Company may in good faith contest any such lien or
charge or claims or demands in appropriate legal proceedings, and
in such event may permit the items so contested and identified as
such by the Company to remain undischarged and unsatisfied during
the period of such contest and any appeal therefrom, unless the
Trustee shall notify the Company in writing that, in the opinion
of counsel to the Trustee based upon material facts disclosed to
the Trustee without any duty of investigation, by nonpayment of
any such items the lien of the Indenture as to the Loan Payments
will be materially endangered, in which event the Company shall
promptly pay and cause to be satisfied and discharged all such
unpaid items. The Pollution Control Corporation shall cooperate
fully with the Company in any such contest.
ARTICLE VI
SPECIAL COVENANTS
SECTION 6.01 Maintenance of 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 Pollution Control
Corporation of an instrument in writing satisfactory in form to
the Trustee, all the obligations of the Company under this
Agreement, including, without limitation, 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 Pollution Control Corporation
and the Trustee an opinion of Bond Counsel to the effect that the
non-assumption by the transferee of such other obligations will
not impair the validity under the Act of the Bonds and will not
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 disposition of all the properties of the
Company, as or substantially as an entirety, unless, immediately
following such sale, transfer or other disposition, the Company
shall own no properties in the other such categories of property
not so sold, transferred or otherwise disposed of. The character
of particular facilities shall be determined by reference to the
Uniform System of Accounts prescribed for public utilities and
licensees subject to the Federal Power Act, as amended, to the
extent applicable.
SECTION 6.02 Permits or Licenses. In the event that it may
be necessary for the proper performance of this Agreement on the
part of the Company or the Pollution Control Corporation that any
application or applications for any permit or license to do or to
perform certain things be made to any governmental or other
agency by the Company or the Pollution Control Corporation, the
Company and the Pollution Control Corporation each shall, upon
the request of either, execute such application or applications.
SECTION 6.03 Pollution Control Corporation's Access to
Facilities. The Pollution Control Corporation shall have the
right, upon appropriate prior notice to the Company, to have
reasonable access to the Facilities during normal business hours
for the purpose of making examinations and inspections of the
same.
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 Pollution Control Corporation 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 Pollution Control
Corporation 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 or
Section 103 of the 1954 Code and Title XIII of the Tax Reform Act
of 1986, as applicable, and any applicable regulations
promulgated thereunder. To such ends, the Pollution Control
Corporation and the Company will comply with all requirements of
such Section 148 to the extent applicable to the Bonds. In the
event that at any time the Pollution Control Corporation or the
Company is of the opinion that for purposes of this Section
6.04(b) it is necessary to restrict or limit the yield on the
investment of any moneys held by the Trustee under the Indenture,
the Pollution Control Corporation or the Company shall so notify
the Trustee in writing.
Without limiting the generality of the foregoing, the
Company and the Pollution Control Corporation agree that there
shall be paid from time to time all amounts required to be
rebated to the United States of America pursuant to Section
148(f) of the Code and any applicable Treasury Regulations. This
covenant shall survive payment in full or defeasance of the Bonds
and the satisfaction and discharge of the Indenture. The Company
specifically covenants to pay or cause to be paid, the Rebate
Requirement as defined and described in the Tax Agreement.
(c) The Pollution Control Corporation certifies and
represents that it has not taken, and the Pollution Control
Corporation covenants and agrees that it will not take, any
action which results in interest paid on the Bonds being included
in gross income of the Owners of the Bonds for federal tax
purposes pursuant to Sections 103 and 141 of the Code or to
Section 103 of the 1954 Code and Title XIII of the Tax Reform Act
of 1986, as applicable, and any regulations thereunder; and the
Company certifies and represents that it has not taken or (to the
extent within its control) permitted to be taken, and the Company
covenants and agrees that it will not take or (to the extent
within its control) permit to be taken any action which will
cause the interest on the Bonds to become includable in gross
income for federal income tax purposes; provided, however, that
neither the Company nor the Pollution Control Corporation shall
be deemed to have violated these covenants if the interest on any
of the Bonds becomes taxable to a person solely because such
person is a "substantial user" of the Facilities or a "related
person" within the meaning of Section 103(b)(13) of the 1954
Code; and provided, further, that none of the covenants and
agreements herein contained shall require either the Company or
the Pollution Control Corporation to enter an appearance or
intervene in any administrative, legislative or judicial
proceeding in connection with any changes in applicable laws,
rules or regulations or in connection with any decisions of any
court or administrative agency or other governmental body
affecting the taxation of interest 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 Pollution Control Corporation 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 Pollution Control
Corporation may conclusively rely upon such opinion in complying
with the requirements of this Section 6.04, and the covenants
hereunder shall be deemed to be modified to that extent.
SECTION 6.05 Use of Facilities. So long as any Bonds are
Outstanding and the Facilities are operated by or for the benefit
of the Company, the Company shall exercise all of its rights,
powers, elections and options under the Plant Agreements to cause
the Facilities to be used for purposes contemplated by the Act
and in the Tax Agreement.
SECTION 6.06 Financing Statements. The Company shall file
and record, or cause to be filed and recorded, all financing
statements and continuation statements referred to in Section
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 Pollution
Control Corporation, all other obligations of the Company
hereunder to the extent of the interest assigned, leased, sold,
transferred or otherwise disposed of, and the Company shall be
released of and discharged from such obligations to the extent so
assumed. Notwithstanding the foregoing, (a) if (i) the Company's
interest in this Agreement shall be assigned as a whole or in
undivided part, (ii) the Company's interest in the Facilities
shall be leased as a whole or in undivided part and the term of
such leasehold or the term of any extension or extensions thereof
at the option of the Company shall extend beyond the maturity
date of the Bonds or (iii) the Company's interest in the
Facilities shall be sold, transferred or otherwise disposed of as
a whole or in undivided part, and (b) in the event that the
assignee, lessee, purchaser or other transferee shall assume the
obligations of the Company under Section 5.01 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 Pollution Control Corporation
and the Trustee of a certificate of an Independent Expert (as
hereinafter defined) describing the interests so assigned,
leased, sold, transferred or otherwise disposed of, together with
all other rights, interests, assets and/or properties assigned,
leased, sold, transferred or otherwise disposed of by the Company
to the same Person in the same or a related transaction, stating
that such rights, interests, assets and/or properties so
described constitute facilities for the generation, transmission
and/or distribution of electric energy and stating that, in the
opinion of such Independent Expert, the Fair Value (as
hereinafter defined) of such rights, interests, assets and/or
properties to the Person acquiring the same is not less than an
amount equal to 10/7 of the sum of (x) the aggregate principal
amount of the Bonds then Outstanding and (y) the outstanding
principal amount of all other obligations of the Company
representing indebtedness for borrowed money or for the deferred
purchase price of property which are being assumed by such
Person; provided, further, that after any such assumption,
release and discharge as aforesaid, the Company may again assume
such obligations under Section 5.01 hereof, in whole or in part,
at any time and from time to time, and, to the extent of any such
assumption by the Company (but only to such extent), the
aforesaid assignee, lessee, purchaser or other transferee shall
be released from and discharged of all liability in respect of
such obligations.
Anything herein to the contrary notwithstanding, the Company
shall not make any assignment, lease or sale as provided in the
immediately preceding paragraph unless it shall have furnished to
the Pollution Control Corporation and the Trustee an opinion of
Bond Counsel to the effect that the proposed assignment, lease or
sale will not impair the validity under the Act of the Bonds and
will not adversely affect the exclusion of interest on the Bonds
from gross income for federal tax purposes.
After any lease, sale, transfer or other disposition of any
element or unit of the Facilities, or any interest therein, the
Company may, at its option, cause such element or unit, or
interest therein, to no longer be deemed to be part of the
Facilities for the purposes of this Agreement by delivering to
the Pollution Control Corporation and the Trustee the agreements
or other documents required pursuant to Section 7.02 hereof
together with an instrument signed by an Authorized Company
Representative stating that such element or unit, or interest
therein, shall no longer be deemed to be part of the Facilities
for the purposes of this Agreement.
For purposes of this Section 701:
(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 Expert certifying the same.
SECTION 7.02 Instrument Furnished to the Pollution Control
Corporation and Trustee. The Company shall, within fifteen (15)
days after the delivery thereof, furnish to the Pollution Control
Corporation and the Trustee a true and complete copy of the
agreements or other documents effectuating any such assignment,
lease, sale, transfer or other disposition.
SECTION 7.03 Limitation. This Agreement shall not be
assigned nor shall the Facilities be leased, sold, transferred or
otherwise disposed of, in whole or in part, except as provided in
this Article VII or in Section 6.01 or 5.02 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 Pollution Control Corporation or
the Trustee, unless the Pollution Control Corporation and the
Trustee shall agree in writing to an extension of such period
prior to its expiration; provided, however, that the Pollution
Control Corporation and the Trustee shall be deemed to have
agreed to an extension of such period if corrective action is
initiated by the Company within such period and is being
diligently pursued; or
(c) the dissolution or liquidation of the Company, or
failure by the Company promptly to lift any execution,
garnishment or attachment of such consequence as will impair
its ability to make any payments under this Agreement, or the
entry of an order for relief by a court of competent
jurisdiction in any proceeding for its liquidation or
reorganization under the provisions of any bankruptcy act or
under any similar act which may be hereafter enacted, or an
assignment by the Company for the benefit of its creditors, or
the entry by the Company into an agreement of composition with
its creditors (the term "dissolution or liquidation of the
Company," as used in this clause, shall not be construed to
include the cessation of the corporate existence of the
Company resulting either from a merger or consolidation of the
Company into or with another 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 Pollution Control Corporation, or the Trustee with
respect to the rights of the Pollution Control Corporation
assigned to the Trustee by the Indenture, may take any action at
law or in equity to collect any payments then due and thereafter
to become due, or to enforce performance and observance of any
obligation, agreement or covenant of the Company hereunder.
(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 Pollution Control Corporation hereby is
intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon
any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right or power may
be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Pollution Control Corporation
to exercise any remedy reserved to it in this Article VIII, it
shall not be necessary to give any notice, other than such notice
as may be herein expressly required.
SECTION 8.05 Reimbursement of Attorneys' and Agents' Fees.
If the Company shall default under any of the provisions hereof
and the Pollution Control Corporation or the Trustee shall employ
attorneys or agents or incur other reasonable expenses for the
collection of payments due hereunder or for the enforcement of
performance or observance of any obligation or agreement on the
part of the Company contained herein, the Company will on demand
therefor reimburse the Pollution Control Corporation or the
Trustee and any predecessor Trustee, as the case may be, for the
reasonable fees of such attorneys and such other reasonable
expenses so incurred.
SECTION 8.06 Waiver of Breach. In the event any obligation
created hereby shall be breached by either of the parties and
such breach shall thereafter be waived by the other party, such
waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder. In view
of the assignment of certain of the Pollution Control
Corporation's rights and interest hereunder to the Trustee, the
Pollution Control Corporation shall have no power to waive any
breach hereunder by the Company in respect of such rights and
interest without the consent of the Trustee, and the Trustee may
exercise any of the rights of the Pollution Control Corporation
hereunder.
ARTICLE IX
REDEMPTION OF BONDS
SECTION 9.01 Redemption of Bonds. The Pollution Control
Corporation shall take, or cause to be taken, the actions
required by the Indenture to discharge the lien created thereby
through the redemption, or provision for payment or redemption,
of all Bonds then Outstanding, or to effect the redemption, or
provision for payment or redemption, of less than all the Bonds
then Outstanding, upon receipt by the Pollution Control
Corporation and the Trustee from the Company of a notice
designating the principal amount of the Bonds to be redeemed, or
for the payment or redemption of which provision is to be made,
and, in the case of redemption of Bonds, or provision therefor,
specifying the date of redemption and the applicable redemption
provision of the Indenture. Such redemption date shall not be
less than 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 Pollution Control Corporation in connection with any of
the foregoing purposes.
SECTION 9.02 Compliance with the Indenture. Anything in this
Agreement to the contrary notwithstanding, the Pollution Control
Corporation and the Company shall take all actions required by
this Agreement and the Indenture in order to comply with any
provisions of the Indenture requiring the mandatory redemption of
Bonds.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Term of Agreement. This Agreement shall remain
in full force and effect from the date hereof until the right,
title and interest of the Trustee in and to the Trust Estate (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
Pollution Control Corporation, c/o Mangum, Wall, Xxxxxx & Xxxxxx,
000 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxx 00000, Attention:
President; and if to the Company, at 000 Xxxx Xxxxx Xxxxxx,
Xxxxxx, Xxxxxxx 00000, Attention: Treasurer; and if to the
Trustee, at such address as shall be designated by it in the
Indenture. A copy of each notice, certificate, request or other
communication given hereunder to the Pollution Control
Corporation, the Company, or the Trustee shall also be given to
the others. The Pollution Control Corporation, the Company, and
the Trustee may, by notice given hereunder, designate any further
or different addresses to which subsequent notices, certificates,
requests or other communications shall be sent.
SECTION 10.03 Parties in Interest. This Agreement shall
inure to the benefit of and shall be binding upon the Pollution
Control Corporation, the Company and their respective successors
and assigns, and no other person, firm or corporation shall have
any right, remedy or claim under or by reason of this Agreement;
provided, however, that the lien and security interest granted to
the Trustee in Section 4.03 hereof, as well as the rights and
remedies granted to the Pollution Control Corporation in Article
VIII hereof, shall inure to the benefit of the Trustee, on behalf
of the Owners from time to time of the Bonds, and shall be
enforceable by the Trustee as a third party beneficiary or as
assignee of the Pollution Control Corporation; and provided,
further, that neither the County of Coconino, Arizona nor the
State of Arizona shall in any event be liable for the payment of
the principal of or premium, if any, or interest on the Bonds or
for the performance of any pledge, mortgage, obligation or
agreement created by or arising out of this Agreement or the
issuance of the Bonds, and further that neither the Bonds nor any
such obligation or agreement of the Pollution Control Corporation
shall be construed to constitute an indebtedness of the County of
Coconino, Arizona or the State of Arizona within the meaning of
any constitutional or statutory provisions whatsoever, but shall
be limited obligations of the Pollution Control Corporation
payable solely out of the revenues derived from this Agreement,
or from the sale of the Bonds, or from the investment or
reinvestment of any of the foregoing, as provided herein and in
the Indenture.
SECTION 10.04 Amendments. This Agreement may be amended only
by written agreement of the parties hereto, subject to the
limitations set forth herein and in the Indenture.
SECTION 10.05 Counterparts. This Agreement may be executed
in any number of counterparts, each of which, when so executed
and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Agreement.
SECTION 10.06 Severability. If any clause, provision or
section of this Agreement shall, for any reason, be held illegal
or invalid by any court, the illegality or invalidity of such
clause, provision or section shall not affect any of the
remaining clauses, provisions or sections hereof, and this
Agreement shall be construed and enforced as if such illegal or
invalid clause, provision or section had not been contained
herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement
or obligation shall be deemed to be the agreement or obligation
of the Pollution Control Corporation or the Company, as the case
may be, to the full extent permitted by law.
SECTION 10.07 Governing Law. The laws of the State of
Arizona shall govern the construction and enforcement of this
Agreement, except that the provisions of Section 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 Issuer within three (3) years from the execution
hereof, unless a waiver is provided by the Pollution Control
Corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed as of the day and year first above
written.
COCONINO COUNTY, ARIZONA
POLLUTION CONTROL CORPORATION
ATTEST: By /s/ Xxxxx X. Xxxxxxxxx
-----------------------------
President
/s/ Xxxxxxxx X. Xxxx
----------------------
Secretary
TUCSON ELECTRIC POWER COMPANY
ATTEST: By /s/ Xxxxx Xxxxxx
----------------------------
Vice President
/s/ Xxxxxxx X. Xxxxxx
-------------------------
Assistant Secretary
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 Pollution Control Revenue
Bonds, 1997 Series A (Tucson Electric Power Company Navajo
Project) issued by Coconino County, Arizona Pollution Control
Corporation and referred to in the foregoing Loan Agreement.
____________________
Sulphur dioxide abatement and related facilities more
particularly described in the Tax Certificate and Agreement,
dated as of April 29, 1997, between the Coconino County, Arizona
Pollution Control Corporation and Tucson Electric Power Company.
