PARTICIPATION AGREEMENT Dated as of October 21, 2003 among TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC., as Construction Agent and as Lessee, WELLS FARGO DELAWARE TRUST COMPANY, not in its individual capacity, except as expressly provided...

Exhibit 10.5

EXECUTION COPY

PARTICIPATION AGREEMENT

Dated as of October 21, 2003

among

TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC.,

as Construction Agent and as Lessee,

▇▇▇▇▇ FARGO DELAWARE TRUST COMPANY,

not in its individual capacity, except

as expressly provided herein, but solely

as Independent Manager,

SPRINGERVILLE UNIT 3 HOLDING LLC,

as Owner Lessor,

SPRINGERVILLE UNIT 3 OP LLC,

as Owner Participant,

and

WILMINGTON TRUST COMPANY,

not in its individual capacity, but solely as

Series A Pass Through Trustee and

Series B Pass Through Trustee

and

as Indenture Trustee

SPRINGERVILLE “UNIT 3” FACILITY

A New 400 MW (net) Coal-Fired Power Plant

Located Near Springerville, Arizona

CREDIT SUISSE FIRST BOSTON,

as Lead Arranger

Table of Contents

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SCHEDULES

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EXHIBITS

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PARTICIPATION AGREEMENT

This PARTICIPATION AGREEMENT, dated as of October 21, 2003, among (i) TRI-STATE GENERATION AND TRANSMISSION ASSOCIATION, INC., a Colorado cooperative corporation, (ii) ▇▇▇▇▇ FARGO DELAWARE TRUST COMPANY, a Delaware banking corporation, not in its individual capacity, except as expressly provided herein, but solely as Independent Manager under the LLC Agreement, (iii) SPRINGERVILLE UNIT 3 HOLDING LLC, a Delaware limited liability company, as Owner Lessor, (iv) SPRINGERVILLE UNIT 3 OP LLC, a Delaware limited liability company, as Owner Participant and (v) WILMINGTON TRUST COMPANY, a banking corporation organized and existing under the laws of the State of Delaware, not in its individual capacity, but solely as trustee under the Series A Pass Through Trust Agreement and the Series B Pass Through Trust Agreement and as Indenture Trustee.

WITNESSETH:

WHEREAS, the Company desires to construct the Facility referred to herein, consisting of an approximately 400-megawatt (net) coal-fired generating facility known as “Unit 3” to be developed, installed, assembled, constructed and operated on the Site, located near Springerville, Arizona;

WHEREAS, the Company desires to fund the construction and lease of the Facility by entering into the transactions contemplated hereby and in the other Operative Documents;

WHEREAS, each Pass Through Trustee (on behalf of the Certificateholders) and the Owner Participant have agreed, on the terms and conditions set forth herein, to provide construction and post-construction funding to the Owner Lessor (a) for the development, engineering, construction, start-up and testing of the Facility and (b) for the lease of the Facility pursuant to the Facility Lease and the lease of the Ground Interest from the Site Lessor pursuant to the Site Lease;

WHEREAS, prior to the execution and delivery of this Agreement, the Owner Participant and the Independent Manager entered into the LLC Agreement, pursuant to which the Owner Lessor agreed, among other things and subject to the terms and conditions hereof and thereof, to hold the Lessor Estate for the use and benefit of the Owner Participant;

WHEREAS, pursuant to the LLC Agreement, the Owner Participant authorized the Owner Lessor to, among other things and subject to the terms and conditions of the Operative Documents, (a) enter into and perform its obligations under this Agreement, the Indenture, the Construction Agency Agreement and the Disbursement Agreement, (b) issue the Initial Lessor Notes to the Pass Through Trustees and accept the Equity Contributions from the Owner Participant, (c) become a party, along with the Company, to the Springerville Project Agreement and the Supplemental Fuel Handling Agreements and enter into and perform its obligations under each of the other Project Documents, (d) lease the Ground Interest from the Site Lessor pursuant to the Site Lease, (e) grant to the Indenture Trustee, for the benefit of the Secured

Parties, Liens against the Facility, the Ground Interest, the Project Document Interest and the other Collateral to secure the Secured Obligations, (f) own the Facility as provided in the Operative Documents, (g) enter into the Swap Agreement with the Swap Counterparty, (h) lease the Facility to the Company pursuant to the Facility Lease, (i) sublease the Ground Interest to the Company pursuant to the Site Sublease and (j) assign the Project Document Interest (other than the Owner Lessor’s rights and obligations under the Springerville Project Agreement and the Supplemental Fuel Handling Agreements) to the Company pursuant to the Assignment and Assumption Agreement;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Company and the Owner Lessor will enter into the Construction Agency Agreement pursuant to which the Company will agree to act as construction agent during the development, engineering, construction, start-up and testing of the Facility;

WHEREAS, prior to the execution and delivery of this Agreement, the Owner Lessor and the Company entered into the Certificate Purchase Agreement with the Initial Purchaser pursuant to which the Initial Purchaser will purchase, on the Construction Closing Date, the Series A Certificates from the Series A Pass Through Trust and the Series B Certificates from the Series B Pass Through Trust;

WHEREAS, concurrently with the execution and delivery of this Agreement, (a) the Series A Pass Through Trustee will enter into the Series A Pass Through Trust Agreement pursuant to which the Series A Pass Through Trustee will be directed to use the proceeds received from the offering of the Series A Certificates to purchase the Series A Lessor Note from the Owner Lessor on the Construction Closing Date and (b) the Series B Pass Through Trustee will enter into the Series B Pass Through Trust Agreement pursuant to which the Series B Pass Through Trustee will be directed to use the proceeds received from the offering of the Series B Certificates to purchase the Series B Lessor Note from the Owner Lessor on the Construction Closing Date;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Indenture Trustee, the Deed of Trust Trustee and the Owner Lessor will enter into the Indenture pursuant to which (a) the Series A Pass Through Trustee will purchase the Series A Lessor Note from the Owner Lessor with the proceeds received from the offering of the Series A Certificates and (b) the Series B Pass Through Trustee will purchase the Series B Lessor Note from the Owner Lessor with the proceeds received from the offering of the Series B Certificates, in each case, in accordance with the terms and conditions hereof and thereof;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Owner Lessor will execute and deliver each Security Agreement and will grant to the Indenture Trustee, for the benefit of the Secured Parties, and/or will grant to the Deed of Trust Trustee, for the benefit of the Indenture Trustee, Liens against the Facility, the Ground Interest, the Project Document Interest and the other Collateral to secure the Secured Obligations;

WHEREAS, immediately prior to the execution and delivery of this Agreement, the Owner Lessor has entered into the EPC Contract with the EPC Contractor, pursuant to which the EPC Contractor shall design and construct the Facility;

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WHEREAS, immediately prior to the execution and delivery of this Agreement, the Owner Lessor (a) became a party, along with the Company, to the Springerville Project Agreement and the Supplemental Fuel Handling Agreements and (b) entered into each of the other Project Documents (other than the Fuel Supply Agreement and the Fuel Transportation Agreement) with the respective Project Participants party to each such agreement;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Owner Lessor will (a) enter into amendments with respect to the Supplemental Construction Agreement, the EPC Contract, the O&M Agreement, the Interconnection Agreement and the Support and Operating Agreement, (b) enter into the Fuel Supply Agreement and the Fuel Transportation Agreement and (c) enter into the Assignment and Assumption Agreement with the Company;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Indenture Trustee, the Owner Lessor, the Owner Participant, the Depositary Bank and the Company will enter into the Disbursement Agreement, pursuant to which the funds received from Advances and from certain other sources will be distributed for application in accordance with the other Operative Documents;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Owner Lessor will enter into (a) the Site Lease with the Site Lessor, pursuant to which the Owner Lessor will lease the Ground Interest from the Site Lessor and (b) the Facility Lease and the Site Sublease with the Company;

WHEREAS, concurrently with the execution and delivery of this Agreement, the OP Guarantor will enter into the OP Guaranty for the benefit of certain of the Funding Parties, whereby the OP Guarantor will guarantee the Owner Participant’s payment and performance obligations under the Operative Documents;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Owner Lessor will enter into the Swap Agreement with the Swap Counterparty;

WHEREAS, concurrently with the execution and delivery of this Agreement, TEP will execute and deliver the TEP Indemnity Agreement for the benefit of the Owner Lessor;

WHEREAS, concurrently with the execution and delivery of this Agreement, the Company and the Owner Participant will enter into the Tax Indemnity Agreement;

WHEREAS, during the Commitment Period, each Pass Through Trustee will make Advances to the Owner Lessor in accordance with the terms hereof that will consist of an initial funding of the proceeds received from the offering of the Certificates, which proceeds will be deposited into the Note Proceeds Account, and subsequent withdrawals and distributions of portions of such proceeds from the Note Proceeds Account;

WHEREAS, during the Commitment Period, the Owner Participant will make Advances to the Owner Lessor in accordance with the terms hereof;

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WHEREAS, on the Lease Commencement Date, each of the Site Sublease Term and the Basic Lease Term will commence and the Project Document Interest will be assigned, transferred, sold, conveyed and set over by the Owner Lessor to the Company, and the Company will accept and assume such assignment, transfer, sale, conveyance and set over of all rights and obligations of the Owner Lessor in respect of the Project Document Interest, pursuant to the Assignment and Assumption Agreement; and

WHEREAS, the parties hereto desire to consummate the transactions contemplated hereby.

NOW, THEREFORE, in consideration of the foregoing premises, the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS; INTERPRETATION

The capitalized terms used in this Agreement, including the foregoing recitals, and not otherwise defined herein shall have the respective meanings specified in Appendix A hereto. The rules of interpretation and the other general provisions of Appendix A shall apply to the terms used in this Agreement.

ARTICLE II

PARTICIPATIONS IN THE TRANSACTIONS

Section 2.1                      Certain Actions. Subject to the terms and conditions of this Agreement, and in reliance on the agreements, representations and warranties made herein, each party hereto hereby agrees to participate in the Overall Transaction as described in this Section 2.1 as follows:

(a)                                 on October 14, 2003, the Owner Participant and the Independent Manager entered into the LLC Agreement;

(b)                                 on October 14, 2003, the Company, the Owner Lessor and the Initial Purchaser entered into the Certificate Purchase Agreement;

(c)                                  on October 20, 2003, the Owner Lessor entered into the EPC Contract with the EPC Contractor;

(d)                                 on October 20, 2003, the Owner Lessor became a party, along with the Company, to the Springerville Project Agreement and the Supplemental Fuel Handling Agreements and entered into each of the other Project Documents (other than the Fuel Supply Agreement and the Fuel Transportation Agreement) with the respective Project Participants party to each such agreement;

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(e)                                  on the date hereof, the Series A Pass Through Trustee and the Company each agree to execute and deliver the Series A Pass Through Trust Agreement, the Series A Pass Through Trustee agrees to declare the creation of the Series A Pass Through Trust for the benefit of the Series A Certificateholders and the initial Series A Certificateholders, as the grantors of the Series A Pass Through Trust and by their respective acceptances of the Series A Certificates, agree to join in the creation of the Series A Pass Through Trust with the Series A Pass Through Trustee;

(f)                                   on the date hereof, the Series B Pass Through Trustee and the Company each agree to execute and deliver the Series B Pass Through Trust Agreement, the Series B Pass Through Trustee agrees to declare the creation of the Series B Pass Through Trust for the benefit of the Series B Certificateholders and the initial Series B Certificateholders, as the grantors of the Series B Pass Through Trust and by their respective acceptances of the Series B Certificates, agree to join in the creation of the Series B Pass Through Trust with the Series B Pass Through Trustee;

(g)                                  on the date hereof, the Series A Pass Through Trustee agrees to use the proceeds received from the offering of the Series A Certificates to purchase the Series A Lessor Note issued by the Owner Lessor and to hold such Series A Lessor Note in trust for the benefit of the Series A Certificateholders;

(h)                                 on the date hereof, the Series B Pass Through Trustee agrees to use the proceeds received from the offering of the Series B Certificates to purchase the Series B Lessor Note issued by the Owner Lessor and to hold such Series B Lessor Note in trust for the benefit of the Series B Certificateholders;

(i)                                     on the date hereof, the Owner Lessor, the Deed of Trust Trustee and the Indenture Trustee each agree to execute and deliver the Indenture pursuant to which (i) the Owner Lessor agrees to issue to the Series A Pass Through Trustee the Series A Lessor Note and the Series A Pass Through Trustee agrees to purchase the Series A Lessor Note from the Owner Lessor with the proceeds received from the offering of the Series A Certificates and (ii) the Owner Lessor agrees to issue to the Series B Pass Through Trustee the Series B Lessor Note and the Series B Pass Through Trustee agrees to purchase the Series B Lessor Note from the Owner Lessor with the proceeds received from the offering of the Series B Certificates;

(j)                                    on the date hereof, the Owner Lessor, the Owner Participant, the Indenture Trustee, the Depositary Bank and the Company each agree to execute and deliver the Disbursement Agreement;

(k)                                 on the date hereof, the Owner Lessor agrees to lease the Ground Interest from the Site Lessor pursuant to the Site Lease;

(1)                                 on the date hereof, the OP Guarantor agrees to enter into the OP Guaranty providing for the guarantee by the OP Guarantor of the Owner Participant’s payment and performance obligations under the Operative Documents;

(m)                             on the date hereof, the Owner Participant and the Company each agree to enter into a Tax Indemnity Agreement;

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(n)                                 on the date hereof, the Company and the Owner Lessor each agree to enter into the Construction Agency Agreement, the Site Sublease and the Facility Lease;

(o)                                 on the date hereof, the Owner Lessor agrees to enter into amendments with respect to the Supplemental Construction Agreement, the EPC Contract, the O&M Agreement, the Interconnection Agreement and the Support and Operating Agreement and to enter into the Fuel Supply Agreement and the Fuel Transportation Agreement with Powder River and BNSF respectively;

(p)                                 on the date hereof, the Owner Lessor and the Company each agree to enter into the Assignment and Assumption Agreement;

(q)                                 on the date hereof, the parties hereto each agree to enter into the other Operative Documents substantially in the respective forms attached hereto;

(r)                                    on the date hereof, the Owner Lessor agrees to enter into the Swap Agreement with the Swap Counterparty;

(s)                                   the Owner Lessor agrees to (i) on the Construction Closing Date and upon receipt of the proceeds received from the offering of the Certificates, issue the Initial Lessor Notes to the Pass Through Trustees pursuant to Section 2.4 of the Indenture and deposit such proceeds into the Note Proceeds Account pursuant to Section 2.2 and Section 3.1 of the Disbursement Agreement, (ii) during the Commitment Period and on the Lease Commencement Date, accept Equity Contributions from the Owner Participant as provided in Sections 2.2, 2.3(b), 4.3(a)(ii) and 4.4 and (iii) on the Construction Closing Date, execute and deliver each Security Document and grant to the Indenture Trustee, for the benefit of the Secured Parties, and grant to the Deed of Trust Trustee, for the benefit of the Indenture Trustee, Liens against the Facility, the Ground Interest, the Project Document Interest and the other Collateral to secure the Secured Obligations;

(t)                                    on the Construction Closing Date, the Series A Pass Through Trustee agrees to purchase the Series A Lessor Note from the Owner Lessor pursuant to Section 2.4 of the Indenture;

(u)                                 on the Construction Closing Date, the Series B Pass Through Trustee agrees to purchase the Series B Lessor Note from the Owner Lessor pursuant to Section 2.4 of the Indenture;

(v)                                 during the Commitment Period, the Indenture Trustee agrees to, from time to time, instruct the Depositary Bank, to withdraw and distribute portions of the proceeds received from the issuance of the Initial Lessor Notes from the Note Proceeds Account as set forth in Sections 2.2, 2.3(a) and 4.3(a)(i) and Article 3 of the Disbursement Agreement in order to make Advances to the Owner Lessor during the Commitment Period;

(w)                               during the Commitment Period, the Owner Participant agrees to, from time to time, (A) fund portions of its Owner Participant Commitment by making Equity Contributions available to the Owner Lessor as set forth in Sections 2.2, 2.3(b) and 4.3(a)(ii) and

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(B) deposit the proceeds of such funding into the Equity Proceeds Account to be withdrawn and distributed in accordance with Article 3 of the Disbursement Agreement;

(x)                                 during the Commitment Period, the Owner Lessor agrees to use the proceeds of Advances from the Pass Through Trustees (consisting of the proceeds originally deposited into the Note Proceeds Account) and the Owner Participant first, to pay accrued interest on the Initial Lessor Notes, second, with the proceeds of Advances made by the Owner Participant only, to pay Equity Yield on the Equity Contributions and Equity Commitment Fees, third to pay all other amounts payable to the Secured Parties, the Owner Lessor or the Owner Participant (other than amounts for which the Secured Parties or the Owner Participant are indemnified by the Company or the Owner Lessor under Section 12.1(g), 12.2(j) or 12.3) and fourth, to fund the remaining amounts of such Advances to the Company pursuant to this Agreement, the Construction Agency Agreement and the Disbursement Agreement;

(y)                                 on the Lease Commencement Date, each of the Basic Lease Term and the Site Sublease Term will commence and the Project Document Interest will be assigned, transferred, sold, conveyed and set over by the Owner Lessor to the Company, and the Company will accept and assume such assignment, transfer, sale, conveyance and set over of all rights and obligations of the Owner Lessor in respect of the Project Document Interest, pursuant to the Assignment and Assumption Agreement; and

(z)                                  on the Lease Commencement Date, the Owner Participant agrees to make an additional Equity Contribution to the Owner Lessor to the extent required by Section 4.4.

The Owner Participant hereby authorizes and directs the Owner Lessor to take all such actions as may be required to be taken by the Owner Lessor by the terms of any Operative Document, whether on the Construction Closing Date or thereafter.

Section 2.2                      Construction Closing Date Participant Fundings. Subject to the terms and conditions of this Agreement, on the Construction Closing Date, the Owner Participant shall fund a portion of its Owner Participant Commitment, the Series A Pass Through Trustee shall purchase the Series A Lessor Note from the Owner Lessor with the proceeds received from the offering of the Series A Certificates and the Series B Pass Through Trustee shall purchase the Series B Lessor Note from the Owner Lessor with the proceeds received from the offering of the Series B Certificates, in each case, not later than 12:00 Noon, New York City time, by transferring or delivering the amount set forth on Schedule II opposite such Person’s name in immediately available funds to (i) with respect to the Owner Participant, the Equity Proceeds Account and (ii) with respect to the Series A Pass Through Trustee and the Series B Pass Through Trustee, the Note Proceeds Account. The proceeds of the Owner Participant Commitment deposited into the Equity Proceeds Account and a portion of the proceeds received from the issuance of the Initial Lessor Notes shall be distributed in accordance with Section 3.4 of the Disbursement Agreement. If any proceeds of the Initial Lessor Notes remain on deposit in the Note Proceeds Account after distribution pursuant to Section 3.4 of the Disbursement Agreement, such proceeds shall be advanced from time to time pursuant to the provisions of Sections 2.3(a) and 4.3(a)(i).

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Section 2.3                      Participations in Project Cost.

(a)                                 Lessor Note Proceeds Funding. Subject to and upon the terms and conditions herein set forth, on each Requested Funding Date, but only to the extent that there are proceeds of the Lessor Notes on deposit in the Note Proceeds Account, the Indenture Trustee agrees, at any time and from time to time during the Commitment Period (including the Advance to be made on the Lease Commencement Date pursuant to Section 4.3(a)(i)), to instruct the Depositary Bank to withdraw from the Note Proceeds Account and distribute an amount in Dollars equal to the Debt Funding Amount requested by the Company to be funded on such Requested Funding Date for distribution in accordance with either Section 3.2(b) or Section 3.5(a) of the Disbursement Agreement.

(b)                                 Owner Participant’s Commitment. Subject to and upon the terms and conditions herein set forth, (i) on each Requested Funding Date, the Owner Participant agrees, at any time from time to time during the Commitment Period (including the Advance to be made on the Lease Commencement Date pursuant to Section 4.3(a)(ii)), to make Equity Contributions to the Owner Lessor, in Dollars, in an amount equal to the Equity Funding Amount requested by the Company to be funded by the Owner Participant on such Requested Funding Date and (ii) on the Lease Commencement Date, the Owner Participant agrees to make the Equity Contribution, to the extent required by Section 4.4; provided, that in no event shall the aggregate amount funded by the Owner Participant pursuant to this Section 2.3(b) and pursuant to Section 2.2, Section 4.3(a)(ii) and, if required, Section 4.4 exceed the Owner Participant Commitment set forth opposite the Owner Participant’s name on Schedule I. The Owner Participant Commitment set forth in this Section 2.3(b) shall expire on the Commitment Termination Date (after the Advance to be made on the Lease Commencement Date pursuant to Section 4.3(a)(ii) and, if required, Section 4.4), without further action on the part of the Owner Participant.

(c)                                  Funding Requests: Notice of Borrowing. Whenever the Company desires that the Owner Lessor request an Advance of funds for use and application in accordance with the Operative Documents, the Company shall submit a Funding Request (each, a “Funding Request”) to the Owner Lessor, the Indenture Trustee and the Owner Participant at least eight (8) Business Days prior to the date on which the Company requires a distribution of funds (the “Requested Funding Date”), or in the case of the initial Advance of funds on the Construction Closing Date, at least three (3) Business Days in advance of such date, providing the information required to be provided by Section 3.2 with respect to such Advance. Each Funding Request shall (i) be signed by an Authorized Officer of the Company and (ii) be substantially in the form of Exhibit O. No more than two Advances under Section 2.2 and this Section 2.3 may be drawn in any calendar month and no more than eighteen (18) Advances under Section 2.2 and this Section 2.3 may be drawn in any calendar year. Each Funding Request given by the Company in accordance with this Section 2.3(c) shall be deemed to have been given jointly by the Owner Lessor and the Company.

(d)                                 Disbursement of Advances. If the conditions precedent to an Advance as set forth in this Section 2.3 and in Section 3.2 shall have been satisfied or waived by the Owner Participant, then no later than 12:00 Noon, New York City time, on each Requested Funding Date, (i) an amount equal to the Debt Funding Amount requested by the Company on such Requested Funding Date shall be withdrawn from the Note Proceeds Account and distributed in

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accordance with Section 3.5(a) of the Disbursement Agreement and (ii) the Owner Participant shall wire transfer an amount, in Dollars and in immediately available funds, equal to the Equity Funding Amount requested by the Company on such Requested Funding Date to the Equity Proceeds Account, which amount shall be withdrawn from the Equity Proceeds Account and distributed in accordance with Section 3.5(a) of the Disbursement Agreement. Notwithstanding anything to the contrary set forth in the Operative Documents, it is agreed that, other than with respect to the Advance to be made on the Construction Closing Date, the Owner Participant may waive the non-satisfaction of any of the conditions set forth in Section 3.2 and, so long as the Owner Participant shall have deposited into the Equity Proceeds Account an amount equal to the Equity Funding Amount requested by the Company to be made on such Requested Funding Date pursuant to the requirements set forth in this Section 2.3, proceeds on deposit in the Note Proceeds Account in an amount equal to the Debt Funding Amount requested to be funded by the Company on such Requested Funding Date shall be withdrawn from the Note Proceeds Account and distributed in accordance with Section 3.5(a) of the Disbursement Agreement concurrently with the funding by the Owner Participant, unless an Indenture Event of Default shall have occurred and is continuing on such date and the Initial Lessor Notes shall have been accelerated.

Section 2.4                      Owner Participant Authorization. The Owner Participant hereby authorizes and directs the Owner Lessor to issue the Initial Lessor Notes to the Pass Through Trustees as provided in this Article II.

Section 2.5                      Equity Commitment Fee. The Owner Lessor shall pay to the Owner Participant, and the Owner Participant shall pay to the Equity Investor, from the proceeds of Advances made by the Owner Participant, a nonrefundable fee (the “Equity Commitment Fee”) equal to ¾ of 1% per annum on the average daily amount of the unused portion of the Owner Participant Commitment. The Equity Commitment Fee shall accrue daily from the Construction Closing Date until the Commitment Termination Date and is payable monthly in arrears on the last day of each month and on the Commitment Termination Date.

Section 2.6                      Making of Equity Contributions. The Equity Contributions made by the Owner Participant from time to time may be (i) LIBOR Rate Equity Contributions, (ii) Base Rate Equity Contributions or (iii) a combination thereof, as determined by the Company and notified to the Owner Participant pursuant to Sections 2.3(c) and 2.8.

Section 2.7                      Certain Agreements Regarding Yield Periods. (a) Each of the Owner Lessor and the Owner Participant hereby agrees that, notwithstanding anything to the contrary contained in this Agreement, the Indenture or any other Operative Documents, without the prior written consent of the Company (which consent shall not be required during the occurrence and continuance of a Significant Company Default or a Company Event of Default), the Owner Lessor shall not take any action with respect to the Equity Contributions concerning the (a) continuation of a LIBOR Rate Equity Contribution as a LIBOR Rate Equity Contribution or (b) conversion of a LIBOR Rate Equity Contribution to a Base Rate Equity Contribution or a Base Rate Equity Contribution to a LIBOR Rate Equity Contribution. The Owner Lessor hereby appoints and authorizes the Company to act as its exclusive agent (and agrees that it will not act other than through the Company, as such agent) for the purpose of (i) continuing a LIBOR Rate Equity Contribution as a LIBOR Rate Equity Contribution or (ii) converting a LIBOR Rate Equity Contribution to a Base Rate Equity Contribution or a Base Rate Equity Contribution to a

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LIBOR Rate Equity Contribution; provided, that such appointment and authorization shall not confer upon the Company during any period in which a Significant Company Default or a Company Event of Default shall have occurred and be continuing, the authority to act as agent to designate an Equity Contribution as other than a Base Rate Equity Contribution. Each of the Owner Lessor and the Owner Participant hereby consents to such appointment and authorization. In taking any actions as agent of the Owner Lessor as aforesaid, the Company shall be authorized to deal directly with the Owner Participant and each of the Owner Lessor and the Owner Participant agrees to cooperate with the Company and otherwise to do all things and take all actions reasonably necessary to effect the actions taken by the Company as the agent of the Owner Lessor under this Section 2.7.

(b)                                 Any action taken by Owner Lessor in violation of any of the foregoing shall be null and void and of no force and effect.

Section 2.8                      Conversion and Continuation Options. (a) The Company may elect from time to time to convert all or a portion of the LIBOR Rate Equity Contributions to Base Rate Equity Contributions by giving the Owner Participant prior irrevocable notice of such election no later than 11:00 A.M., New York City time, on the Business Day preceding the proposed conversion date; provided, that any such conversion of LIBOR Rate Equity Contributions may only be made on the last day of a Yield Period with respect thereto. The Company may elect from time to time to convert all or a portion of the Base Rate Equity Contributions to LIBOR Rate Equity Contributions by giving the Owner Participant prior irrevocable notice of such election no later than 11:00 A.M., New York City time, on the third Business Day preceding the proposed conversion date (which notice shall specify the length of the initial Yield Period therefor). All or any part of the outstanding LIBOR Rate Equity Contributions or Base Rate Equity Contributions may be converted as provided herein; provided, that no Base Rate Equity Contributions may be converted into LIBOR Rate Equity Contributions when any Significant Company Default or Company Event of Default has occurred and is continuing and the Owner Participant has determined in its sole discretion not to permit such conversions after the date that is one month prior to the Commitment Termination Date.

(b)                                 Any LIBOR Rate Equity Contribution may be continued as such upon the expiration of the then current Yield Period with respect thereto by the Company giving irrevocable notice to the Owner Participant, in accordance with the applicable provisions of the term “Yield Period” set forth in Appendix A hereto, of the length of the next Yield Period to be applicable to such Equity Contribution, provided, that no LIBOR Rate Equity Contribution may be continued as such when any Significant Company Default or Company Event of Default has occurred and is continuing and the Owner Participant has determined in its sole discretion not to permit such continuation, and provided, further, that if the Company shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Equity Contribution shall be automatically continued as a LIBOR Rate Equity Contribution on the last day of such then expiring Yield Period and such continued LIBOR Rate Equity Contribution shall have a Yield Period with the same length as that of then expiring Yield Period.

Section 2.9                      Limitations on LIBOR Rate Tranches. Notwithstanding anything to the contrary in this Agreement or the other Operative Documents, all Advances, conversions

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and continuations of LIBOR Rate Equity Contributions and all selections of Yield Periods shall be in such amounts and be made pursuant to such elections so that, no more than five LIBOR Rate Tranches shall be outstanding at any one time, collectively in respect of LIBOR Rate Equity Contributions.

Section 2.10               Equity Yield and Payment Dates. (a) Each LIBOR Rate Equity Contribution shall bear Equity Yield for each day during each Yield Period with respect thereto at a rate per annum determined in accordance with clause (i) of the definition of “Equity Yield” in Appendix A.

(b)                                 Each Base Rate Equity Contribution shall bear Equity Yield at a rate per annum determined in accordance with clause (ii) of the definition of “Equity Yield” in Appendix A.

(c)                                  If all or a portion of (i) any Equity Contribution, (ii) any Equity Yield payable on any Equity Contribution, (iii) any Equity Commitment Fee or (iv) any other amount calculated with respect thereto, shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear Equity Yield at a rate per annum equal to 200 basis points over the Base Rate then in effect, plus the Applicable Margin, from the date of such non-payment until such amount is paid in full (as well after as before judgment).

(d)                                 Equity Yield shall be payable in arrears on each Yield Payment Date from the proceeds of Advances made by the Owner Participant, provided that Equity Yield accruing pursuant to paragraph (c) of this Section 2.10 shall be payable from time to time on demand and provided, further that each prepayment of Equity Contributions shall be accompanied by accrued Equity Yield to the date of such prepayment.

Section 2.11               Computation of Interest, Equity Yield and Fees. (a) Equity Yield and Equity Commitment Fees payable pursuant to this Agreement shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to Base Rate Equity Contributions, the Equity Yield on which is calculated on the basis of the Prime Rate, the Equity Yield thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Owner Participant shall as soon as practicable notify the Company of each determination of a LIBOR Rate in respect thereof. Any change in the rate of Equity Yield on an Equity Contribution resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Owner Participant shall as soon as practicable notify the Company of the effective date and the amount of each such change in the rate of Equity Yield on an Equity Contribution.

(b)                                 Each determination of the rate of Equity Yield on an Equity Contribution by the Owner Participant pursuant to any provision of this Agreement shall be conclusive and binding on the Company in the absence of manifest error. The Owner Participant shall, at the request of the Company, deliver to the Company and the Owner Lessor a statement showing the quotations used by the Owner Participant in determining any rate of Equity Yield on an Equity Contribution pursuant to Section 2.10(a).

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Section 2.12               Inability to Determine Rate on Equity Yield. If, prior to the first day of any Yield Period, the Owner Participant shall have determined (which determination shall be conclusive and binding upon the Company) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate for such Yield Period, the Owner Participant shall give telecopy or telephonic notice thereof to the Owner Lessor and the Company as soon as practicable thereafter. If such notice is given (x) any LIBOR Rate Equity Contributions requested to be made on the first day of such Yield Period shall be made as Base Rate Equity Contributions, (y) any Equity Contribution that was to have been converted on the first day of such Yield Period to a LIBOR Rate Equity Contribution shall be continued as a Base Rate Equity Contribution and (z) any outstanding LIBOR Rate Equity Contributions shall be converted, on the last day of the then-current Yield Period, to Base Rate Equity Contributions. Until the Owner Participant has withdrawn such notice, no further LIBOR Rate Equity Contributions shall be made or continued as such, nor shall the Company have the right to convert such Base Rate Equity Contributions to LIBOR Rate Equity Contributions.

Section 2.13               Payments. All payments to be made by the Owner Lessor hereunder, whether on account of Equity Yield, Equity Commitment Fees or otherwise, shall be made without setoff or counterclaim from the proceeds of Advances made by the Owner Participant and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Owner Participant, in Dollars and in immediately available funds. If any payment hereunder (other than payments on the LIBOR Rate Equity Contributions) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a LIBOR Rate Equity Contribution becomes due and payable on a day other than a LIBOR Business Day, the maturity thereof shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding LIBOR Business Day.

Section 2.14               Requirements of Law. (a) If a Change in Law:

(i)                       shall subject the Owner Participant or any Consolidated Tax Group Member to any tax of any kind whatsoever with respect to this Agreement or any LIBOR Rate Equity Contribution made by it, or change the basis of taxation of payments to the Owner Participant in respect thereof (except for Taxes covered by Section 12.2(k) and changes in the rate of tax on the overall net income of the Owner Participant or any Consolidated Tax Group Member);

(ii)                    shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of the Owner Participant or any Consolidated Tax Group Member that is not otherwise included in the determination of the LIBOR Rate; or

(iii)                 shall impose on the Owner Participant or any Consolidated Tax Group Member any other condition relating to the making or maintaining of LIBOR Rate Equity Contributions;

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and the result of any of the foregoing is to increase the cost to the Owner Participant or any Consolidated Tax Group Member, by an amount that the Owner Participant or any Consolidated Tax Group Member deems to be material, of making, converting into, continuing or maintaining LIBOR Rate Equity Contributions, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Company shall promptly pay to the Owner Participant, on an After-Tax Basis, any additional amounts necessary to compensate the Owner Participant or any Consolidated Tax Group Member for such increased cost or reduced amount receivable. If the Owner Participant or any Consolidated Tax Group Member becomes entitled to claim any additional amounts pursuant to this paragraph, it shall promptly notify the Company of the event by reason of which it has become so entitled.

(b)                                 If the Owner Participant shall have determined that the adoption of or any change in any Applicable Law regarding capital adequacy or in the interpretation or application thereof or compliance by the Owner Participant or any Person controlling the Owner Participant with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on the Owner Participant’s or such Person’s capital as a consequence of its obligations hereunder to a level below that which the Owner Participant or such Person could have achieved but for such adoption, change or compliance (taking into consideration the Owner Participant’s or such Person’s policies with respect to capital adequacy) by an amount deemed by the Owner Participant to be material, then from time to time, after submission by the Owner Participant to the Company of a written request therefor, the Company shall pay to the Owner Participant such additional amount or amounts as will compensate the Owner Participant or such Person for such reduction.

(c)                                  A certificate as to any additional amounts payable pursuant to this Section 2.14 submitted by the Owner Participant to the Company shall be conclusive in the absence of manifest error. Notwithstanding anything to the contrary in this Section 2.14, the Company shall not be required to compensate the Owner Participant pursuant to this Section 2.14 for any amounts incurred more than nine months prior to the date that the Owner Participant notifies the Company of the Owner Participant’s intention to claim compensation therefor; provided, that, if the circumstances giving rise to such claim have a retroactive effect, then such nine-month period shall be extended to include the period of such retroactive effect. The obligations of the Company pursuant to this Section 2.14 shall survive the termination of this Agreement and the payment of the Equity Contributions and all other amounts payable hereunder.

Section 2.15               Indemnity. The Company agrees to indemnify the Owner Participant for, and to hold the Owner Participant harmless from, any loss or expense that the Owner Participant or any Consolidated Tax Group Member may sustain or incur as a consequence of (a) a default by the Company in requesting the Owner Lessor to request an Advance of, conversion into or continuation of a LIBOR Rate Equity Contribution after the Company has given a notice to the Owner Lessor in order to request the same in accordance with the provisions of this Agreement, (b) a default by the Company in making any prepayment of or conversion from a LIBOR Rate Equity Contribution after the Company has requested that the Owner Lessor give a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of a LIBOR Rate Equity Contribution on a day that is not the last

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day of a Yield Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of Equity Yield that would have accrued on the amount so prepaid, or not so advanced, converted or continued, for the period from the date of such prepayment or of such failure to advance, convert or continue to the last day of such Yield Period (or, in the case of a failure to advance, convert or continue, the Yield Period that would have commenced on the date of such failure), in each case, at the applicable rate of Equity Yield for such Equity Contributions provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of Equity Yield (as reasonably determined by the Owner Participant) that would have accrued to the Owner Participant on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank LIBOR market. A certificate as to any amounts payable pursuant to this Section 2.15 submitted to the Company by the Owner Participant shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Equity Contributions and all other amounts payable hereunder.

Section 2.16               Closing Date. The closing of the Overall Transaction (the “Construction Closing”) shall take place after 9:00 A.M., New York City time, on the Scheduled Closing Date or such other date as the parties hereto shall mutually agree (the “Construction Closing Date”), at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP in New York City.

Section 2.17               Transaction Expenses; Fees and Expenses; Make-Whole Premium. (a) All Transaction Expenses incurred on or prior to the Construction Closing Date and substantiated by an appropriate invoice or otherwise supported in reasonable detail shall be paid by the Owner Lessor from the proceeds of Advances. Subject to Section 2.17(b) and the Mandate Letter, all other fees, costs and expenses incurred by the Funding Parties on or prior to the Construction Closing Date shall be for their respective accounts whether or not the Overall Transaction is consummated.

(b)                                 On the Construction Closing Date, all administration fees through the end of the Facility Lease Term charged by the Trust Company, the Independent Manager, the Pass Through Trustees, the Indenture Trustee and the Depositary Bank shall be paid by the Owner Lessor from the proceeds of Advances.

(c)                                  On and after the Lease Commencement Date, Make-Whole Premium shall be payable by the Company to the Noteholders, if and when due, as Supplemental Lease Rent.

(d)                                 All Transaction Expenses due and payable on the Lease Commencement Date by any Funding Party and substantiated by an appropriate invoice or otherwise supported in reasonable detail and which are in excess of the Transaction Expenses used in the Pricing Assumptions shall be paid directly by the Company. Any such payment shall not result in an adjustment to Basic Lease Rent.

Section 2.18               Limit on the Company’s Obligations. Notwithstanding anything to the contrary in any Operative Document or the Certificate Purchase Agreement, recourse of the Company in respect of any payment of its obligations under the Operative Documents or the Certificate Purchase Agreement made prior to the Lease Commencement Date or otherwise in respect of Project Costs made prior to the Lease Commencement Date shall be limited to the

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proceeds of Advances, Other Available Amounts and amounts payable by Persons that the Company is required to pay over to the Owner Lessor, any Noteholder, the Indenture Trustee, the Depository Bank, the Initial Purchaser or the Pass Through Trustees, except that (i) any payment obligation (other than any Non-Recourse Payment Obligation) pursuant to Article XII, Section 7 of the Certificate Purchase Agreement and Section 4.1(f) of the Disbursement Agreement shall not be paid with the proceeds of Advances or Other Available Amounts, but shall be paid directly by the Company with other funds of the Company, (ii) the Company shall be personally liable with respect to the exercise of remedies pursuant to Section 11.4 upon the occurrence of a Company Event of Default and, with respect to the payment of any obligation (other than any Non-Recourse Payment Obligation), pursuant to Article XII, Section 7 of the Certificate Purchase Agreement and Section 4.1(f) of the Disbursement Agreement, but in any such case, only to the extent provided in Section 11.5 and (iii) the Company shall be personally liable for all of its obligations under the Operative Documents or otherwise in respect of Project Costs if the Company delivers a Recourse Notification pursuant to Section 3.1 of the Construction Agency Agreement (and, no recourse limitations under the Operative Documents shall thereafter apply in any respect).

Section 2.19               Mandatory Prepayments of Lessor Notes; Mandatory Reduction of Owner Participant Commitment. (a) If, at any time prior to the Lease Commencement Date, the Company shall have received notice from the Unit 4 Owner of the Unit 4 Owner’s intention to exercise its option to make a lump sum payment (i) to the Owner Lessor to purchase an undivided ownership interest in all, but not a portion, of the Designated Shared Facilities (as defined in the Shared Facilities Agreement) pursuant to Section 4.1.4(b) of the Shared Facilities Agreement and/or (ii) to reimburse the Owner Lessor for 50% of the Existing Station Construction Work Sum (as defined in the Existing Facilities Upgrade Reimbursement Agreement) pursuant to Section 3.2.2 of the Existing Facilities Upgrade Reimbursement Agreement (such options, the “Unit 4 Owner Options”), the Company shall promptly notify the Owner Lessor, the Owner Participant and the Indenture Trustee of the exercise of either or both of such options. Such notice from the Company to the Owner Lessor, the Owner Participant and the Indenture Trustee shall specify (A) the Unit 4 Owner Option Base Amount expected to be received from the Unit 4 Owner upon the exercise of either or both of the Unit 4 Owner Options, (B) the amount of funds expected to be received from the Unit 4 Owner upon the exercise of either or both of the Unit 4 Owner Options in respect of Make-Whole Premium, Breakage Costs and Swap Termination Obligation and any other amounts due to the Secured Parties (other than accrued interest on the Lessor Notes) (the “Unit 4 Owner Option Other Amount”, and together with the Unit 4 Owner Option Base Amount, the “Unit 4 Owner Option Purchase Amount”) and (C) the date of expected receipt of the ▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, which date shall not be later than 5 Business Days prior to the Lease Commencement Date. Upon the Owner Lessor’s receipt of the ▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, the Owner Lessor shall promptly pay over such amount to the Indenture Trustee.

(b)                                 The Indenture Trustee shall distribute the Unit 4 Owner Option Base Amount to the Noteholders and the Owner Participant pro rata in accordance with the Debt/Equity Ratio in existence immediately prior to the receipt of such amount. The portion of the Unit 4 Owner Option Base Amount paid to the Indenture Trustee for distribution to the Noteholders pursuant to the preceding sentence shall be used to prepay the Lessor Notes, together with accrued interest to the date of such prepayment on the amount of Lessor Notes so

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prepaid, in the manner set forth in Section 3.5(d)(iii) of the Indenture. The portion of the Unit 4 Owner Option Base Amount paid to the Owner Participant pursuant to the first sentence of this Section 2.19(b) shall be used to prepay any outstanding Equity Contributions advanced by the Owner Participant to the Owner Lessor, together with accrued Equity Yield to the date of such prepayment on the amount of Equity Contributions so prepaid. Once prepaid pursuant to this Section 2.19(b), such Equity Contributions may not be re-advanced pursuant to Section 2.3 and the Owner Participant Commitment shall be permanently reduced by the amount of such prepayment.

(c)                                  The Indenture Trustee shall distribute the Unit 4 Owner Option Other Amount to the Noteholders in amounts sufficient to cover any Make-Whole Premium and any other amounts due and payable on the Lessor Notes (other than accrued interest), to the Owner Participant in amounts sufficient to cover any Breakage Costs due and payable on any LIBOR Rate Equity Contribution and to the Swap Counterparty in amounts sufficient to cover any Swap Termination Obligations due and payable under the Swap Agreement, in each such case, to the extent such amounts have become due and payable due to the exercise of either or both of the Unit 4 Owner Options and the related prepayment of the Lessor Notes and Equity Contributions.

(d)                                 The parties agree that all or a portion of the Unit 4 Owner Option Base Amount may be paid by the Unit 4 Owner on a date prior to the date specified for prepayment of the Lessor Notes in the notice of prepayment given pursuant to Section 3.6 of the Indenture. In such event, the parties agree that the amount of such early payment by the Unit 4 Owner may be held by the Company, in trust for the sole benefit of the Owner Lessor, and that the amount of such payment held by the Company shall be required to be paid over to the Owner Lessor immediately prior to the date specified for prepayment of the Lessor Notes in the notice of prepayment given pursuant to Section 3.6 of the Indenture. In no event shall any portion of the Unit 4 Owner Option Base Amount held by the Company be considered to be the Property of the Company, but shall at all times be and remain the Property of the Owner Lessor until paid over to the Indenture Trustee.

ARTICLE III

CONDITIONS PRECEDENT

Section 3.1                      Conditions Precedent to Construction Closing. The obligations of the parties hereto to consummate the transactions contemplated hereby on the Construction Closing Date shall be subject to prior or concurrent satisfaction or waiver of the following conditions, except that the obligations of any Person shall not be subject to such Person’s own performance or compliance with any of the following:

(a)                                 Documents Executed and Delivered on Construction Closing Date. On or before the Construction Closing Date, each of the documents set forth in Schedule 3.1(a) shall have been duly authorized, executed and delivered by the parties thereto and, if attached hereto as Exhibits, in substantially the form attached as an exhibit hereto, and executed counterparts of each shall have been delivered to each of the parties hereto (except that there shall be only one (1) original of the Series A Lessor Note and one (1) original of the Series B Lessor Note, which

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originals shall be delivered to the Series A Pass Through Trustee and the Series B Pass Through Trustee, respectively).

(b)                                 Project Documents. The Indenture Trustee and each Participant shall have received a true and complete copy of each of the following Project Documents, certified by the Company as such on the Construction Closing Date, each of which shall be in form and substance satisfactory to the Indenture Trustee and each such Participant and in full force and effect:

(i)                                     the EPC Contract;

(ii)                                  the Springerville Project Agreement;

(iii)                               the Supplemental Construction Agreement;

(iv)                              the Power Purchase Agreement;

(v)                                 the Fuel Supply Agreement;

(vi)                              the Fuel Transportation Agreement;

(vii)                           the O&M Agreement;

(viii)                        the Supplemental Fuel Handling Agreements;

(ix)                              the Shared Facilities Agreement;

(x)                                 the Existing Facilities Upgrade Reimbursement Agreement;

(xi)                              the Support and Operating Agreement;

(xii)                           the Interconnection Agreement;

(xiii)                        the Unit 1 Supplemental Agreement; and

(xiv)                       the Tucsonel Lease.

In addition, the Indenture Trustee and each Participant shall have received an Officer’s Certificate of the Company or other evidence satisfactory to it that each of the conditions precedent set forth in the Project Documents that are required to be satisfied on or prior to the Construction Closing Date (including the provision of notices and acknowledgements under Sections 5.4, 30.1 and 30.2 of the Springerville Project Agreement, Section 2(a) of the Intercompany Transfer Agreement and Section 2.1 of Amendment No. 2 to the Springerville Project Agreement) have been satisfied or waived by the parties thereto with the consent of the Required Participants and that no breach, default or violation by the Company, the Owner Lessor or, to the Company’s knowledge, any other Project Participant under any Project Document has occurred and is continuing and that no event or condition exists that could permit any party thereto to terminate any Project Document or suspend its performance thereunder or excuse such party from the failure to perform thereunder.

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(c)                                  Other Documents. Each of the Funding Parties shall have received certified copies of the Constitutive Documents of each of the other Funding Parties (other than the Initial Purchaser, the Depositary Bank, the Indenture Trustee and the Pass Through Trustees who shall not be required to provide such documents) and resolutions of the Governing Body of each such Funding Party duly authorizing the Overall Transaction and such documents and such evidence as each party may reasonably request in order to establish the authority of each such other party to consummate the transactions contemplated by the Transaction Documents, the taking of all corporate, limited liability company, trust, partnership and other proceedings in connection therewith and compliance with the conditions herein or therein set forth and the incumbency of all officers, members or partners signing any of the Transaction Documents. Each of the foregoing documents shall be reasonably satisfactory to the recipients thereof.

(d)                                 Representations and Warranties. The representations and warranties set forth in the Operative Documents (including pursuant to Article VI hereof) shall be true and correct on and as of the Construction Closing Date with the same effect as though made on and as of the Construction Closing Date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties were true and correct on and as of such date). Each of the Funding Parties shall have received an Officer’s Certificate of each of the other parties hereto (other than the Initial Purchaser, the Depositary Bank, the Indenture Trustee and the Pass Through Trustees who shall not be required to provide such documents) to such effect.

(e)                                  Default under Operative Documents. No Company Event of Default or Company Default shall have occurred and be continuing, or shall occur after giving effect to the issuance of the Initial Lessor Notes and the Certificates, the acceptance of the Equity Contributions and the making of the Advances on the Construction Closing Date. No Event of Loss shall have occurred.

(f)                                   Ratings.

(i)                                     The Certificates shall have been rated at least BBB- by S&P, Baa3 by ▇▇▇▇▇’▇ and BBB- by Fitch pursuant to a final ratings letter delivered by each of S&P, ▇▇▇▇▇’▇ and Fitch, respectively.

(ii)                                  The Company’s corporate or indicative credit rating shall be rated at least A from S&P, Baa2 from ▇▇▇▇▇’▇ and A from Fitch pursuant to a ratings letter delivered by each of S&P, ▇▇▇▇▇’▇ and Fitch, respectively.

(g)                                  Governmental Actions. All Governmental Approvals listed on Part A of Schedule 6.1(d) shall have been duly obtained or made and validly issued and shall be in full force and effect and, except as disclosed on Schedule 6.1(1), shall not be the subject of any pending or, to the knowledge of the Company, threatened judicial or administrative proceedings, and if the applicable statute, rule or regulation provides for a fixed period for judicial or administrative appeal or review thereof, such period shall have expired. The Indenture Trustee and each Participant shall have received true and complete copies of all such Governmental Approvals, certified by the Company as such.

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(h)                                 Construction Budget; Drawdown Schedule; Adequate Funding.

(i)                                     The Indenture Trustee and each Participant shall have received the Construction Budget, in form and substance reasonably satisfactory to each such Person and attached hereto as Schedule 3.1(h)(i), for all anticipated costs to be incurred in connection with the construction and start-up of the Facility and the Upgrades, including in the Construction Budget all construction and non-construction costs and all interest, taxes and other carrying costs relating to the Facility and the Upgrades, and such other information as the Indenture Trustee and each such Participant may reasonably request. The Construction Budget shall also be made available to the Indenture Trustee and each Participant in electronic form on the Construction Closing Date. The Construction Budget will contain an appropriate number of budget categories (each, a “Budget Category”), which will detail the estimated timing and value of draw downs in each such Budget Category, and the total of all estimated amounts to be drawn down in respect of such Budget Category (with respect to each Budget Category, the “Budget Category Amount”);

(ii)                                  The Indenture Trustee and each Participant shall have received an estimated schedule of Advances, in form and substance reasonably satisfactory to each such Person and attached hereto as Schedule 3. l(h)(ii) (the “Drawdown Schedule”). It is understood that the actual timing of Advances may deviate from the Drawdown Schedule to reflect construction progress; and

(iii)                               The Indenture Trustee and each Participant shall have received evidence reasonably satisfactory to each such Person that adequate funding exists to cover the full amount of the Construction Budget.

(i)                                     Financial Statements. The Indenture Trustee and each Participant shall have received a copy of (i) the audited consolidated financial statements of the Company and its consolidated Subsidiaries as at the end of the fiscal year ended December 31, 2002 and (ii) a copy of the unaudited consolidated financial statements of the Company and its consolidated Subsidiaries for the six-month period ended June 30, 2003. Each of such financial statements shall be reasonably satisfactory to each such Person, and shall not, in the reasonable judgment of such Persons reflect any material adverse change in the consolidated assets, liabilities, business operations or financial condition of the Company and its consolidated Subsidiaries, the Facility or the Site since the date of such financial statements.

(j)                                    Insurance Coverage. The Indenture Trustee and each Participant shall have received and found reasonably satisfactory, certificates of, or binders for, each policy of insurance required under Schedule 7.29, documenting insurance coverage and the Additional Insurance Beneficiary status as required, accompanied by a report of the Insurance Consultant addressed to the Indenture Trustee and each Participant stating that (i) insurance complying with the provisions of Schedule 7.29 and covering the risks and in the amounts referred to therein has been obtained and is in full force and effect, is not subject to cancellation without prior notice and that all currently due premiums therefor have been paid in full and (ii) the coverages contemplated by such insurance are reasonable for the Facility. Each Participant and the Indenture Trustee shall have received executed insurance brokers letters in customary form,

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dated as of the Construction Closing Date, identifying all insurance coverage in place as required by Schedule 7.29 and certifying that all premiums in respect of such policies are current.

(k)                                 Engineering Report. The Indenture Trustee and each Participant shall have received a report of the Engineering Consultant with respect to the technical and economic feasibility of the Facility and the Upgrades, the reasonableness of the terms of the EPC Contract (including design and specifications, the Construction Schedule, the Construction Budget and the contract prices), the capital budget, the status of Governmental Approvals, the ability of the Facility and the Upgrades to meet regulatory requirements, the adequacy of the “Phase I” and the “Phase II” environmental studies prepared with respect to the Site and such other matters relating to the Facility, the Upgrades, the Project Documents and the transactions contemplated hereby and thereby as the Indenture Trustee and the Participants shall reasonably request, which report shall be addressed to the Indenture Trustee and each Participant and shall be reasonably satisfactory in scope, form and substance to each such Person.

(l)                                     Intentionally Omitted.

(m)                             Intentionally Omitted.

(n)                                 Appraisal; Condition of the Facility. The Owner Participant and the Equity Investor shall have received the Closing Appraisal prepared by the Appraiser addressed and delivered only to the Owner Participant and the Equity Investor, such Appraisal to be in form and substance satisfactory to the Owner Participant and the Equity Investor. The Indenture Trustee and the Company shall have received a copy of the verification of value, useful life and estimated residual value prepared by the Appraiser in connection with the appraisal of assets subject to the Facility Lease, each of which will be reasonably satisfactory to each such Person. The parties acknowledge that neither the Owner Participant nor the Equity Investor is undertaking to provide the foregoing to the Indenture Trustee or the Company.

(o)                                 Opinion with Respect to Certain Tax Aspects. The Owner Participant and the Equity Investor shall have received the opinion of, Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, dated the Construction Closing Date, addressed and delivered only to the Owner Participant and the Equity Investor as to certain tax matters in form and substance satisfactory to the Owner Participant and the Equity Investor.

(p)                                 Opinions of Counsel. Each of the Funding Parties (other than the Depositary Bank) shall have received an opinion or opinions, dated the Construction Closing Date, of (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Senior Vice President and General Counsel of the Company, (ii) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special counsel to the Company, (iii) ▇▇▇▇▇ & ▇▇▇▇, P.A., Arizona counsel to the Company, (iv) Roshka ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special Arizona regulatory counsel to the Company, (v) Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel to the OP Guarantor, the Equity Investor and the Owner Participant, (vi) Bond ▇. ▇▇▇▇, counsel to the OP Guarantor, (vii) Potter ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special Delaware counsel to the Independent Manager and the Trust Company, (viii) Potter ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, special Delaware counsel to the Owner Lessor and the Owner Participant, (ix) Morris, James, Hitchens & ▇▇▇▇▇▇▇▇ LLP, special Delaware counsel to the Indenture Trustee and the Pass Through Trustees, (x) ▇▇▇▇▇ & ▇▇▇▇▇▇, L.L.P., special Arizona counsel to the Initial Purchaser, the OP Guarantor, the Equity Investor

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and the Owner Participant, (xi) ▇▇▇▇▇ ▇▇▇▇▇ Duke, counsel to the EPC Contractor, (xii) ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., special Arizona counsel to the EPC Contractor, (xiii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & Sutcliffe, special counsel to TEP, (xiv) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇., general counsel of TEP, (xv) Hunton & ▇▇▇▇▇▇▇▇, special environmental counsel to TEP, (xvi) Roshka ▇▇▇▇▇▇ & ▇▇▇▇▇▇, special Arizona regulatory counsel to TEP and (xvii) ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇ P.L.C., special counsel to SRP and the Unit 4 Owner. Each such opinion shall be in form and substance reasonably satisfactory to each recipient thereof. Each such Person expressly consents to the rendering by its counsel of the opinion referred to in this Section 3.1(p) and acknowledges that such opinion shall be deemed to be rendered at the request and upon the instructions of such Person, each of whom has consulted with and has been advised by its counsel as to the consequences of such request, instructions and consent. Furthermore, each such counsel shall, to the extent required, (i) include as addressees the Rating Agencies and the Initial Purchaser or (ii) permit the Rating Agencies and the Initial Purchaser to rely on its opinion as if such opinion were addressed to such parties. In addition, the Rating Agencies and the Company shall have received an appropriate non-consolidation opinion of Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, special counsel to the Owner Participant, relating to the bankruptcy of the Owner Lessor and the Owner Participant.

(q)                                 Perfection of Liens and Security Interests. The financing statements, instruments and other documents with respect to the filings and recordings described in Schedule 3.1(g) shall be in form and substance satisfactory to the Indenture Trustee and all such filings and recordings and all other filings and recordings and other actions that are necessary in order to establish, protect, preserve and perfect the Indenture Trustee’s Lien on and perfected security interest in all right, title, estate and interest of the Owner Lessor in and to the Collateral prior and superior to all other Liens, existing or future, except Permitted Liens, shall have been duly executed (if required to be executed by the Company and/or the Owner Lessor by Applicable Law) and delivered to the Indenture Trustee or its designees in proper form for filing, registration or recordation, and all fees, taxes and other charges relating to such filings and recordings and other actions shall have been paid by the Owner Lessor from the proceeds of Advances; and when such documents are filed or recorded, the Indenture Trustee shall have a first Lien on and prior perfected security interest in all right, title, estate and interest of the Owner Lessor in and to the Collateral prior and superior to all other Liens, except Permitted Liens. In addition, the Indenture Trustee shall have received copies of Uniform Commercial Code, judgment and tax lien search reports with respect to each “Debtor” specified in Schedule 3.1(q) in each jurisdiction in which financing statements are to be filed confirming that no Uniform Commercial Code filing exists with respect to the Property of such Person.

(r)                                    No Liens. There shall be no Liens (other than Permitted Liens) on the Facility, the Ground Interest, the Project Document Interest or the other Collateral.

(s)                                   Taxes. All Taxes, if any, due and payable on or before the Construction Closing Date in connection with the execution, delivery, recording and filing of this Agreement or any other Operative Document required to be executed and delivered on or before the Construction Closing Date, or any document or instrument contemplated thereby, shall have been duly paid in full.

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(t)                                    No Changes in Applicable Laws. No change shall have occurred in Applicable Laws or the interpretation thereof by any competent court or other Governmental Authority that would make it illegal for any Funding Party to participate in the Overall Transaction or would materially adversely affect the Company, the Facility, the Site or the Transaction Documents.

(u)                                 No Tax Law Change. The Owner Participant shall not have delivered notice to the Company that a Material Adverse Tax Law Change shall have occurred.

(v)                                 Title Insurance. Each of the Title Policies shall have been delivered to the Indenture Trustee, each Participant and the Owner Lessor in form and substance reasonably satisfactory to each such Person. The Indenture Trustee and the Owner Participant shall also have received evidence that the premium in respect of such Title Policies has been paid.

(w)                               Survey. Each Participant, the Indenture Trustee and the Owner Lessor shall have received a copy of the Survey certified and delivered to the Company, each Participant, the Indenture Trustee and the Owner Lessor, which Survey shall be in form and substance reasonably satisfactory to each such Person.

(x)                                 Utility Regulation. The Indenture Trustee and each Participant shall have received evidence reasonably satisfactory to it that (i) none of the Company or any of its Subsidiaries is a “holding company” or a “subsidiary company” or an “affiliate” of a “holding company” within the meaning of PUHCA and (ii) the Company shall have filed an application with FERC seeking (A) a declaratory order disclaiming jurisdiction during the Facility Lease Term over certain of the Funding Parties and (B) EWG Status Orders determining that each of the Owner Lessor and the Owner Participant is an “exempt wholesale generator” as defined in Section 32(a) of PUHCA.

(y)                                 Environmental Report. The Indenture Trustee and each Participant shall have received the Environmental Report, which shall be addressed to the Indenture Trustee, each Participant and the Equity Investor and shall be reasonably satisfactory to each such Person in scope, form and substance.

(z)                                  Chattel Paper. The original chattel paper counterpart of the Facility Lease shall have been delivered to the Indenture Trustee.

(aa)                          Notice to Proceed. The Company, in its capacity as Construction Agent, shall have issued the Notice to Proceed under the EPC Contract. The Indenture Trustee and each Participant shall have received an Officer’s Certificate from the EPC Contractor stating that the EPC Contractor knows of no facts or conditions not previously disclosed to the Indenture Trustee, the Participants and the Engineering Consultant that would entitle the EPC Contractor to a material Change Order under the EPC Contract.

(bb)                          Fees. All fees and expenses due and payable on or prior to the Construction Closing Date pursuant to Section 2.17 shall have been paid.

(cc)                            Letter as to Number of Offerees. (i) The Owner Participant, the Company and the Indenture Trustee shall have received a certification from the Lease Advisor as to the

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number of offerees by it of the Lessor Estate and the Equity Contributions and (ii) the Company and the Indenture Trustee shall have received a certification from the Owner Participant as to the number of offerees by it of the Lessor Estate, the Initial Lessor Notes and the manner of offering thereof.

(dd)                          Operating Lease Treatment. The Company shall have determined that the Facility Lease qualifies as an operating lease (subject to any Rent adjustments pursuant to the Operative Documents that may be applied on the Lease Commencement Date) under GAAP, including FAS 13.

(ee)                            Evidence of Necessary Utility Rights. The Indenture Trustee and each Participant shall have received evidence that all utility services, roadway access and fuel and interconnection services necessary for the construction and operation of the Facility are and will be available to the Facility on commercially reasonable terms.

(ff)                              Adequate Rights. The Indenture Trustee and each Participant shall have received evidence that all necessary titles, leaseholds and Appurtenant Rights that are required for the construction and operation of the Facility have been obtained, free and clear of all Liens, except for Permitted Liens.

(gg)                            EPC Security. The EPC Security in the amount required by the EPC Contract shall have been issued for the benefit of and received by the Indenture Trustee.

(hh)                          No Material Adverse Effect. No event shall have occurred and be continuing, and no condition exists, that has had or could reasonably be expected to have a Material Adverse Effect.

(ii)                                  Certificate Purchase Agreement. The Company, the Owner Lessor and the Initial Purchaser shall have executed and delivered the Certificate Purchase Agreement and all conditions precedent to the issuance of the Certificates contained in the Certificate Purchase Agreement shall have been satisfied or waived by the Initial Purchaser. The Initial Purchaser shall have purchased the Certificates pursuant to, and in accordance with the terms of, the Certificate Purchase Agreement, and the proceeds received from the offering of the Certificates shall have been provided to the Owner Lessor through the purchase by the Pass Through Trustees of the Initial Lessor Notes.

(jj)                                Registered Agent. CT Corporation System shall have been appointed by the Company as registered agent for service of process in the State of New York as provided in the Operative Documents and CT Corporation System shall have accepted such appointment.

Section 3.2                      Conditions Precedent to Advances. The obligations of the Participants to make Advances (including the withdrawal and distribution of any proceeds of the Lessor Notes held in the Note Proceeds Account) to the Owner Lessor during the Commitment Period and the obligation of the Owner Lessor to make Advances to the Company during the Commitment Period shall be subject to the satisfaction or waiver on the date such Advance is made (or, with respect to the condition set forth in Section 3.2(i), on an annual basis during the Commitment Period and in any event on the date of the last requested Advance to be made pursuant to Section 4.3(a)) of the following conditions precedent:

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(a)                                 Construction Closing Date. The Construction Closing Date shall have occurred.

(b)                                 Funding Request; Invoices. With respect to Advances by the Participants pursuant to Section 2.2 and Section 2.3, the Owner Lessor, the Owner Participant and the Indenture Trustee shall have received a Funding Request from the Company in accordance with Section 2.3(c) and copies of invoices with respect to Project Costs to be paid with the proceeds of such Advances, if available.

(c)                                  Payment of Project Costs. The Indenture Trustee and the Owner Participant shall have received an Officer’s Certificate (such Officer’s Certificate may be contained in the related Funding Request) from the Company certifying that (i) the amount of the Advance requested by the Company on the date of such Advance shall not exceed the amount of Project Costs due and payable within thirty (30) days of the date of such Advance, or in the case of the initial Advance of funds on the Construction Closing Date, the amount of such Advance requested by the Company shall not exceed the amount of Project Costs due and payable on or before November 30, 2003 (in either case, as such Project Costs are set forth in the related Funding Request delivered to the Indenture Trustee and the Owner Participant with respect to such Advance), (ii) the proceeds of such Advance shall be used solely to pay Project Costs and (iii) such Project Costs are in accordance with the Construction Budget.

(d)                                 No Other Proceeds. With respect to any Advance, the Owner Participant and the Indenture Trustee shall have received an Officer’s Certificate (such Officer’s Certificate may be contained in the related Funding Request) from the Company certifying that the proceeds of all prior Advances shall have been expended or applied pursuant to the provisions of the Operative Documents and the Construction Budget or remain in the Inflow Account, the Equity Proceeds Account or the Note Proceeds Account to be applied against subsequent requisitions (and the items for which amounts are requested in the subject Funding Request shall have not been the basis for a previous Funding Request).

(e)                                  Representations and Warranties of the Company. The representations and warranties of the Company set forth in Section 6.1 and the Operative Documents shall be true and correct in all material respects, on and as of the date of such Advance with the same effect as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date, in which case such representations and warranties were true and correct in all material respects on and as of such date). Each of the Indenture Trustee and the Owner Participant shall have received an Officer’s Certificate (such Officer’s Certificate may be contained in the related Funding Request) from the Company to such effect.

(f)                                   No Company Default, Company Event of Default or Event of Loss. No Company Event of Default or Company Default shall have occurred and be continuing on the date of such Advance, or shall occur after giving effect to the Advance to be made on such date. No Event of Loss shall have occurred. No breach, default or violation by the Company, the Owner Lessor or the EPC Contractor under the EPC Contract shall have occurred and be continuing that permits the EPC Contractor to terminate the EPC Contract or suspend its performance thereunder (unless the EPC Contractor shall have irrevocably waived its right to terminate the EPC Contract or suspend its performance thereunder from its failure to perform

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thereunder, in each case, with respect to the circumstance giving rise to the breach, default or violation).

(g)                                  Engineering Consultant Report. With respect to each Advance other than the Advance made on the Construction Closing Date, the Owner Participant and the Indenture Trustee shall have received a certificate of the Engineering Consultant (the “Engineering Consultant’s Certificate”) dated not more than four (4) Business Days prior to the date of such Advance, (i) identifying the Project Costs that have been properly incurred and are due and payable on the date of such Advance and itemizing the use of the proceeds of the Advance to be made on the date of such Advance by Budget Category, (ii) stating that (A) construction of the Facility is proceeding satisfactorily, in a good and workmanlike manner and according to the EPC Contract and the Construction Schedule, the amount to be paid to the EPC Contractor does not exceed the amount required to be paid in accordance with Section 4.2 and Schedule A to the EPC Contract (as adjusted to reflect any Change Orders permitted or approved pursuant to Section 7.19), (B) as of the date of such Engineering Consultant’s Certificate, and without giving effect to any Advances made on such date, the estimated cost of completing the Facility and paying amortization, Equity Yield, interest, taxes (or payments in lieu thereof), rent and other carrying costs through completion does not exceed the sum of (1) the Available Owner Participant Commitment and (2) the amount on deposit in the Inflow Account, the Equity Proceeds Account, the Note Proceeds Account and the Completion Escrow Account, (C) in its judgment, Completion of the Facility should occur prior to the Outside Completion Date and (D) to the best of its knowledge, no events or changes have occurred since the date of the last Engineering Consultant’s Certificate that would have a material adverse effect on the Facility, (iii) describing (x) the results of the Engineering Consultant’s most recent site visit to the Facility and (y) the results of the Engineering Consultant’s review of the EPC Contractor’s most recent monthly progress report (including with respect to the areas of design, procurement and start-up), which monthly progress report shall certify as to the matters set forth in clause (ii) above and shall be delivered to the Indenture Trustee and the Owner Participant and (iv) specifying the estimated date for Completion.

(h)                                 Insurance. The Owner Participant and the Indenture Trustee shall have received an Officer’s Certificate (such Officer’s Certificate may be contained in the related Funding Request) of the Company stating that all insurance coverages required to be obtained by or on behalf of the Company pursuant to Schedule 7.29 are in place and are in full force and effect.

(i)                                     Master Indenture; RUS Loan Agreement. No “event of default” (as such term is defined in the Master Indenture) shall have occurred and be continuing under the Master Indenture and no “event of default” (as such term is defined in the RUS Loan Agreement) shall have occurred and be continuing under the RUS Loan Agreement, other than any “event of default” arising in respect of any of Section 2.1(g), 2.1(1) or 6.14 of the RUS Loan Agreement.

(j)                                    Title Endorsement. The Indenture Trustee, the Owner Lessor and the Owner Participant shall have received from the Title Company a notice of title continuation or an endorsement, on satisfactory terms, to the Title Policies theretofore delivered (insuring as of each anniversary of the Construction Closing Date), covering all Advances made through the date of such endorsement and indicating that since the date of the previous such endorsement (or, if

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none, since the effective date of said Title Policy), there shall have been no change in the state of title to the Facility and the Site and that there are no Liens (other than Permitted Liens) affecting the Facility or the Site that may take priority over the Lien of the Security Documents with respect to the Advances made through the date of such endorsement. If there is any charge for such endorsement, such endorsement shall have been issued at regular rates, without hazard or extra premium and without any indemnification of the Title Company by the Company or any other Person for any risk the Title Company is otherwise assuming. Such endorsement shall reflect that no Liens arising from labor and services performed and materials furnished through the date of such endorsement have been filed in Apache County, Arizona, prior to the date of such endorsement, except for Permitted Liens. The Title Company, the Owner Participant, the Owner Lessor and the Indenture Trustee shall have received any and all affidavits, lien waivers, certificates and other documents, in form and substance satisfactory to each such Person, that may be required by the Title Company as a condition to issuing the endorsement referred to above.

(k)                                 Project Documents, (i) Each of the Material Project Documents shall be in full force and effect and (ii) each of the Owner Lessor and the Company shall have complied in all material respects with its covenants and obligations with respect to each of the Material Project Documents.

(l)                                     No Significant Company Event. Since the Construction Closing Date, no event has occurred, and no condition exists, that has resulted in a Significant Company Event or could reasonably be expected to result in, a Significant Company Event.

(m)                             Regulatory Approvals. No order shall have been issued by the Arizona Corporation Commission that takes the position or states mat an approval from the Arizona Corporation Commission was required in connection with the granting and/or transfer of certain rights and interests from TEP or any of its Affiliates to the Owner Lessor under any of the Transaction Documents or the Intercompany Transfer Agreement.

ARTICLE IV

LEASE COMMENCEMENT

Section 4.1                      Notice of Completion Date; Occurrence of Lease Commencement Date.

(a)                                 Prior Notice of Completion; Completion. The Company covenants that it will give each of the other Funding Parties (other than the Initial Purchaser) at least thirty (30) days prior written notice of the expected Completion Date; provided, that Company shall have no liability to any Person for failure to provide such notice.

(b)                                 Notice of Lease Commencement Date. The Company will provide written notice (such notice to include the Required Rent Adjustment Information (it being understood that such information is subject to change pursuant to Section 4.2(a)(ii))) to each of the other Funding Parties (other than the Initial Purchaser) advising each such Person of a date (the “Lease Commencement Date”) on which the lease commencement closing (the “Lease Commencement

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Closing”) is scheduled to occur, which date must be a Business Day not less than fifteen (15) days after such notice, provided, that Company may revoke such notice in the event that the Company reasonably determines that the Completion Date will not occur prior to the proposed Lease Commencement Date (but shall promptly thereafter provide a new notice in accordance with this Section 4.1(b)). In any event, the Lease Commencement Date shall occur on or before the tenth (10th) day after the Completion Date, but in no event shall the Lease Commencement Date occur prior to the date that the Facility has been placed in service for United States federal income tax purposes and has been synchronized into the electric transmission grid, in each case, as confirmed by the Special Tax Advisor. On the Completion Date, the Company shall provide each of the Funding Parties (other than the Initial Purchaser) with evidence that the Completion Date has occurred. The Owner Participant shall provide the Company with a preliminary proposal with respect to the adjustments required by Section 3.4(a)(i) of the Facility Lease within ten (10) days of receipt of the Required Rent Adjustment Information.

Section 4.2                      Actions Prior to the Lease Commencement Date.

(a)                                 Facility Lease Adjustments.

(i)                                     After the Company has given the notice required by Section 4.1 (a), the Company shall request a letter from the Appraiser indicating any revisions to the cost segregation analysis provided in the Closing Appraisal resulting from any variations in the actual constructed property as of the Lease Commencement Date from the property planned to be constructed on the Construction Closing Date.

(ii)                                  After the Company has given the notice required by Section 4.1(b) with respect to the Lease Commencement Date and has, no later than ten (10) Business Days prior to the scheduled Lease Commencement Date, provided a final notice of the Required Rent Adjustment Information to the Owner Participant, the Owner Participant shall promptly take all actions necessary and appropriate to provide the Company with the Owner Participant’s proposal with respect to the adjustments required by Section 3.4(a)(i) of the Facility Lease (such adjustments to give effect to, among other things, any Performance Liquidated Damages received on or prior to the Lease Commencement Date, the Targeted LD Amount determined pursuant to Section 4.5, the amount of the Unit 4 Owner Option Purchase Amount, if any, and the projected Advances or payments under Section 4.3(a) and, if required, Section 4.4), and in any event shall provide the Company with such proposed adjustments within five (5) Business Days of the receipt of the final Required Rent Adjustment Information. The Company and the Owner Participant will negotiate in good faith prior to (or after as mutually agreed) the Lease Commencement Date to resolve any differences with respect to the adjustments required by Section 3.4(a)(i) of the Facility Lease. The parties hereto acknowledge that all such adjustments shall (A) be in compliance with the tests of Sections 4.02(5) and 4.07 of Revenue Procedure 2001-29 and (B) be made in a manner so that the Facility Lease complies with the safe harbor set forth in Treasury Regulations Section 1.467-3(c)(3)(i) and therefore avoids any potential characterization of the Facility Lease as a “disqualified leaseback or long-term agreement” within the meaning of Section 467 of the Code.

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(b)                                 Final Funding Request. At least eight (8) Business Days prior to the then scheduled Lease Commencement Date, the Company shall submit a final Funding Request (the “Final Funding Request”) requesting a final Advance from the Participants for all remaining Project Costs (incurred or expected), including any Project Costs relating to Punch List items to be completed after the Lease Commencement Date pursuant to Section 6.1.4 of the EPC Contract and any other Project Costs that may be required to be paid after the Lease Commencement Date under any of the other Construction Documents.

Section 4.3                      Actions on the Lease Commencement Date; Payment of Project Costs.

(a)                                 Final Construction Advance. Not later than 11:00 A.M., New York City time, on the Lease Commencement Date, but subject to Sections 2.3(a) and (b) and 3.2 (but not subject to Section 2.3(c) or (d)), (i) an amount equal to the Debt Funding Amount requested by the Company pursuant to the Final Funding Request shall be withdrawn from the Note Proceeds Account and either transferred to the Completion Escrow Account in accordance with Sections 3.1(d) and 3.2 of the Disbursement Agreement or distributed in accordance with Section 3.5(a) of the Disbursement Agreement and (ii) the Owner Participant shall wire transfer an amount, in Dollars and in immediately available funds, equal to the Equity Funding Amount requested by the Company pursuant to the Final Funding Request to the Equity Proceeds Account, which amount shall be withdrawn from the Equity Proceeds Account and either transferred to the Completion Escrow Account in accordance with Sections 3.1(d) and 3.2 of the Disbursement Agreement or distributed in accordance with Section 3.5(a) of the Disbursement Agreement. On the Lease Commencement Date, the Company shall use the proceeds of such Advance to pay, or cause to be paid, all remaining Project Costs, other than amounts representing Punch List items to be completed after the Lease Commencement Date pursuant to Section 6.1.4 of the EPC Contract and any other Project Costs under any other Construction Documents not required to be paid under such Construction Documents until after the Lease Commencement Date and the remaining proceeds of such Advance, which shall be an amount at least equal to the sum of the amounts of such Punch List items and such other Projects Costs, shall have been deposited into the Completion Escrow Account.

(b)                                 Rent Adjustments. Subject to Section 4.2(a), the Owner Lessor and the Company, without necessity of any consent or approval from any other Funding Party other than the Owner Participant, shall execute and deliver a supplement to the Facility Lease reflecting the Rent adjustments required to be made pursuant to Section 3.4(a)(i) of the Facility Lease (such adjustments to give effect to any Performance Liquidated Damages received on or prior to the Lease Commencement Date, the Targeted LD Amount determined pursuant to Section 4.5, the amount of the Unit 4 Owner Option Purchase Amount, if any, and the projected Advances or payments under Section 4.3(a) and, if required, Section 4.4) and the Company shall update Exhibit 1 and Exhibit 2 to the Tax Indemnity Agreement and provide such updated exhibits to the Owner Participant.

(c)                                  Commencement of Facility Lease Term and Site Lease Term. On the Lease Commencement Date, the Owner Lessor shall deliver possession of the Facility and the Ground Interest to the Company pursuant to the terms of the Facility Lease and the Site

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Sublease, respectively, and the Facility Lease Term and the Site Sublease Term shall immediately commence.

(d)                                 Assignment of Project Document Interest. On the Lease Commencement Date, the Owner Lessor shall assign, transfer, sell, convey and set over the Project Document Interest to the Company, and the Company shall accept and assume such assignment, transfer, sale, conveyance and set over of all rights and obligations in respect of the Project Document Interest, pursuant to the terms of the Assignment and Assumption Agreement.

(e)                                  Completion Certificate. On the Lease Commencement Date, each of the Indenture Trustee and the Owner Participant shall have received a certificate, substantially in the form of Exhibit Q (the “Completion Certificate”), duly completed and executed and delivered by a duly Authorized Officer of each of the Company and the Engineering Consultant.

Section 4.4                      Lease Commencement Date Commitment of Owner Participant. On the Lease Commencement Date and following the Advance contemplated by Section 4.3(a)(ii), but only to the extent that, after giving effect to the Advance contemplated by Section 4.3(a)(ii), the Debt/Equity Ratio is less than the Lease Term Debt/Equity Ratio, the Owner Participant shall make an additional Equity Contribution available to and for the account of the Owner Lessor in an amount sufficient to cause the Debt/Equity Ratio immediately after such contribution by the Owner Participant to be equal to the Lease Term Debt/Equity Ratio (after giving effect to the Advance contemplated by Section 4.3(a)(ii)); provided, that in no event shall the aggregate amounts expended by the Owner Participant pursuant to this Section 4.4 and pursuant to Sections 2.2, 2.3 and 4.3(a)(ii) exceed the Owner Participant Commitment set forth opposite the Owner Participant’s name on Schedule I. The Owner Lessor shall promptly apply all amounts funded by the Owner Participant pursuant to this Section 4.4 to the prepayment of the Lessor Notes in accordance with Section 3.5(d)(ii)of the Indenture.

Section 4.5                      Performance Liquidated Damages. (a) After the Company has given the notice required by Section 4.1(a), but no later than 30 days prior to the scheduled Lease Commencement Date, the Company shall provide the Owner Lessor, the Owner Participant and the Indenture Trustee with an estimate of the amount of Performance Liquidated Damages that are expected to be received from the EPC Contractor pursuant to the EPC Contract (the “Targeted LP Amount”).

(b)                                 On the Lease Commencement Date and in connection with the adjustments required by Section 3.4(a)(i) of the Facility Lease, to the extent that the Company determines that any Targeted LD Amount is expected to be received from the EPC Contractor under the EPC Contract, the Owner Lessor and the Company shall include in the adjustments to Basic Lease Rent payable under the Facility Lease an amount of Basic Lease Rent payable on the third Rent Payment Date to occur after the Lease Commencement Date equal to the Targeted LD Amount. If the Targeted LD Amount is less than or equal to $10,000,000, then the portion of such payment of Basic Lease Rent attributable to the Targeted LD Amount shall be retained by the Owner Lessor (in addition to any other amount payable to the Owner Participant on such date) and shall not be used to prepay the Lessor Notes. If the Targeted LD Amount exceeds $10,000,000, then (i) the portion of such Basic Lease Rent attributable to the Targeted LD Amount payment up to $10,000,000 (in addition to any other amount payable to the Owner

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Participant on such date) shall be retained by the Owner Lessor and shall not be used to prepay the Lessor Notes and (ii) the portion of such Basic Lease Rent payment attributable to the Targeted LD Amount in excess of $10,000,000 shall be paid to the Indenture Trustee, for distribution to the Noteholders, and to the Owner Participant, pro rata in accordance with the Debt/Equity Ratio in existence immediately after giving effect to the transaction described in clause (i) above. The amount paid to the Indenture Trustee, for distribution to the Noteholders, pursuant to the preceding sentence shall be used to prepay the Lessor Notes in accordance with Section 3.5(d)(i) of the Indenture.

(c)                                  To the extent that the amount of Performance Liquidated Damages actually received from the EPC Contractor pursuant to the EPC Contract exceeds the Targeted LD Amount (the amount of such excess, the “Excess LD Amount”), such Excess LD Amount (as assigned to the Owner Lessor pursuant to Section 2 of the Assignment and Assumption Agreement) shall be paid directly to the Owner Lessor and shall be deposited into the Major Expenditure Account for distribution in accordance with Section 3.7 of the Disbursement Agreement.

ARTICLE V

EXTENT OF INTEREST OF NOTEHOLDERS

No Noteholder shall have any further interest in, or other right with respect to, the Liens created by the Security Documents when and if the principal of and interest on all Lessor Notes owing to such Noteholder and all other sums payable to such Noteholder hereunder, under the Indenture and under the other Operative Documents shall have been paid in full. Each Noteholder agrees that it will look solely to the income and proceeds from the Collateral to the extent available for distribution to such Noteholder as provided in Article IV of the Indenture, and that neither the Owner Participant nor the Owner Lessor shall be personally liable to any Noteholder for any amounts payable hereunder, under the Indenture or under any other Operative Document, except as expressly provided in the Operative Documents.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES

Section 6.1                      Representations and Warranties of the Company. The Company represents and warrants that:

(a)                                 Organization; Power. It (i) is a cooperative corporation duly organized, validly existing and in good standing under the laws of the State of Colorado, (ii) is duly licensed or qualified to do business and is in good standing in the State of Arizona and in each other jurisdiction where the nature of its business or the ownership of its Property requires such qualification, (iii) has all requisite corporate power, authority and legal right to construct, own, lease and operate the Property it purports to own and to carry on its business as now being conducted and as proposed to be conducted by it and (iv) has all requisite corporate power, authority and legal right and holds all requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Transaction Documents to which it is or will be a party except, with respect to clause (ii) and (iii), where the failure to be so

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qualified or be in good standing (except with respect to qualification in the State of Arizona) or the failure to obtain such Governmental Approvals would not reasonably be expected to result in a Material Adverse Effect.

(b)                                 Due Authorization; Enforceability, Etc. This Agreement and each of the other Transaction Documents to which the Company is or will be a party have been or, when executed and delivered will be, duly authorized, executed and delivered by all necessary corporate action by the Company and, this Agreement constitutes and, assuming the due authorization, execution and delivery by each other party thereto, when executed and delivered, each other Transaction Document to which the Company is or will be a party will constitute, legal, valid and binding obligations of the Company, enforceable against it in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity.

(c)                                  Non-Contravention. The execution, delivery and performance by the Company of this Agreement and each of the other Transaction Documents to which it is or will be a party, the consummation by the Company of the transactions contemplated hereby and thereby, and the compliance by the Company with the terms and provisions hereof and thereof, do not and will not (i) contravene any Applicable Law (including Environmental Laws) binding on or affecting the Company or its Property or the Facility, (ii) contravene any of the Company’s Constitutive Documents, (iii) require any action, consent or approval by any trustee or holder of any Indebtedness of the Company, (iv) contravene or constitute a violation of, or a default by, the Company under any Contractual Obligation binding on or affecting the Company or its Property or (v) result in, or require the creation or imposition of, any Lien upon the Property of the Company (other than pursuant to the Master Indenture or as permitted pursuant to any Operative Document).

(d)                                 Government Approvals. Except for those Governmental Approvals which are set forth in Schedule 6.1(d), no Governmental Approval is required in connection with (a) the execution, delivery and performance by the Company or the Owner Lessor of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby, (b) the construction, use, lease, ownership or operation of the Facility and to the Actual Knowledge of the Company, the Common Facilities or the Fuel Handling Facilities or (c) the making of the Equity Contributions and the issuance of the Lessor Notes and the Certificates, in each case, as contemplated by the Operative Documents. Each of the Governmental Approvals listed in Part A of Schedule 6.1(d) has been duly obtained or made, was validly issued and is in full force and effect and, except as otherwise disclosed on Schedule 6.1(1), is not the subject of any pending or threatened judicial or administrative proceedings, and if the applicable statute, rule or regulation provides for a fixed period for judicial or administrative appeal or review thereof, such period has expired. None of the Governmental Approvals listed in Part B of Schedule 6.1(d) is required to be obtained prior to the date hereof and each thereof is customarily obtained at a later stage of construction of the Facility or after the Completion Date. The Company reasonably expects that each of the Governmental Approvals listed in Part B of Schedule 6.1(d) can be obtained or made in the normal course of business as and when required without significant delay or material impairment to the consummation and performance of the Overall Transaction. Each of the Company and the Owner Lessor, as the case may be, is in

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compliance with all Governmental Approvals required to be obtained as of the Construction Closing Date, any subsequent Advance date or on the Lease Commencement Date, as the case may be, other than any failure with which to be in compliance as of such date would not have a Material Adverse Effect.

(e)                                  Transaction Documents. Each of the Transaction Documents is in full force and effect and the Company or the Owner Lessor, as the case may be, has not given or received any notice of default thereunder and, to the Company’s Actual Knowledge (i) no default, breach or violation has occurred and is continuing under any Transaction Document and (ii) no event of “force majeure” under any Project Document has occurred and is continuing that affects the performance under such Project Document of any other Project Participant under such Project Document.

(f)                                   No Company Default or Company Event of Default: No Event of Loss. No Company Default or Company Event of Default has occurred or will occur as a consequence of the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby and the performance by the Company of its obligations hereunder or thereunder. No Event of Loss has occurred or will occur as a result of the execution and delivery of the Transaction Documents and the consummation of the transactions contemplated hereby and thereby and the performance by the Company of its obligations hereunder or thereunder.

(g)                                  Compliance with Applicable Laws. The Company is in compliance in all material respects with all Applicable Laws (including Environmental Laws) and Governmental Approvals applicable to it or relating to the construction, operation, maintenance, use, lease or ownership of the Facility.

(h)                                 Litigation. Except as set forth on Schedule 6.1(h), there is no pending or, to the knowledge of the Company, threatened (i) action, suit, arbitration, litigation, investigation or proceeding in law or in equity against the Company, any Property of the Company, the Facility, the Upgrades, the Springerville Generating Station, the Site or to the Actual Knowledge of the Company, the Common Facilities that could reasonably be expected to have a Material Adverse Effect or (ii) injunction, writ, preliminary restraining order or other order of any nature issued by an arbitrator, court or any other Governmental Authority against the Company, any Property of the Company, the Facility, the Upgrades, the Springerville Generating Station, the Site or to the Actual Knowledge of the Company, the Common Facilities that could reasonably be expected to have a Material Adverse Effect.

(i)                                     Title; Liens.

(i)                                     The Owner Lessor has (A) good, clear, record and marketable title to the Facility and the other tangible personal property forming a part of the Collateral purported to be covered by the Lien of the Security Documents, free and clear of all Liens other than Permitted Liens, (B) good, clear, record and marketable title or valid leasehold rights or other interests in the Ground Interest, free and clear of all Liens other than Permitted Liens and (C) good, clear, record and marketable title to or a valid leasehold, easement interest or, in the case of the Fuel Handling Facilities and the

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Common Facilities only, a valid right of use, free and clear of all Liens other than Permitted Liens, in all Appurtenant Rights required for access to, and construction and/or operation of, the Facility, the Fuel Handling Facilities and the Common Facilities as contemplated by the applicable Transaction Documents, other than any thereof not needed for the construction of the Facility that the Company has no reason to believe it will not be able to obtain by the time needed on commercially reasonable terms.

(ii)                                  When duly authorized, executed and delivered by each of the parties thereto, the Indenture and the other Security Documents will create a valid Lien in favor of the Indenture Trustee in the Facility, the Ground Interest, the Project Document Interest and the other Collateral and no filing, recording, registration or notice with any federal or state Governmental Authority will be necessary to establish or, except for such filings and recordings as will be made pursuant to Section 3.1 (q), to perfect, or give record notice of, the Lien in favor of the Indenture Trustee in the Facility, the Ground Interest, the Project Document Interest and the other Collateral to the extent such Lien may be created or perfected by filings or recordings.

(j)                                    Utility Regulation.

(i)                                     None of the Company or any of its Subsidiaries is a “holding company” or a “subsidiary company” or an “affiliate” of a “holding company” within the meaning of PUHCA.

(ii)                                  On and after the date of receipt from the FERC of the EWG Status Orders required to be obtained pursuant to Section 7.30, each of the Owner Lessor and the Owner Participant has been determined by the EWG Status Orders to be and is an “exempt wholesale generator” as defined under Section 32(a) of PUHCA, and, as a result, based solely on its participation in the Overall Transaction, neither the Owner Lessor nor the Owner Participant can be considered an “electric utility company” or a “public utility company” under PUHCA and each is exempt from all provisions of PUHCA.

(iii)                               After receipt from the FERC, (A) the EWG Status Orders obtained from the FERC pursuant to Section 7.30 were validly issued by the FERC and are final and in full force and effect and (B) neither the EWG Status Orders nor the Owner Lessor’s or the Owner Participant’s status as an “exempt wholesale generator” as defined under Section 32(a) of PUHCA, is the subject of any pending or, to the Company’s knowledge, threatened judicial or administrative proceeding.

(iv)                              The Company is not subject to any regulation as a “public service corporation” under Arizona law and is not otherwise subject to any regulation under Arizona law relating to “public service corporations” that could reasonably be expected to have a Material Adverse Effect.

(v)                                 None of the Trust Company, the Independent Manager, the Noteholders, the Depository Bank, the Owner Participant, the Owner Lessor, the Indenture Trustee, the Equity Investor, the OP Guarantor or the Initial Purchaser will, during the Facility Lease Term, solely by reason of (i) the ownership of the Facility by

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the Owner Lessor or the construction, use, leasing, operation or maintenance of the Facility by the Company, (ii) the making of the Equity Contributions and the issuance of the Lessor Notes and the Certificates, in each case, as contemplated by the Operative Documents or (iii) the consummation of any other transaction contemplated by any Transaction Document, be deemed by any Governmental Authority having jurisdiction to be or otherwise become a “public utility”, a “public utility company”, a “public utility holding company”, a “public service company”, a “public service corporation”, an “electric utility”, an “electric company”, an “electric utility company” or any similar type of entity (or an affiliate of any thereof) under any Applicable Law (including PUHCA, the Federal Power Act, Article XV of the Arizona Constitution or Title 40 of the Arizona Revised Statutes) or otherwise subject to any regulation relating to any such type of entity (or an affiliate of any thereof) under any Applicable Law (including PUHCA, the Federal Power Act, Article XV of the Arizona Constitution or Title 40 of the Arizona Revised Statutes).

(k)                                 Securities Act. Neither the Company nor anyone authorized by the Company has directly or indirectly offered or sold any interest in the Member Interest, the Lessor Notes, the Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Member Interest, the Lessor Notes, the Certificates or any part thereof, solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act.

(l)                                     Environmental Warranties.

(i)                                     Except as disclosed in Schedule 6.1(1), the Company has not received from any Governmental Authority or other Person any, and does not have Actual Knowledge of any existing or threatened, written notice, letter, citation, order, warning, complaint, inquiry, claim or demand that (A) there has been any violation or potential violation of any Environmental Law by the Company or at, or relating to, the Facility, the Common Facilities or the Site, (B) there has been any Release of any Hazardous Materials in, on, under or from the Facility, the Common Facilities or the Site, or by the Company at any other location which would be in material violation of any Environmental Law or could result in material Liability under or relating to any Environmental Law, (C) the Company may be or is liable, in whole or in part regarding any violation or potential violation of any Environmental Law or for the costs of cleaning up, remedying or responding to a Release of any Hazardous Materials or (D) either the Facility, the Common Facilities or the Site is subject to a Lien in favor of any Governmental Authority or other Person in response to a release of Hazardous Materials.

(ii)                                  Each of the Company and the Facility is, and at all prior times has been, complying with all Environmental Laws applicable to the construction and operation of the Facility, including the compliance with any Governmental Approvals related to Environmental Laws that are necessary for the construction and operation of the Facility, except to the extent that failure to so comply individually and in the aggregate could not reasonably be expected to result in a Material Adverse Effect.

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(iii)                               Except as disclosed in Schedule 6.1(1), there is not and has not been any Environmental Condition (A) at, on, under or from the Facility or the Site, (B) resulting from or arising in connection with the construction, operation, maintenance, use or ownership of the Facility or (C) otherwise relating to the Company, that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or involve any danger of (1) foreclosure, sale, forfeiture or loss of, or imposition of a material Lien on, the Facility or the Site or the impairment of the ownership, construction, use, operation or maintenance of the Facility or the Site in any material respect or (2) any criminal liability or any civil liability beyond the means of the Company to reasonably satisfy being incurred by any Funding Party (other than the Company).

(iv)                              Except as disclosed in Schedule 6.1(1), the Company has not assumed, either by contract or by operation of law, any material liability or obligation under or relating to Environmental Laws.

(m)                             Jurisdiction of Incorporation of Company. The Company is a Colorado cooperative corporation.

(n)                                 Margin Regulation. The Company is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes, the Certificates or the Equity Contributions as contemplated by this Agreement and the other Operative Documents will be used for a purpose which violates, or would be inconsistent with, Regulations T, U and X of the Federal Reserve System or Section 7 of the Exchange Act, or any regulations issued pursuant thereto. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 6.1(n) with such meanings.

(o)                                 Investment Company Act. The Company is not an “investment company” within the meaning of, or subject to regulation under, the Investment Company Act of 1940, as amended.

(p)                                 Taxes. The Company has filed or caused to be filed all Tax and information returns which are required to be filed by it in any jurisdiction, all such returns are true, correct and complete in all material respects and the Company has paid all Taxes shown to be due and payable on such returns or on any assessments made against it or any of its property and all other Taxes and assessments payable or imposed on it by any Governmental Authority (other than Taxes the payment of which are not yet due and payable or which are being contested in good faith by the Company through appropriate judicial or administrative proceedings and with respect to which adequate accounting reserves have, to the extent required by GAAP, been set aside and the failure to pay such Taxes or assessments during the pendency of such proceedings would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect) and no Liens for Taxes (other than Permitted Liens) on the Company, the Facility or the Site have been filed. No adjustment relating to any such returns has been proposed formally or informally by any Governmental Authority and, to the Actual Knowledge of the Company, no basis exists for any such adjustment. Proper and accurate amounts have been withheld by the Company from its employees, independent contractors, creditors, members,

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partners and other third parties for all periods in full and complete compliance with all Applicable Laws and such withholdings have been timely paid to the respective Governmental Authorities. Schedule 6.1(p) sets forth, as of the Construction Closing Date, those taxable years for which the Company’s tax returns are currently being audited by the IRS or any other applicable Governmental Authority. The Company has not executed or filed with the IRS or any other Governmental Authority any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Taxes.

(q)                                 Disclosure. Taken as a whole, none of the representations and warranties set forth herein, the information furnished in writing or to be furnished in writing by the Company to the Lead Arranger, any other Funding Party, the Appraiser, the Engineering Consultant, the Insurance Consultant, the Environmental Consultant or the Market and Fuel Consultant in connection with Overall Transaction and the information contained in the Offering Circular contains or will contain any untrue statement of a material fact or omits or will omit to state as of the date made or furnished a material fact necessary to make the statements contained therein not misleading, in light of the circumstances under which they were made (unless disclosed in writing to such Persons prior to the date hereof); provided, that no representation or warranty is made with regard to any projections or other forward-looking statements provided by or on behalf of the Company (except as set forth in Section 6.1(r)); provided, further, that the Indenture Trustee and each Participant acknowledges and agrees that the Company has heretofore provided to the Appraiser, the Engineering Consultant, the Insurance Consultant, the Environmental Consultant, the Market and Fuel Consultant certain (1) general market information, (2) information about certain energy markets and the deregulation process relating thereto and (3) information passed along from Persons who are not Affiliates of the Company, and that the Company makes no representation or warranty whatsoever with respect to such information, except as expressly set forth in the Tax Indemnity Agreement. There is no fact known to the Company that has not been disclosed in writing by or on behalf of the Company to each of the other Funding Parties, the Lead Arranger, the Appraiser, the Engineering Consultant, the Insurance Consultant, the Environmental Consultant and the Market and Fuel Consultant which has had or would reasonably be expected to have a Material Adverse Effect.

(r)                                    Construction Budget; Base Case Projections.

(i)                                     The Construction Budget (as it may be revised pursuant to the Operative Documents) was prepared on behalf of the Company in good faith and represents, in the opinion of the Company, accurate estimates of the costs of constructing the Facility and the Upgrades based on reasonable and complete assumptions. On the Construction Closing Date, the Company is not aware of any existing condition or state of facts that is not generally known that is reasonably expected to result in any material or adverse change in the Construction Budget.

(ii)                                  The Base Case Projections were prepared on behalf of the Company based on assumptions developed on behalf of the Company and, to the Company’s Actual Knowledge, the Base Case Projections are (i) based on reasonable assumptions as to all legal and factual matters material to the estimates set forth therein and (ii) as of the Construction Closing Date, are consistent with the provisions of the Transaction Documents. As of the Construction Closing Date, the textual material

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accompanying the Base Case Projections discloses, in the reasonable opinion of the Company, all information reasonably necessary for an understanding of the Base Case Projections, and does not, to the Actual Knowledge of the Company, contain any material misstatements or omit any information which, in conjunction with other information given, would be necessary to make such information not materially misleading.

(s)                                   ERISA.

(i)                                     Assuming the correctness of the representations of the Owner Participant set forth in Sections 6.4(h) and 9.10, the Noteholders set forth in Section 6.5 and the Certificateholders set forth in the fifth paragraph of each Certificate, the execution and delivery of the Operative Documents, the making of the Equity Contributions, the issuance of the Lessor Notes and the Certificates and the consummation of transactions contemplated hereby and thereby, will be exempt from, or will not involve any transaction which is subject to, the prohibitions of either Section 406 of ERISA or Section 4975 of the Code and will not involve any transaction in connection with which a tax or penalty could be imposed under Section 502(i) of ERISA or a tax could be imposed pursuant to Section 4975 of the Code.

(ii)                                  Except where the failure of any of the following statements to be true could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect (i) with respect to each Plan, neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, (ii) each Plan has complied in all respects with the applicable provisions of ERISA and the Code, (iii) no termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen during such five-year period, (iv) the present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits, (v) neither the Company nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan, (vi) neither the Company nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Company or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made and (vii) no such Multiemployer Plan is in Reorganization or Insolvent.

(t)                                    Financial Statements.

(i)                                     The audited consolidated balance sheet of the Company as at December 31, 2002 and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified opinion from Ernst & Young LLP, present fairly the consolidated financial condition of the Company as at such date and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited

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consolidated balance sheet of the Company as at June 30, 2003 and the related unaudited consolidated statements of income and cash flows for the six-month period ended on such date, present fairly the consolidated financial condition of the Company as at such date and the consolidated results of its operations and its consolidated cash flows for the six-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). The Company does not have any material Guarantee Obligations, contingent liabilities and liabilities for taxes or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph.

(ii)                                  Since December 31, 2002, no event has occurred, and no condition exists, that has had, or could reasonably be expected to have, a Material Adverse Effect.

(u)                                 Adequate Rights. Based upon the Company’s reasonable expectations and upon Applicable Law in effect on and as of the date this representation is made, except as set forth on Schedule 6.1(u), the rights and interests made available to the Owner Lessor pursuant to the Transaction Documents permit on a commercially practicable basis during the period following the expiration or earlier termination of the Facility Lease Term (but with respect to the Common Facilities only, subject to the rights of the parties to the Springerville Project Agreement and, with respect to the Fuel Handling Facilities only, subject to the rights of the parties to the Supplemental Fuel Handling Agreements) (i) the occupation, maintenance and repair of the Facility, (ii) the use, operation and possession of the Facility, (iii) the construction, use, operation, leasing, possession, maintenance, replacement, renewal and repair of all alterations, modifications, additions, accessions, improvements, appurtenances, replacements and substitutions to the Facility, subject to the provisions of the Operative Documents, (iv) appropriate ingress to and egress from the Facility, the Site, the Fuel Handling Facilities and the Common Facilities for any reasonable purpose in connection with such Owner Lessor’s interest in the Facility and the exercise of rights under the Project Documents, (v) the rights and services necessary or appropriate to utilize the Facility, the Fuel Handling Facilities and the Common Facilities in a commercial manner, including the procurement of fuel, (vi) the interconnection of the Facility electrically with the transmission system of TEP sufficient to enable the Owner Lessor to sell the output of the Facility at such interconnection point and (vii) any intellectual property necessary to operate and maintain the Facility pursuant to Prudent Utility Practices.

(v)                                 Utility Services. All utility services, means of transportation and facilities (including electrical, water and sewage services and facilities) necessary for the construction, use and operation of the Facility, the Fuel Handling Facilities or the Common Facilities are available to the Facility and the Site pursuant to the Project Documents or otherwise on commercially reasonable terms and, to the extent appropriate, contractual arrangements have been made on commercially reasonable terms for such services, means of transportation, facilities and other materials.

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(w)                               Eminent Domain. There is no action pending or, to the Company’s Actual Knowledge, threatened by a Governmental Authority or other Person to initiate a taking or use of the Facility, the Site, the Fuel Handling Facilities or the Common Facilities through Condemnation, seizure, Requisition, power of eminent domain or otherwise, which is reasonably likely to have an adverse effect on the value (current and fair market), utility or useful life of the Facility or would prevent or materially interfere with the use or operation of the Facility, the Fuel Handling Facilities or the Common Facilities.

(x)                                 No Adverse Proceedings. There are no violations or proceedings or actions pending or, to the Company’s Actual Knowledge, threatened, with respect to any Appurtenant Rights that are reasonably likely to materially adversely affect the Facility, the Fuel Handling Facilities or the Common Facilities or enjoin or prevent the construction, use, occupancy or operation of the Facility, the Fuel Handling Facilities or the Common Facilities in such a way that the Company would be impaired in any material respect in its ability to perform its material obligations under this Agreement or any other Transaction Document.

(y)                                 Notices. To the Company’s Actual Knowledge, (i) there are no outstanding notices from any Governmental Authority of any violation of, or that the Facility, the Site, the Fuel Handling Facilities or the Common Facilities are not in compliance with, any and all Applicable Laws relating to the Facility, the Site, the Fuel Handling Facilities or the Common Facilities or the ownership, construction, use, occupancy and operation thereof and (ii) there are no outstanding notices that any repairs or work or capital improvements are required to be done at or with respect to the Facility, the Site, the Fuel Handling Facilities or the Common Facilities by any Governmental Authority or by any insurance company which currently issues any insurance in respect of the Facility or by any board of fire underwriters or other body exercising similar functions, except, in either case, where such violation, noncompliance or repairs, individually or in the aggregate, are not reasonably likely to result in a Material Adverse Effect.

(z)                                  Location of the Facility and the Site. The Facility is located on and surrounded by the Site. The Site and the related Appurtenant Rights do not lie within areas of “special flood hazard” as that term is defined in 44 Code of Federal Regulations Section 59.1.

(aa)                          Compliance with Building Codes; Zoning Laws, Etc. The Facility, as contemplated by the EPC Contract, is capable of being maintained, leased and operated in compliance in all material respects with all applicable Environmental Laws and with all applicable zoning (including use and building code requirements) laws, regulations and ordinances and the Company does not have any Actual Knowledge of any violation of any laws, ordinances, codes, requirements or orders of any Governmental Authority materially adversely affecting the Facility.

(bb)                          Description of Property. The real property descriptions of the Site and related Appurtenant Rights set forth in the Indenture are true and accurate in all material respects and are adequate for the purpose of establishing, preserving, protecting and perfecting the interests and rights, and the first priority of the Liens intended to be created and provided in such property by Security Documents.

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(cc)                            Insurance Coverage. All insurance required to be maintained by or on behalf of the Company or the Owner Lessor pursuant to Schedule 7.29 and under each of the Project Documents to which the Company or the Owner Lessor is a party has been obtained and is in full force and effect.

(dd)                          Completion of the Project. The Company has no reason to believe that (i) construction of the Facility will not occur in accordance with the Construction Schedule, (b) the Lease Commencement Date will not occur on or prior to the Outside Completion Date, (c) the aggregate amount of Project Costs required to be paid in order to complete the Facility and the Upgrades will exceed the aggregate amount budgeted therefor in the Construction Budget and (d) the Facility, upon completion in accordance with the EPC Contract and the Supplemental Construction Contract, will not comply in all material respects with the Project Documents and all Applicable Laws and Governmental Approvals.

(ee)                            Subsidiaries. The Subsidiaries listed on Schedule 6.1(ee) constitute all the Subsidiaries of the Company at the date hereof. Schedule 6.1(ee) sets forth the name and jurisdiction of organization of each Subsidiary and, as to each Subsidiary, whether such Subsidiary is a member of the Restricted Group.

(ff)                              Intellectual Property. The Company has the right to use all intellectual property rights that are necessary for the operation of its business as presently conducted, except where the failure to have such rights would not be reasonably likely to result in a Material Adverse Effect.

Section 6.2                      Representations and Warranties of the Owner Lessor. The Owner Lessor represents and warrants that:

(a)                                 Organization; Power. The Owner Lessor (i) is a limited liability company, duly organized, validly existing and in good standing under the laws of the State of Delaware of which the Owner Participant is the sole member, (ii) is duly qualified to do business and is in good standing in the State of Arizona and (iii) has all requisite power and authority and holds all requisite Governmental Approvals to enter into and perform its obligations under this Agreement and each of the other Transaction Documents to which it is a party except, with respect to clause (iii), where the failure to obtain such Governmental Approvals would not reasonably be expected to result in a material adverse effect on the Owner Lessor.

(b)                                 Due Authorization; Enforceability; Etc. This Agreement and each of the other Transaction Documents to which the Owner Lessor is or will be a party have been or, when executed and delivered will be, duly authorized, executed and delivered by the Owner Lessor, and this Agreement constitutes and when executed and delivered each of the other Transaction Documents to which it is or will be a party will be the legal, valid and binding obligation of the Owner Lessor, enforceable against the Owner Lessor in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity.

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(c)                                  Non-Contravention. The execution, delivery and performance by the Owner Lessor of this Agreement and the other Transaction Documents to which it is or will be a party, the consummation by the Owner Lessor of the transactions contemplated hereby and thereby, and the compliance with the terms and conditions hereof and thereof, do not and will not (i) contravene any Applicable Law binding on or affecting the Owner Lessor or its Property, (ii) contravene the LLC Agreement or the Owner Lessor’s other Constitutive Documents, (iii) contravene or constitute a violation of, or a default under, any Contractual Obligation binding on or affecting the Owner Lessor or its Property or (iv) result in, or require the creation or imposition of, any Owner Lessor’s Lien upon the Lessor Estate.

(d)                                 Governmental Actions. No authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by, or the validity or enforceability as against, the Owner Lessor of the LLC Agreement, this Agreement or the other Transaction Documents to which the Owner Lessor is or will be a party, other than any such authorization or approval or other action or notice or filing or registration as has been duly obtained, taken or given and is in full force and effect or other than with respect to any such authorization or approval or other action or notice or filing or registration required by or with the Arizona Corporation Commission.

(e)                                  Litigation. There is no pending or, to the knowledge of the Owner Lessor, threatened, action, suit, investigation or proceeding in law or in equity against the Owner Lessor before any Governmental Authority that (i) questions the validity of the Transaction Documents or (ii) would, if determined adversely to it, materially adversely affect the ability of the Owner Lessor to perform its obligations under the LLC Agreement, this Agreement or the other Transaction Documents to which it is or will be a party or would materially adversely affect the Facility, the Ground Interest, the Project Document Interest or any interest therein or part thereof or the Lien of the Security Documents in the Facility, the Ground Interest, the Project Document Interest or the other Collateral.

(f)                                   Liens. The Lessor Estate is free of any Owner Lessor’s Liens.

(g)                                  Jurisdiction of Organization of Owner Lessor. The Owner Lessor is a Delaware limited liability company.

(h)                                 Compliance with Applicable Laws. The Owner Lessor is in compliance with all Applicable Laws applicable to it, except to the extent that failure to so comply would not reasonably be expected to result in a material adverse effect on the Owner Lessor.

(i)                                     Margin Regulation. The Owner Lessor is not engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes, the Equity Contributions or the Certificates as contemplated by this Agreement and the other Operative Documents will be used for a purpose which violates, or would be inconsistent with, Regulations T, U and X of the Federal Reserve System or Section 7 of the Exchange Act or any regulations issued pursuant thereto. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 6.2(i) with such meanings.

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(j)                                    Utility Regulation. The Owner Lessor is not (A) a “holding company” or a “subsidiary company” or an “affiliate” of a “holding company” within the meaning of PUHCA (other than regulation under Section 9(a)(2) thereof) pursuant to Section 3(c) thereof, as such terms are used thereunder, (B) an “electric utility” or a “public utility”, within the meaning of the Federal Power Act or (C) a “public service corporation” under Arizona law.

Section 6.3                      Representations and Warranties of the Independent Manager and the Trust Company. The Trust Company (only with respect to representations and warranties relating to the Trust Company) and the Independent Manager hereby severally represent and warrant that:

(a)                                 Due Incorporation; etc. The Trust Company is a banking corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority, as the Independent Manager and/or in its individual capacity to the extent expressly provided herein or in the LLC Agreement, to enter into and perform its obligations under the LLC Agreement, this Agreement and each of the other Operative Documents to which it is or will be a party.

(b)                                 Due Authorization, Enforceability; etc.

(i)                                     The LLC Agreement has been duly authorized, executed and delivered by the Trust Company, and constitutes the legal, valid and binding obligation of the Trust Company, enforceable against it in its individual capacity or as Independent Manager, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity.

(ii)                                  This Agreement has been duly authorized, executed and delivered by the Independent Manager and the Trust Company, and this Agreement constitutes the legal, valid and binding obligation of each of the Independent Manager and the Trust Company, enforceable against each of Trust Company and the Independent Manager, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity.

(iii)                               Each of the other Operative Documents to which the Trust Company or the Independent Manager is or will be a party has been or, when executed and delivered will be, duly authorized, executed and delivered by the Trust Company or the Independent Manager, as the case may be, and each of the other Operative Documents to which the Trust Company or the Independent Manager is or will be a party constitutes or, when executed and delivered will constitute, a legal, valid and binding obligation of the Trust Company or the Independent Manager, as the case may be, enforceable against the Trust Company or the Independent Manager, as the case may be, in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other

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laws relating to or affecting the rights of creditors generally and by general principles of equity.

(c)                                  Non-Contravention. The execution and delivery by the Trust Company, in its individual capacity or as Independent Manager, as the case may be, of the LLC Agreement, this Agreement and the other Operative Documents to which it is or will be a party, the consummation by the Trust Company, in its individual capacity, or as Independent Manager, as the case may be, of the transactions contemplated hereby and thereby, and the compliance by the Trust Company, in its individual capacity, or as Independent Manager, as the case may be, with the terms and provisions hereof and thereof, do not and will not (i) contravene any Applicable Laws of the State of Delaware governing the Trust Company or any United States federal law governing the banking or trust powers of the Trust Company, (ii) contravene the LLC Agreement or its Constitutive Documents, (iii) contravene or constitute a violation of, or a default under, any Contractual Obligation binding on or affecting the Trust Company or its Property or (iv) result in, or require the creation or imposition of, any Owner Lessor’s Lien unrelated to the transactions contemplated by the Operative Documents upon the Lessor Estate.

(d)                                 Governmental Actions. No authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by, or the validity or enforceability as against, the Trust Company or the Independent Manager, as the case may be, of the LLC Agreement, this Agreement or the other Operative Documents to which the Trust Company or the Independent Manager is or will be a party, other than any such authorization or approval or other action or notice or filing or registration as has been duly obtained, taken or given and is in full force and effect or other than with respect to any such authorization or approval or other action or notice or filing or registration required by or with the Arizona Corporation Commission.

(e)                                  Litigation. There is no pending or, to the knowledge of the Trust Company, threatened action, suit, investigation or proceeding in law or in equity against the Trust Company either in its individual capacity or as the Independent Manager, as the case may be, before any Governmental Authority that (i) if determined adversely to it, would reasonably be expected to materially adversely affect the ability of the Trust Company, in its individual capacity, or as Independent Manager, as the case may be, to perform its obligations under the LLC Agreement, this Agreement or the other Operative Documents to which it is or will be a party or would reasonably be expected to materially adversely affect the Facility, the Ground Interest, the Project Document Interest or any interest therein or part thereof or the Lien of the Security Documents in the Facility, the Ground Interest, the Project Document Interest or the other Collateral or (ii) questions the validity or enforceability of any Operative Document.

(f)                                   Liens. The Lessor Estate is free of any Owner Lessor’s Liens attributable to the Trust Company or the Independent Manager.

(g)                                  Taxes. There are no Taxes payable by the Trust Company imposed by the State of Delaware or any political subdivision thereof in connection with the making of the Equity Contributions and the issuance of the Lessor Notes and the Certificates, in each case, as contemplated by the Operative Documents, or the execution and delivery of any of the Operative Documents to which it is a party and the consummation of the transactions contemplated

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thereby, that, in each case, would not have been imposed if the Lessor Estate were not located in Wilmington, Delaware and the Trust Company had not (i) had its principal place of business in, (ii) performed any or all of its duties under the Operative Documents in and (iii) engaged in any activities unrelated to the transactions contemplated by the Operative Documents in, Wilmington, Delaware.

(h)                                 Location of Chief Executive Office. The chief executive office of the Trust Company and the office where the Trust Company keeps its corporate records concerning the Independent Manager, the Facility, the Ground Interest, the Project Document Interest and the Operative Documents are located in Wilmington, Delaware.

(i)                                     Securities Act. Except as expressly provided in the Operative Documents, neither the Trust Company, the Independent Manager nor anyone authorized by either such Person has directly or indirectly offered or sold any interest in the Member Interest, the Lessor Notes, the Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the Member-Interest, the Lessor Notes, the Certificates or any part thereof, solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act.

Section 6.4                      Representations and Warranties of the Owner Participant, the Equity Investor and the OP Guarantor. The Owner Participant represents and warrants on behalf of itself and on behalf of the Equity Investor and the OP Guarantor that:

(a)                                 Organization; Power.

(i)                                     The Owner Participant (A) is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, (B) is duly qualified to do business and is in good standing in each jurisdiction where the nature of its business requires such qualification and (C) has all requisite power and authority and holds all requisite Governmental Approvals to enter into and perform its obligations under the LLC Agreement, this Agreement and the Tax Indemnity Agreement, except with respect to clauses (B) and (C), where the failure to be so qualified or be in good standing or the failure to obtain such Governmental Approvals would not reasonably be expected to result in a material adverse effect on the Owner Participant.

(ii)                                  The OP Guarantor (A) is a corporation, duly incorporated and validly existing and is in good standing under the laws of the State of Delaware, (B) is duly qualified to do business and is in good standing in each jurisdiction where the nature of its business requires such qualification and (C) has all requisite corporate power and authority and holds all requisite Governmental Approvals to enter into and perform its obligations under the OP Guaranty, except with respect to clauses (B) and (C), where the failure to be so qualified or be in good standing or the failure to obtain such Governmental Approvals would not reasonably be expected to result in a material adverse effect on the OP Guarantor.

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(b)                                 Due Authorization; Enforceability; Etc.

(i)                                     This Agreement, the LLC Agreement and the Tax Indemnity Agreement have been or, when executed and delivered will be, duly authorized, executed and delivered by the Owner Participant and this Agreement, the LLC Agreement and the Tax Indemnity Agreement constitute or, when executed and delivered will constitute, the legal, valid and binding obligation of the Owner Participant, enforceable against the Owner Participant in accordance with their respective terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity.

(ii)                                  The OP Guaranty has been or, when executed and delivered will be, duly authorized, executed and delivered by all necessary corporate action by the OP Guarantor and the OP Guaranty constitutes or, when executed and delivered will constitute, the legal, valid and binding obligation of the OP Guarantor, enforceable against the OP Guarantor in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, arrangement, moratorium or other laws relating to or affecting the rights of creditors generally and by general principles of equity.

(c)                                  Non-Contravention.

(i)                                     The execution, delivery and performance by the Owner Participant of this Agreement, the LLC Agreement and the Tax Indemnity Agreement, the consummation by the Owner Participant of the transactions contemplated hereby and thereby and the compliance with the terms and conditions hereof and thereof, do not and will not (A) contravene the Constitutive Documents of the Owner Participant, (B) contravene any Applicable Law binding on or affecting the Owner Participant or its Property, (C) contravene or constitute a violation of, or a default under, any Contractual Obligation binding on or affecting the Owner Participant or its Property or (D) result in, or require the creation or imposition of, any Owner Participant’s Lien (other than any Lien created under any Operative Document) upon the Lessor Estate.

(ii)                                  The execution, delivery and performance by the OP Guarantor of the OP Guaranty, the consummation by the OP Guarantor of the transactions contemplated thereby and the compliance with the terms and conditions thereof, do not and will not (i) contravene the Constitutive Documents of the OP Guarantor, (ii) contravene any Applicable Law binding on or affecting the OP Guarantor or its Property, (iii) contravene or constitute a violation of, or a default under, any Contractual Obligation binding on or affecting the OP Guarantor or its Property or (iv) result in, or require the creation or imposition of, any Owner Participant’s Lien (other than any Lien created under any Operative Document) upon the Lessor Estate.

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(d)                                 Government Action.

(i)                                     No authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by, or the validity or enforceability as against, the Owner Participant of this Agreement, the LLC Agreement or the Tax Indemnity Agreement, other than any authorization or approval or other action or notice or filing or registration as has been duly obtained, taken or given and is in full force and effect or other than with respect to any such authorization or approval or other action or notice or filing or registration required by or with the Arizona Corporation Commission.

(ii)                                  No authorization or approval or other action by, and no notice to or filing or registration with, any Governmental Authority is required for the due execution, delivery or performance by, or the validity or enforceability as against, the OP Guarantor of the OP Guaranty, other than any authorization or approval or other action or notice or filing or registration as has been duly obtained, taken or given and is in full force and effect.

(e)                                  Compliance with Applicable Laws. Each of the Owner Participant and the OP Guarantor is in compliance with all Applicable Laws applicable to it, except to the extent that failure to so comply would not reasonably be expected to result in a material adverse effect on the Owner Participant or the OP Guarantor, as applicable.

(f)                                   Litigation. There is no pending or, to the knowledge of the Owner Participant, threatened action, suit, investigation or proceeding in law or in equity against the Owner Participant or the OP Guarantor before any Governmental Authority that (i) questions the validity of the Operative Documents, (ii) would, if determined adversely to the Owner Participant, materially adversely affect the Owner Participant’s ability to perform its obligations under this Agreement, the LLC Agreement or the Tax Indemnity Agreement or (iii) would, if determined adversely to the OP Guarantor, materially adversely affect the OP Guarantor’s ability to perform its obligations under the OP Guaranty, or would materially adversely affect the Facility, the Ground Interest, the Project Document Interest or any interest therein or part thereof or the Lien of the Security Documents in the Facility, the Ground Interest, the Project Document Interest or the other Collateral.

(g)                                  Liens. The Lessor Estate is free of any Owner Participant’s Liens.

(h)                                 ERISA. The Owner Participant is not and will not be funding its Equity Contributions, and is not and will not be performing its obligations, under the Operative Documents with Plan Assets. The OP Guarantor is not and will not be performing its obligations under the OP Guaranty with Plan Assets.

(i)                                     Acquisition for Investment.

(i)                                     The Owner Participant is purchasing the Member Interest to be acquired by it for its own account with no present intention of distributing such Member Interest or any part thereof in any manner that would require registration under the Securities Act, but without prejudice, however, to the right of the Owner Participant at all times to sell or otherwise dispose of all or any part of such Member Interest in

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accordance with the Operative Documents and under an exemption from registration available under the Securities Act.

(ii)                                  The Equity Investor is purchasing the OP Interest to be acquired by it for its own account with no present intention of distributing such OP Interest or any part thereof in any manner that would require registration under the Securities Act, but without prejudice, however, to the right of the Equity Investor at all times to sell or otherwise dispose of all or any part of such OP Interest in accordance with the Operative Documents and under an exemption from registration available under the Securities Act.

(j)                                    Regulatory Event of Loss; Deemed Loss. The Owner Participant is not aware of any fact or circumstance that could constitute or cause a Regulatory Event of Loss or any other type of Deemed Loss.

(k)                                 Securities Act. Neither the Owner Participant, the Equity Investor, the OP Guarantor nor anyone authorized by the Owner Participant, the Equity Investor or the OP Guarantor has directly or indirectly offered or sold any interest in the OP Interest, the Member Interest, the Lessor Notes, the Certificates or any part thereof, or in any similar security or lease, the offering of which for the purposes of the Securities Act would be deemed to be part of the same offering as the offering of the OP Interest, the Member Interest, the Lessor Notes, the Certificates or any part thereof, solicited any offer to acquire any of the same in violation of the registration requirements of Section 5 of the Securities Act.

(l)                                     Utility Regulation. Neither the OP Guarantor, the Equity Investor nor the Owner Participant is (A) a “holding company” or a “subsidiary company” or an “affiliate” of a “holding company” within the meaning of PUHCA (other than regulation under Section 9(a)(2) thereof) pursuant to Section 3(c) thereof, as such terms are used thereunder, (B) an “electric utility” or a “public utility”, within the meaning of the Federal Power Act or (C) a “public service corporation” under Arizona law.

(m)                             Margin Regulation. Neither the OP Guarantor, the Equity Investor nor the Owner Participant is engaged in the business of extending credit for the purposes of purchasing or carrying margin stock, and no proceeds of the Lessor Notes, the Equity Contributions or the Certificates as contemplated by this Agreement and the other Operative Documents will be used for a purpose which violates, or would be inconsistent with, Regulations T, U and X of the Federal Reserve System or Section 7 of the Exchange Act or any regulations issued pursuant thereto. Terms for which meanings are provided in Regulations T, U and X of the Federal Reserve System or any regulations substituted therefor, as from time to time in effect, are used in this Section 6.4(m) with such meanings.

(n)                                 Capital Structure. As of the Construction Closing Date, Schedule 6.4(n) sets forth the true, correct and complete description of the capital structure of the Owner Participant, the Equity Investor and the OP Guarantor.

(o)                                 U.S. Person. Each of the Equity Investor and the OP Guarantor is a “United States Person” for purposes of Section 7701(a)(30) of the Code.

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(p)                                 Net Worth; Ratings. The OP Guarantor has a Consolidated Tangible Net Worth, calculated in accordance with GAAP, of at least $75,000,000 and the Reference Debt of the OP Guarantor is rated at least BBB+ by S&P and Baal by ▇▇▇▇▇’▇.

(q)                                 Relationship of Parties. (i) The OP Guarantor has received a copy of this Agreement and the other Operative Documents and is familiar with and fully understands the terms and conditions hereof and thereof, (ii) none of the Owner Participant or any Beneficiary (as defined in the OP Guaranty) has made any representation or warranty to the OP Guarantor regarding the Owner Participant, this Agreement or the other Operative Documents and (iii) the OP Guarantor has established adequate means of obtaining from the Owner Participant, on a continuing basis, financial and other information pertaining to the business of the Owner Participant.

Section 6.5                      Representations and Warranties of the Noteholders. Each Noteholder hereby severally represents and warrants that, based upon and subject to the accuracy of the representations made by the Certificateholders in each Certificate, at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by it to purchase its Lessor Notes:

(a)                                 the Source is an “insurance company general account” (within the meaning of U.S. Department of Labor Prohibited Transaction Class Exemption (“PTE”) 95-60) and there is no employee benefit plan, treating as a single plan all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan exceeds 10% of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the National Association of Insurance Commissioners Annual Statement filed with such Noteholder’s state of domicile; or

(b)                                 the Source is an insurance company pooled separate account (within the meaning of PTE 90-1) maintained by such Noteholder in which no plan (together with any other plans maintained by the same employer or employee organization) has an interest in excess of 10% of the total of all assets in such pooled separate account, and the other applicable conditions of PTE 90-1 issued by the Department of Labor are satisfied; or

(c)                                  the Source is a bank collective investment fund (within the meaning of PTE 91-38) maintained by such Noteholder in which no plan (together with any other plans maintained by the same employer or employee organization) has an interest in excess of 10% of the total assets in such collective investment fund, and the other applicable conditions of PTE 91-38 issued by the Department of Labor are satisfied; or

(d)                                 the Source constitutes assets of an “investment fund” (within the meaning of Part V of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(l) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client

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assets managed by such QPAM, the conditions of Part 1 (c), (d) and (g) of the QPAM Exemption are satisfied, and (i) the identity of the QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this paragraph (d); or

(e)                                  the Source constitutes the assets of a “plan” within the meaning of Part IV(h) of PTE 96-23 (the “INHAM Exemption”) managed by a “in-house asset manager” within the meaning of Part IV(a) of the INHAM Exemption and the conditions of Part 1(a) of the INHAM Exemption with respect to the purchase of the Lessor Notes are satisfied; or

(f)                                   the Source is a governmental plan; or

(g)                                  the Source does not include assets of any employee benefit plan or other retirement account or arrangement, other than a plan exempt from the coverage of ERISA and Section 4975 of the Code.

As used herein, the terms “employee benefit plan” and “governmental plan” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

ARTICLE VII

COVENANTS OF THE LESSEE

Section 7.1                      Maintenance of Existence and Properties. The Company shall at all times (i) preserve and maintain in full force and effect its organizational existence and its good standing under the laws of the State of Colorado, (ii) preserve and maintain in full force and effect its qualification to do business in the State of Arizona, (iii) preserve and maintain in full force and effect its qualification to do business in each other jurisdiction in which the character of its properties or the nature of its activities makes such qualification necessary, except where the failure to be so qualified, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and (iv) preserve and maintain in full force and effect and obtain all material rights, franchises, privileges and consents necessary for the maintenance of its existence, for the normal conduct of its business and the construction and operation of the Facility.

Section 7.2                      Maintenance of Governmental Approvals. The Company shall obtain and maintain, or cause to be obtained and maintained, in full force and effect all Governmental Approvals (including those required under Environmental Laws) required to be obtained by the Company from time to time in connection with (i) the construction, use, lease, ownership, maintenance or operation of the Facility (ii) the making of the Equity Contributions and the issuance of the Lessor Notes and the Certificates, in each case, as contemplated by the Operative Documents and (iii) the execution, delivery and performance by the Company or the Owner Lessor of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby, except, in each case, where failure to so obtain or maintain any such Governmental Approval could not reasonably be expected to result in a Material Adverse Effect.

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Section 7.3                      Compliance with Laws and Governmental Approvals. The Company shall comply in all material respects with, and ensure that the Facility is constructed, maintained and operated in compliance in all material respects with, all Applicable Laws (including Environmental Laws) and Governmental Approvals. Without limitation to the foregoing, the Company shall promptly perform all required investigations, removals or remediations of all Environmental Conditions at or relating to the Site or the Facility.

Section 7.4                      Project Reports. The Company shall furnish to the Owner Lessor, the Indenture Trustee, the Owner Participant and the Engineering Consultant, the following:

(a)                                 Monthly Construction Progress Report. On or before the tenth (10) day of any calendar month during the Construction Period, a report executed by an Authorized Officer of the Company (i) specifying the amount of Project Costs expended since the Construction Closing Date as well as during the preceding calendar month and the amount of Project Costs estimated to be required to complete the Facility, (ii) providing an assessment of the overall construction progress of the Facility since the date of the last report and since the Construction Closing Date, together with an assessment of how such progress compares to the Construction Schedule, (iii) specifying the estimated Completion Date with respect to the Facility and the estimated date of each of the Construction Contract Milestones, (iv) providing a detailed description of all material problems (including but not limited to actual and then anticipated Cost Overruns, if any) encountered or then anticipated in connection with the construction of the Facility since the date of the last report, together with an assessment of how such problems are likely to impact the Construction Schedule and the meeting of critical dates thereunder and a detailed description of the proposed solutions to any such problems, (v) specifying the delivery status of major Equipment and the effect, if any, that the anticipated delivery dates of such Equipment has on the overall Construction Schedule, (vi) specifying any currently proposed or pending Change Orders and (vii) a discussion or analysis of such other matters related to the Facility as the Indenture Trustee, the Owner Participant or the Engineering Consultant may reasonably request. The Company shall respond, and use commercially reasonable efforts to cause the EPC Contractor to respond, to the Indenture Trustee’s, the Owner Participant’s or the Engineering Consultant’s inquiries regarding such report, the construction of the Facility and the EPC Contractor’s performance of its obligations under the EPC Contract.

(b)                                 EPC Contractor Reports. During the Construction Period, promptly after receipt thereof, a copy of the Monthly Progress Report (as defined in the EPC Contract) and each other material report delivered by the EPC Contractor to the Company or the Owner Lessor pursuant to the EPC Contract.

Section 7.5                      Acceptance of Project. The Company shall not, without the prior written consent of the Indenture Trustee (acting in consultation with the Engineering Consultant) and the Owner Participant deliver any certificate to the EPC Contractor with respect to the achievement of any of the Construction Contract Milestones or otherwise consent or agree to any such achievement (including any elected or deemed Final Acceptance under Section 6.8.4 of the EPC Contract), accept all or any portion of the Facility as substantially complete or waive any of the requirements to achieve any Construction Contract Milestones.

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Section 7.6                      Project Completion. The Company shall deliver to the Indenture Trustee, the Owner Lessor and the Owner Participant, no later than the Project Completion Date, a final certificate of the EPC Contractor that all requested waivers of all Liens relating to the work performed under the EPC Contract have been obtained (attaching copies of such waivers that were not previously delivered).

Section 7.7                      Financial Statements. The Company shall deliver to the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents has not been terminated or discharged, the Indenture Trustee:

(a)                                 As soon as available but, in any event, within 60 days after the end of each of the first three quarterly accounting periods in each fiscal year of the Company (commencing with the quarter ending September 30, 2003), a copy of the unaudited balance sheet of the Company and its consolidated Subsidiaries as at the end of such quarterly period with related unaudited statements of income and of cash flows for such quarterly period and for the elapsed portion of the fiscal year ended with the last day of such quarterly period, prepared in accordance with GAAP, consistently applied and setting forth comparative unaudited figures for the related periods in the prior fiscal year, all of which shall be accompanied by an Officer’s Certificate of the Company to the effect that such financial statements present fairly in all material respects the financial condition and results of operation and cash flows of the Company on the dates and for the periods indicated, subject to normal year-end audit adjustments;

(b)                                 As soon as available but, in any event, within 120 days after the end of each fiscal year (commencing with the fiscal year ended December 31, 2003), a copy of the audited balance sheet of the Company and its consolidated Subsidiaries as at the end of such fiscal year with the related audited statements of income and of cash flows for such fiscal year, in each case setting forth comparative figures for the preceding fiscal year and certified without a “going concern” or like qualification or exception, or qualification as to the scope of the audit, by a nationally recognized independent certified public accounting firm;

all such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail in accordance with GAAP, consistently applied throughout the periods reflected therein and with prior periods (except for changes approved or required by the independent certified public accountants certifying such statements and disclosed in reasonable detail therein).

Section 7.8                      Certificates; Other Information. The Company shall deliver to the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents has not been terminated or discharged, the Indenture Trustee:

(a)                                 at the time of the delivery of the financial statements referred to in Section 7.7(b), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary thereof no knowledge was obtained of any Company Default or Company Event of Default, except as specified in such certificate;

(b)                                 at the time of the delivery of the financial statements pursuant to Section 7.7, an Officer’s Certificate of the Company stating that (i) such financial statements are true,

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complete and correct in all respects as of the date of such statement and fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of the date thereof and (ii) to the best of such Authorized Officer’s knowledge after reasonable inquiry, the Company during the period covered by such financial statements has observed and performed in all material respects all of its covenants and other agreements and satisfied every condition contained in this Agreement and the other Operative Documents, and that such Authorized Officer is not aware of any Company Default or Company Event of Default hereunder at any time during such period or on the date of such certificate (or, if any such Company Default or Company Event of Default shall have occurred, a statement setting forth the nature thereof and the steps being taken by the Company to remedy the same);

(c)                                  promptly after delivery or receipt thereof, a copy of each material default or material notice or material demand or material waiver thereof delivered by or received by the Company or the Owner Lessor pursuant to any Project Document, the Master Indenture or the RUS Loan Agreement;

(d)                                 promptly after receipt thereof (and with a copy to the Engineering Consultant), a copy of (i) any notice it receives from the EPC Contractor pursuant to the EPC Contract that any Construction Contract Milestone has been achieved or requesting that all or any portion of the Facility be accepted as complete or substantially complete and (ii) any proposal it receives from the EPC Contractor with respect to any list of Operating Spare Parts, any Approved Test Procedures, the Commissioning Manual, the Operating Manual or any Punch List items under Sections 2.1.14, 2.1.22, 2.1.23, 2.1.24 and 6.1.4, respectively, of the EPC Contract (as such terms are defined under the EPC Contract);

(e)                                  promptly after receipt thereof, a copy of any written notice indicating that any Governmental Approval will not be granted or renewed, will not be granted or renewed in time to allow continued operation of the Facility in compliance with all Applicable Laws, or will be granted, renewed or modified on terms materially more burdensome than proposed or materially more burdensome than under a previously applicable Governmental Approval;

(f)                                   promptly after the obtaining or filing thereof, as the case may be, a copy of (i) each Governmental Approval or other consent or approval obtained by the Company, or obtained by the EPC Contractor and delivered to the Company or the Owner Lessor pursuant to the EPC Contract after the Construction Closing Date and (ii) each material filing made or received by the Company with respect to any Government Authority, except such as are routine or ministerial in nature and in respect of which a failure to file could not reasonably be expected to have a Material Adverse Effect;

(g)                                  concurrently with the delivery thereof to the Depositary Bank, a copy of each certificate, request, direction or notice delivered by the Company or the Owner Lessor pursuant to the Disbursement Agreement;

(h)                                 a quarterly RUS Form 12(d) (USDA Rural Utilities Service Operating Report Steam Plant) relating to the Facility providing information for the year to date through the end of the applicable quarterly period. Any information provided pursuant to this paragraph (h) may, at the Company’s option, be in summary form and, to the extent it includes any operational,

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generation, sales or similar data, such as megawatt hours produced, availability, megawatts sold, fuel used and all other statistical information, may, at the Company’s option, be limited to aggregate numbers for each of the applicable quarterly periods; and

(i)                                     promptly, such additional financial and other information with respect to the Company or the Facility, as the Indenture Trustee or the Owner Participant may reasonably request.

Section 7.9                      Notices. The Company shall give notice to the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents has not been terminated or discharged, the Indenture Trustee of:

(a)                                 the occurrence of any Company Default, Company Event of Default, Event of Loss, Deemed Loss, any Indenture Event of Default or Indenture Default or any waiver in respect of any thereof, the occurrence of an “event of default” (as such term is defined in the Master Indenture) or the occurrence of an “event of default” (as such term is defined in the RUS Loan Agreement), other than any “event of default” arising in respect of any of Sections 2.1(g), 2.1(e) or 6.14 of the RUS Loan Agreement;

(b)                                 the occurrence of any Casualty or Condemnation in excess of $500,000 per occurrence and $1,000,000 in the aggregate or the occurrence and continuance of any Requisition that could reasonably be expected to give rise to requisition proceeds in an amount in excess of $1,000,000 (without regard to the existence of any good faith contest in respect thereof);

(c)                                  any litigation or proceeding affecting the Company or any of its Subsidiaries (i) in which the amount involved is $5,000,000 or more and not covered by insurance or (ii) that relates to the Facility or the Transaction Documents; or any material litigation, investigation or proceeding which may exist at any time between the Company and any Government Authority;

(d)                                 any violation of any Environmental Law, any dispute, litigation, investigation, proceeding or pending claim arising under or relating to any Environmental Law against the Company, any Release of Hazardous Materials or the identification of any other event or condition that would reasonably be expected to result in material Liabilities against the Company, the Facility or the Site;

(e)                                  any Lien or claim to the Company’s knowledge against the Collateral, other than Permitted Liens;

(f)                                   any notice received by the Company purporting to cancel or materially alter the terms of any insurance policy that the Company is required to maintain or cause to be maintained pursuant to Schedule 7.29; or

(g)                                  any matter that has or is reasonably likely to result in a Material Adverse Effect.

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Each notice pursuant to this Section 7.9 shall be accompanied by a statement of an Authorized Officer of the Company setting forth details of the occurrence referred to therein and stating what action, if any, the Company proposes to take with respect thereto.

Section 7.10               Books and Records; Inspections. The Company shall keep adequate logs, books, records and accounts in accordance with GAAP consistently applied and Applicable Law and the Company shall permit representatives and agents of the other Funding Parties, including any environmental consultant retained by any of the foregoing, and the Engineering Consultant to visit and inspect its Property and operations, to examine and audit all of Company’s logs, books, records and accounts, to make copies and memoranda thereof, and to discuss its affairs, operations, finances and accounts with its principal officers, employees, engineers and Independent Accountants, all at such times during business hours and at such intervals as any such Funding Party or the Engineering Consultant may reasonably request. The Engineering Consultant and representatives and agents of such Funding Parties, including any environmental consultant retained by any of the foregoing, shall have the right to inspect the Facility from time to time upon notice to a representative of the Company (except that if a Company Event of Default has occurred and is continuing, no such notice shall be required) and to witness and verify all tests, investigations and inspections referred to in the EPC Contract (including the Initial Operation Demonstration and all Performance Tests, each as defined in the EPC Contract). The Engineering Consultant, the Owner Participant and the Indenture Trustee shall be given reasonable notice of all such tests, investigations and inspections. Without limiting the generality of the foregoing provisions of this Section 7.10, the Company shall permit the Engineering Consultant, after reasonable pre-scheduling with the Company, to make such inspections of the Facility, and shall provide to the Engineering Consultant such information with respect to the Facility, as the Engineering Consultant may from time to time reasonably request. Each such inspection pursuant to this Section 7.10 shall be conducted so as not to unreasonably interfere with the construction or operation of the Facility or such other Property and any such party making an inspection shall comply with (i) the reasonable request of the Company to maintain the confidentiality of any information identified by the Company in writing to the recipient thereof as confidential and received as a result of such inspection and (ii) the provisions concerning confidentiality in the Operative Documents.

Section 7.11               Taxes. The Company shall, prior to the time penalties shall attach thereto, (i) file, or cause to be filed, all tax and information returns that are required to be, or are required to have been, filed by it in any jurisdiction and (ii) pay or cause to be paid all Taxes shown to be, or to have been, due and payable on such returns and all other Taxes lawfully imposed and payable by it, to the extent the same shall have become due and payable, except to the extent there is a good faith contest thereof by the Company, if the Company has established (and is maintaining in accordance with GAAP) adequate reserves for such Taxes.

Section 7.12               Performance and Enforcement. The Company shall duly perform and observe all of the covenants, agreements and conditions on its part to be performed and observed under each Operative Document and shall (a) perform and observe its and the Owner Lessor’s covenants, agreements and conditions contained in any of the Material Project Documents, (b) enforce, defend and protect all of its and the Owner Lessor’s rights contained in any of the Material Project Documents and (c) take all reasonable and necessary actions to prevent the termination or cancellation of any of the Material Project Documents, except, with

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respect to the requirements set forth in clauses (a), (b) and (c) above, but not with respect to the EPC Contract, to the extent that the Owner Lessor and the Owner Participant and, so long as the Lien of the Security Documents has not been terminated or discharged, the Indenture Trustee shall have received an Officer’s Certificate from the Company stating that the failure to comply with any of the provisions of such clauses could not reasonably be expected to result in a Material Adverse Effect; provided, that, during the Construction Period, the Company shall be subject in all respects to the terms of the Construction Agency Agreement and Article XI and not this Section 7.12.

Section 7.13               Notice of Change in Jurisdiction of Organization or Name. The Company shall provide the Owner Participant and the Owner Lessor, and, so long as the Lien of the Security Documents has not been terminated or discharged, the Indenture Trustee, prompt written notice of any anticipated change in its jurisdiction of organization or name, which notice shall, in any event, be provided no later than 30 days prior to such change.

Section 7.14               Further Assurances. The Company, at its own cost, expense and liability, will cause to be promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and assurances as may be necessary in order to carry out the intent and purposes of this Agreement and the other Operative Documents to which it is a party and the transactions contemplated hereby and thereby. The Company, at its own cost, expense and liability, will cause any financing statements and fixture filings (and continuation statements with respect thereto) as may be necessary and such other documents as the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents shall not have been terminated or discharged, the Indenture Trustee shall reasonably request to be recorded or filed at such places and times in such manner, and will take all such other actions or cause such actions to be taken, as may be necessary or advisable in order to establish, preserve, protect and perfect the right, title and interest of the Owner Lessor in and to the Facility, the Ground Interest, the Project Document Interest and the other Collateral, or any portion of any thereof or any interest therein and the first priority Lien intended to be created by the Security Documents therein. The Company shall promptly from time to time furnish to the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents shall not have been terminated or discharged, the Indenture Trustee such information with respect to the Facility, the Ground Interest, the Project Document Interest and the other Collateral or the transactions contemplated by the Operative Documents to which it is a party as may be required to enable the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents shall not have been terminated or discharged, the Indenture Trustee to timely file with any Governmental Authority any reports and obtain any licenses or permits required to be filed or obtained by the Owner Lessor under any Operative Document or the Owner Participant as the owner of the Member Interest.

Section 7.15               Limitation on Liens. The Company shall not, directly or indirectly, create, incur, assume or suffer to exist or permit any Lien upon the Facility, the Ground Interest, the Project Document Interest or any of the other Collateral, other than Permitted Liens.

Section 7.16               Future Real Property. The Company shall, if it or the Owner Lessor shall at any time acquire any real property or leasehold or other interest in real property

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related to the Facility or the Site that is not covered by the Indenture, promptly upon such acquisition (or on the Construction Closing Date, if such acquisition occurred prior thereto) execute, deliver and record a supplement to the Indenture, reasonably satisfactory in form and substance to the Indenture Trustee, subjecting such real property or leasehold or other interest to the Lien and security interest created by the Indenture.

Section 7.17               Limitations on Amendment, Termination or Extension of Project Documents. The Company shall not, without the prior written consent of the Required Participants agree to or acquiesce in (i) the cancellation, suspension or termination of any Material Project Document, (ii) the assignment, release or relinquishment of the rights or obligations of any Project Participant under a Material Project Document, (iii) any amendment, revision, supplement or modification of, or consent or waiver with respect to, any provision of the EPC Contract (except as permitted pursuant to Section 7.19) or (iv) any amendment, revision, supplement or modification of, or consent or waiver with respect to, any provision of any Material Project Document (other than the EPC Contract), except to the extent that the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents has not been terminated or discharged, the Indenture Trustee shall have received an Officer’s Certificate from the Company stating that such amendment, revision, supplement, modification, consent or waiver could not reasonably be expected to result in a Material Adverse Effect.

Section 7.18               Additional Construction Documents. (a) Without the prior written consent of the Required Participants, the Company shall not (i) enter into any Additional Construction Documents relating to the Facility (other than the EPC Contract and the Supplemental Construction Agreement) with a value in excess of $1,000,000 individually or $5,000,000 in the aggregate or (ii) enter into or amend, modify or waive any contract as Construction Agent that would, directly or indirectly, impose any liability or any obligation on any other Funding Party other than the liabilities and obligations of such Funding Parties pursuant to the Operative Documents.

(b)                                 To the extent that the Company has entered into any Additional Construction Document in compliance with Section 7.18(a), the Company shall undertake all obligations thereunder (until such Additional Construction Document is assigned to the Company pursuant to the Assignment and Assumption Agreement) in its capacity as Construction Agent for the Owner Lessor (and not on a recourse basis to itself) and such Additional Construction Document shall contain provisions (i) limiting the recourse against the Owner Lessor and the Company, as Construction Agent, by the other party to such Additional Construction Document with respect to any claims against the Owner Lessor and the Construction Agent under such Additional Construction Document solely to the proceeds of Advances funded to the Owner Lessor specifically for the purpose of making payments to such party under such Additional Construction Document for payment of such claims and (ii) eliminating any obligation or personal liability of the Company, the members of the Owner Lessor or the other Funding Parties under such Additional Construction Document for the payment or performance of any obligation of the Owner Lessor thereunder.

Section 7.19               Changes to Construction Budget and Construction Schedule; Change Orders. The Company shall not (a) amend, modify or otherwise change the Construction Budget or the Construction Schedule as to the scheduled date of any of the Construction Contract

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Milestones or extend the scheduled date of Guaranteed Completion Date beyond the Outside Completion Date, provided, that, to the extent that an unanticipated delay in the Construction Schedule arises and the Company either (i) arranges for additional sources of financing for any additional Project Costs arising therefrom and any scheduled principal payments due in respect of the Lessor Notes during any such period of delay in accordance with Section 13.3 and Section 2.7 of the Construction Agency Agreement (or, if applicable, Section 14.1) or (ii) provides a Recourse Notification pursuant to Section 3.1(b) of the Construction Agency Agreement, the Company may amend the Construction Budget and the Construction Schedule in order to appropriately account for such delay as well as the additional Project Costs arising from and other amounts due during such delay and the additional sources of financing to pay such Project Costs and other amounts, (b) enter into any Change Order without the prior written consent of the Required Participants, provided, that no consent of the Required Participants shall be required if (i) any such Change Order would not result in an increase in amounts payable under the EPC Contract in excess of $2,000,000 individually or $8,000,000 in the aggregate and (ii) the Company certifies that the amount of such Change Order, when aggregated with the amount of all previous Change Orders and utilizations of the “contingency” category of the Construction Budget does not exceed the amount set forth for such category in the Construction Budget, or (c) agree to any Change Order otherwise permitted under clause (b) of this sentence that represents or would result in a material change in the Scope of the Work, the Project Schedule, the Payment Schedule, the Significant Design Documents, any Performance Guarantee, the amount or method of computing any Performance Guarantee Payment or Late Completion Payment or the requirements to achieve any Construction Contract Milestone or to conduct any Performance Testing (as such terms, if not defined herein, are defined in the EPC Contract).

Section 7.20               Fiscal Year. The Company shall not change its fiscal year except on 60 days’ prior written notice to the Owner Participant and the Owner Lessor and, so long as the Lien of the Security Documents has not been terminated or discharged, the Indenture Trustee.

Section 7.21               Utility Regulation. The Company shall not take any action (or omit to take any action) which action or omission could reasonably be expected to result in either (i) the Company being subject to any regulation as a “public service corporation” under Arizona law or (ii) any other Funding Party, solely by reason of (1) the construction, ownership, lease, operation or maintenance of the Facility by the Company, (2) the making of the Equity Contributions and the issuance of the Lessor Notes and the Certificates, in each case, pursuant to the Operative Documents or (3) the consummation of any other transactions contemplated by any Transaction Document, being deemed by any Government Authority having jurisdiction to be or otherwise become a “public utility”, a “public utility company”, a “public utility holding company”, a “public service company”, a “public service corporation”, an “electric utility”, an “electric company”, an “electric utility company”, an “electrical corporation” or any similar type of entity (or an affiliate of any thereof) under any Applicable Law (including PUHCA, the Federal Power Act, Article XV of the Arizona Constitution or Article 40 of the Arizona Revised Statutes) or otherwise subject to any regulation relating to any such type of entity (or an affiliate of any thereof) under any Applicable Law (including PUHCA, the Federal Power Act, Article XV of the Arizona Constitution or Article 40 of the Arizona Revised Statutes).

Section 7.22               Company Merger Covenant. The Company covenants that it will not enter into any merger, consolidation or amalgamation, or liquidate, wind-up or dissolve itself

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(or suffer any liquidation or dissolution) or convey, transfer, lease or otherwise dispose of all or substantially all of its Property or business as an entirety or convey, transfer or assign the Facility Leasehold Interests (other than pursuant to Section 15.2 or Section 18 or 21.4(c) of the Facility Lease) to any Person (in one or in a series of related transactions) unless, in the case of any merger, consolidation or amalgamation only:

(a)                                 the Company shall be the surviving entity of such merger, consolidation or amalgamation and, immediately after giving effect to such merger, consolidation or amalgamation, at least 51% of the membership of the Company shall consist of organizations that were members of the Company immediately prior to such merger, consolidation or amalgamation;

(b)                                 for so long as the Initial Lessor Notes or the Certificates shall be outstanding and immediately after giving effect to such merger, consolidation or amalgamation, the Rating Agencies shall each confirm that such merger, consolidation or amalgamation shall not result in a downgrade of the then-existing credit rating of the Certificates, and in any event, the Certificates shall not be rated less than Baa3 by ▇▇▇▇▇’▇ or BBB- by S&P;

(c)                                  immediately after giving effect to such merger, consolidation or amalgamation, no Significant Company Default or Company Event of Default shall have occurred and be continuing; and

(d)                                 the Company shall have delivered to the Owner Participant and the Owner Lessor, and so long as the Lien of the Security Agreement has not been terminated or discharged, the Indenture Trustee an Officer’s Certificate stating that such consolidation, merger or amalgamation complies with this Section 7.22 and that all conditions precedent herein provided for relating to such transaction have been complied with.

Upon any such consolidation, merger or amalgamation in accordance with this Section 7.22, the Company, as the surviving entity, shall remain liable in respect of, and shall retain the right to exercise every right and power of, the “Company” under this Agreement and the other Operative Documents with the same effect as if such merger, consolidation or amalgamation had not occurred.

Section 7.23               Disbursement Agreement Accounts. The Company shall cause to be deposited and maintained in each of the Accounts the amounts required by this Agreement and the Disbursement Agreement at the times required hereby and thereby. The amounts on deposit in each of the Accounts shall be subject to the terms of, and distributed in accordance with, this Agreement and the Disbursement Agreement.

Section 7.24               Rate Covenant. (a) Subject to any necessary regulatory approval, including the approval of the RUS if required, in each fiscal year of the Company, the Company shall and shall cause each of its Restricted Subsidiaries to, establish and collect rates, fees and charges for the use or the sale of the output, capacity or service of the System that, together with other Revenues, are reasonably expected to cause the Debt Service Ratio of the Restricted Group in each such fiscal year to be not less than 102%.

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(b)                                 Promptly upon any material change in the circumstances that was not contemplated at the time such rates and charges were most recently reviewed, but not less frequently than once in each fiscal year, the Company shall review the rates and charges so established and shall promptly take, and cause each of its Restricted Subsidiaries to take, the actions necessary to revise such rates and charges as necessary to comply with the requirements set forth in Section 7.24(a) and all covenants under this Agreement and the other Operative Documents.

(c)                                  If, at the end of any fiscal year, the Debt Service Ratio of the Restricted Group is less than 102%, within 60 days of the receipt of the audited financial statements of the Company and its Restricted Subsidiaries for the preceding fiscal year of the Company, the Governing Bodies of the Company and the Restricted Subsidiaries shall implement a plan that is designed to produce a Debt Service Ratio of the Restricted Group for the current fiscal year that will be at least 102%. Subject to any Applicable Laws to which the Company or any of its Restricted Subsidiaries are subject, the Company and its Restricted Subsidiaries shall promptly implement such changes described in such plan to the fullest extent practicable. The Company shall promptly supply the Owner Participant with a copy of such plan. The Company shall take reasonable action to seek the approval of any applicable regulatory authority, including RUS if required, of rates required to be set pursuant to this Section 7.24.

(d)                                 The failure of the Restricted Group to realize a Debt Service Ratio at least equal to 102% shall not be a Company Event of Default or a Company Default hereunder so long as (i) such plan is adopted in a timely manner by the Governing Bodies of the Company and all Restricted Subsidiaries and they are implementing such plan and (ii) no payment default has occurred with respect to the outstanding Debt of the Restricted Group.

Section 7.25               Distributions of Patronage Capital. The Company may only return to its members patronage capital allocated to members so long as (a) no Company Default or Company Event of Default has occurred and is continuing or would occur after giving effect to such return and (b) after giving effect to such return, the Equity to Capitalization Ratio on the date of any such return shall be not less than the percentage set forth below opposite the fiscal year in which such return occurred:

Section 7.26               Survey. The Company shall have delivered to each of the Indenture Trustee, the Title Company, the Owner Lessor and the Owner Participant, no later than 180 days after the Lease Commencement Date, a map or a plat of an “as-built” survey of the Facility and the Site and all Appurtenant Rights, certified to the Owner Lessor, the Owner Participant, the Indenture Trustee and the Title Company, in a manner reasonably satisfactory to each such Person by an independent professional licensed land surveyor reasonably satisfactory to each such Person, which map or plat and the survey on which it is based shall be made in accordance with the Minimum Standard Detail Requirements for ALTA/ACSM Surveys jointly

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established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1997.

Section 7.27               Securities Act Information. So long as any of the Certificates are “restricted securities” within the meaning of Rule 144(a)(3) under the Securities Act, unless at the time the Company is subject to and in compliance with the reporting requirements of Sections 13 and 15(d) of the Exchange Act, the Company shall provide to any Certificateholder or beneficial owner of an interest in a Certificate or any prospective purchaser of Certificates designated by a Certificateholder or beneficial owner of an interest in a Certificate, upon the request of such Certificateholder, beneficial owner or prospective purchaser, the information described in Rule 144A(d)(4) under the Securities Act.

Section 7.28               ERISA. Except where the events or conditions described in this Section 7.28 might not reasonably be expected to have a Material Adverse Effect, the Company shall ensure that (a) each Plan subject to Title IV of ERISA shall be maintained in compliance with the applicable provisions of ERISA and the Code, (b) no condition shall exist that could reasonably be expected to result in the institution of proceedings to terminate any underfunded Plan and (c) no event shall incur with respect to any Plan that might reasonably be expected to result in the incurrence by the Company or any Commonly Controlled Entity of any liability.

Section 7.29               Insurance. The Company shall maintain (or cause to be maintained) on behalf of itself, as Construction Agent and as Lessee, and on behalf of the Owner Lessor, the insurance required to be maintained pursuant to Schedule 7.29.

Section 7.30               Regulatory Approvals. The Company shall diligently work to cause to be obtained from the FERC, within 90 days after the Construction Closing Date, (a) a declaratory order disclaiming jurisdiction during the Facility Lease Term over each of the Funding Parties (other than the Company) and (b) EWG Status Orders determining that each of the Owner Lessor and the Owner Participant is an “exempt wholesale generator” as defined under Section 32(a) of PUHCA.

ARTICLE VIII

COVENANTS OF THE TRUST COMPANY, THE OWNER

MANAGER AND THE OWNER LESSOR

Section 8.1                      Compliance with the LLC Agreement. Each of the Trust Company, the Independent Manager and the Owner Lessor hereby severally covenants and agrees as to itself only that it will:

(a)                                 comply with all of the terms of the LLC Agreement applicable to it; and

(b)                                 not (i) amend, supplement, or otherwise modify the LLC Agreement except for amendments required by the Operative Documents or by Applicable Laws or which are administrative or ministerial in nature without the prior written consent of (A) so long as no Company Event of Default has occurred and is continuing, the Company and (B) so long as any Lessor Notes remain outstanding, the Indenture Trustee (acting on the instruction of the Required Noteholders) or (ii) revoke, rescind or otherwise waive compliance with or terminate the LLC

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Agreement without the prior written consent of (A) so long as no Company Event of Default has occurred and is continuing, the Company and (B) so long as any Lessor Notes remain outstanding, the Indenture Trustee (acting on the instruction of the Required Noteholders).

Section 8.2                      Owner Lessor’s Liens. Each of the Trust Company, the Independent Manager and the Owner Lessor covenants severally and as to itself only that it (i) will not directly or indirectly create, incur, assume or suffer to exist any Owner Lessor’s Lien attributable to it, (ii) will promptly notify in writing the Company, the Owner Participant and the Indenture Trustee of the imposition of any such Owner Lessor’s Lien of which it has knowledge and (iii) shall promptly, at its own expense, take such action as may be necessary to duly discharge any Owner Lessor’s Lien attributable to it.

Section 8.3                      Amendments to Transaction Documents. (a) Each of the Owner Lessor, the Independent Manager and the Trust Company covenants severally and as to itself only that it will not, unless such action is expressly contemplated by the Operative Documents, (i) through its own action, terminate any Operative Document to which it is a party, (ii) amend, supplement, waive or modify (or consent to any such amendment, supplement, waiver or modification) any Operative Document (other than the LLC Agreement, amendments to and modifications of which are governed by Section 8.1) in any manner or (iii) except as provided in Section 13.2, take any action to prepay or refund the Lessor Notes or amend any of the payment terms of the Lessor Notes without, in each case, the prior written consent of (A) so long as no Company Event of Default shall have occurred and be continuing, the Company and (B) in the case of clause (i) or (ii), but except as otherwise set forth in Section 7.2(j) of the Indenture, so long as any Lessor Notes remain outstanding, the Indenture Trustee (acting on the instruction of the Required Noteholders pursuant to Section 7.1 of the Indenture).

(b)                                 Except as permitted by Section 7.12, 7.17 or 7.19, each of the Owner Lessor, the Independent Manager and the Trust Company covenants severally and as to itself only that it will not, without the prior written consent of the Required Participants, agree to or acquiesce in (i) the cancellation, suspension or termination of any Material Project Document, (ii) the assignment (except the assignments under the Assignment and Assumption Agreement), release or relinquishment of the rights or obligations of any Project Participant under a Material Project Document, (iii) any amendment, revision, supplement or modification of, or consent or waiver with respect to, any provision of the EPC Contract (except as permitted pursuant to Section 7.19) or (iv) any amendment, revision, supplement or modification of, or consent or waiver with respect to, any provision of any Material Project Document (other than the EPC Contract), except to the extent that the Company shall have delivered an Officer’s Certificate stating that such amendment, revision, supplement, modification, consent or waiver could not reasonably be expected to result in a Material Adverse Effect.

Section 8.4                      Transfer of the Facility. Other than as contemplated by the Operative Documents, each of the Owner Lessor and the Independent Manager covenants severally and as to itself only that it will not assign, pledge, sell, lease, convey or otherwise transfer any of its then existing right, title or interest in and to the Facility, the Ground Interest, the Project Document Interest, the Lessor Estate or the other Operative Documents. Nothing in this Section 8.4 shall limit the ability of the Independent Manager to resign pursuant to Section

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12.1 of the LLC Agreement or the ability of the Owner Participant to appoint a successor Independent Manager pursuant to Section 12.1 of the LLC Agreement.

Section 8.5                      Lessor Estate. The Owner Lessor and the Independent Manager covenants severally and as to itself only that it will not voluntarily take any action to subject the Owner Lessor or the Lessor Estate to the provisions of any applicable bankruptcy or insolvency law (as now or hereafter in effect).

Section 8.6                      Quiet Enjoyment. Each of the Trust Company, the Independent Manager and the Owner Lessor agrees that, notwithstanding any provision of any other Operative Document, (a) prior to the Lease Commencement Date, so long as no Company Event of Default (including by virtue of any failure or omission to obtain, or cause to be obtained, any Governmental Approval) has occurred and is continuing, neither it nor any party acting by, through or under such Person shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Company of the Facility and the Ground Interest conveyed by the Construction Agency Agreement and (b) after the Lease Commencement Date, so long as no Company Event of Default (including by virtue of any failure or omission to obtain, or cause to be obtained, any Governmental Approval) has occurred and is continuing, neither it nor any party acting by, through or under such Person shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Company of the Facility conveyed by the Facility Lease and the Ground Interest conveyed by the Site Sublease.

Section 8.7                      Single Purpose. The business of the Owner Lessor is and will continue to be restricted (until the expiration or earlier termination of the Facility Lease) to the holding of the Facility, the Ground Interest, the Project Document Interest and the other Collateral and the leasing or assigning of such, in each case as required or expressly permitted or contemplated by the Operative Documents, and it will not engage, and it has not engaged, in any other business transaction except for administration of the Lessor Estate and for matters reasonably incidental to any of the foregoing. Each of the Independent Manager, on behalf of the Owner Lessor, and the Owner Lessor covenants severally as to itself only that it will not incur any Indebtedness nor enter into any business or activity except as required or expressly permitted or contemplated by any Operative Document.

Section 8.8                      Change of Jurisdiction of Organization. Each of the Owner Lessor, the Independent Manager and the Trust Company agrees that, notwithstanding any provision of any other Operative Document, it will not change the jurisdiction of organization of the Owner Lessor from the jurisdiction set forth in Section 6.2(g) or change the name of the Owner Lessor from “Springerville Unit 3 Holding LLC”.

Section 8.9                      Approvals in Writing. If and to the extent approval or direction is required at any time from the Owner Lessor and/or the Independent Manager (including from one to the other) under the Operative Documents or otherwise, the Owner Lessor and/or the Independent Manager, as the case may be, shall only give such approval or direction in writing.

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ARTICLE IX

COVENANTS OF THE OWNER PARTICIPANT

Section 9.1                      Restrictions on Transfer of Member Interest. (a) The Owner Participant covenants and agrees that it shall not during the Construction Period or the Facility Lease Term, directly or indirectly, assign, convey or transfer any of its right, title or interest in the Member Interest without the prior written consent of the Company (so long as no Company Event of Default has occurred and is continuing) and, so long as any Lessor Notes remain outstanding, the Indenture Trustee (acting on the instruction of the Required Noteholders); provided, however, the Owner Participant may assign, convey or transfer all or any portion of its interest in the Member Interest without such consent to a Person (the “Transferee”) which shall assume the duties and obligations of the Owner Participant under the Operative Documents (and the guarantor or guarantors, as the case may be, of the Transferee shall assume the duties and obligations of the OP Guarantor under the Operative Documents), with respect to the interest being transferred pursuant to a Transfer Agreement substantially in the form of Exhibit P (and such guarantor or guarantors, as the case may be, shall execute and deliver to the other parties hereto a guaranty in the form of Exhibit J), if each of the following further conditions shall have been satisfied:

(i)                                     the Company (so long as no Company Event of Default has occurred and is continuing), the Owner Lessor and, so long as any Lessor Notes remain outstanding, the Indenture Trustee, for the benefit of the Noteholders, shall have received an opinion of counsel of the Transferee and the transferring Owner Participant, which opinion shall be reasonably satisfactory to each of the Company, the Owner Lessor and the Indenture Trustee to the effect that (A) such Transfer Agreement (and any guaranty of the Transferee’s obligations) is a legal, valid and binding obligation of, and is enforceable against, each party thereto (subject to customary qualifications), (B) all material Governmental Approvals required in connection with such transfer or necessary to assume the Owner Participant’s obligations (and issue any guaranty of the Transferee’s guarantor or guarantors, as the case may be) under the Operative Documents shall have been obtained, (C) the existence, power and authority of, and due authorization, execution and delivery of all relevant documentation by, the Transferee (and any guarantor of such Transferee’s obligations under the Operative Documents) and (D) the proposed transfer of the Member Interest will not require registration pursuant to the Securities Act;

(ii)                                  the Transferee (and any guarantor of the Transferee’s obligations under the Operative Documents) shall be a “United States person” within the meaning of Section 7701(a)(30) of the Code;

(iii)                               the Transferee or any guarantor of such Transferee shall have a Consolidated Tangible Net Worth of at least $75 million, calculated in accordance with GAAP and, if such transfer occurs during the Commitment Period, the Reference Debt of any guarantor of such Transferee shall be rated at least BBB+ by S&P and Baal by ▇▇▇▇▇’▇;

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(iv)                              neither the Transferee nor any guarantor (nor any Affiliate of any such Person) shall be (A) a Competitor or (B) in material litigation with the Company or an Affiliate thereof unless, in either case, the Company shall have, in its sole discretion, consented to such transfer;

(v)                                 after such transfer, there shall be no more than four Owner Participants; and

(vi)                              the transferring Owner Participant shall pay, without any right of indemnification from the Company or any other Person, on an After Tax-Basis, all reasonable documented out-of-pocket costs, fees and expenses (including reasonable attorney’s fees and expenses) incurred in connection with any such transfer or proposed transfer, including any of foregoing relating to any amendments to the Operative Documents required in connection therewith, by (A) the other parties hereto, except the Company and (B) the Company, so long as no Significant Company Default or Company Event of Default has occurred and is continuing at the time of such transfer.

(b)                                 For purposes of determining whether a Transferee, any guarantor of such Transferee or any Affiliate of any such Person is a “Competitor” of the Company or any Affiliate thereof, the Company shall, on the Construction Closing Date, provide a list of entities, each of which, or an Affiliate of which, shall be significantly involved as a generator, seller, trader, wholesale purchaser or marketer of capacity or energy in the WECC power market or any successor thereto as determined in good faith by the Company; provided, that the restriction set forth in paragraph (a)(iv)(A) above shall not apply in the case of a Transferee that is an Affiliate of such a generator, seller, trader, wholesale purchaser or marketer so long as (i) such Transferee is an entity involved in making passive investments (such as the Owner Participant’s investment in the Overall Transaction) and not otherwise engaged as a generator, seller, trader, wholesale purchaser or marketer of capacity or energy in the electric market, (ii) such Transferee has in place procedures that shall be reasonably acceptable to the Company to prevent such Affiliate that is a generator, seller, trader, wholesale purchaser or marketer of capacity or energy from acquiring confidential information relating to such passive investments and agrees in writing with the Company to maintain such procedures and (iii) neither such Transferee nor any Affiliate thereof is an entity that is actively involved in the selling, trading or generation of electricity in the WECC power market or any successor thereto and derives a material percentage of its revenues from participation in such power market. After the Construction Closing Date, the Company may, with the Owner Participant’s written consent, which consent shall not be unreasonably withheld, modify or supplement the initial List of Competitors from time to time, but no more often than once per year based on the standards used in preparing the initial List of Competitors and, in addition, after notice of any proposed transfer by the Owner Participant pursuant to this Section 9.1. Notwithstanding the foregoing, the restrictions set forth in clauses (a)(i), (a)(iii), (a)(iv) and (a)(v) shall not inure to the benefit of the Company if such transfer is in connection with the exercise of remedies during the continuance of a Company Event of Default.

(c)                                  Notwithstanding anything to the contrary contained herein, upon the occurrence of a Regulatory Event of Loss or an event described in clause (i) of the definition of “Deemed Loss” set forth in Appendix A, the Owner Participant shall have satisfied the transfer requirements of this Section 9.1 in the event the Transferee satisfies the conditions set forth in

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clauses (a)(ii) and (a)(iii), and the Owner Participant and the Transferee, as the case may be, shall satisfy each other condition set forth in this Section 9.1 as soon as practicable, but in any event within 15 days, following such assignment, conveyance or transfer; provided, that solely with respect to a Regulatory Event of Loss or an event described in clause (i) of the definition of “Deemed Loss” set forth in Appendix A, the condition set forth in clause (a)(iv) shall not inure to the benefit of the Company and shall be deemed waived by the Company.

(d)                                 Notwithstanding anything to the contrary contained herein, any transfer of any direct or indirect ownership interest in the Owner Participant (including any transfer of the OP Interest), up to but excluding the OP Guarantor, shall comply with the transfer restrictions set forth in Section 9.1 (a); provided, that, as long as the OP Guaranty remains in full force and effect, the transfer restrictions set forth in clause (a)(iii) will not apply to any transfers of an interest in such direct or indirect parent of the Owner Participant to other entities that are at all times wholly-owned, directly or indirectly, by the OP Guarantor; provided, further, that, in any event, any such entity shall represent and covenant that it is not and will not be funding its equity amounts, and is not and will not be performing its obligations under the Operative Documents with Plan Assets.

(e)                                  So long as any Lessor Notes remain outstanding, it shall be a condition precedent to the effectiveness of a transfer of (i) the Member Interest or (ii) the OP Interest, that the Rating Agencies shall have received an opinion of counsel substantially to the effect of the nonconsolidation opinion delivered on the Construction Closing Date or in such other form as may be acceptable to the Rating Agencies or, if as a consequence of a change in bankruptcy law, such opinion cannot be given:

(A)                               (1) in connection with an event described in clause (i) above, a legal opinion to the effect that the risk of bankruptcy consolidation of the Transferee with the Transferee’s parent immediately after giving effect to the transfer of such equity interest is not materially greater than the risk of bankruptcy consolidation of the transferor with such transferor’s parent, immediately prior to giving effect to such transfer or (2) in connection with an event described in clause (ii) above, a legal opinion to the effect that the risk of bankruptcy consolidation of the Owner Participant with the transferee in such transfer after giving effect to the transfer of such equity interest is not materially greater than the risk of bankruptcy consolidation of the Owner Participant with the transferor, immediately prior to giving effect to such transfer; and

(B)                               in connection with an event described in clause (i) above, an Officer’s Certificate of the Transferee certifying that the Constitutive Documents of the Transferee contain, and will continue to contain after the transfer, provisions substantially equivalent to those contained in the Constitutive Documents of the Owner Participant on the Construction Closing Date with respect to the following provisions: separateness, independent managers, no bankruptcy petition, no dissolution and amendment of such organizational documents or such other provisions as may be acceptable to the Rating Agencies.

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(f)                                   Except as provided in Section 12.2 or in the Tax Indemnity Agreement and except for any transfer made in connection with the exercise of remedies during the continuance of a Company Event of Default, the Company shall not be responsible for any adverse Tax consequence to the Owner Lessor or the Owner Participant resulting from any transfer pursuant to this Section 9.1.

(g)                                  The Owner Participant shall give the Owner Lessor, the Indenture Trustee (so long as any Lessor Notes remain outstanding) and the Company fifteen (15) days prior written notice, in the form of an Officer’s Certificate, of any transfer pursuant to this Section 9.1, specifying the name and address of any proposed Transferee and such additional information as shall be necessary to determine whether the proposed transfer satisfies the requirements of this Section 9.1.

(h)                                 Upon any transfer that is made in compliance with this Section 9.1, (i) the Transferee shall (x) be deemed the “Owner Participant” for all purposes and (y) enjoy the rights and privileges, and perform the obligations, of the Owner Participant hereunder and under the Transfer Agreement and each other Operative Document to which the transferor Owner Participant is a party and each reference in this Agreement, the Transfer Agreement and each other Operative Document to the “Owner Participant” shall thereafter be deemed to include such Transferee for all purposes and (ii) the transferor Owner Participant and any guarantor of such transferor Owner Participant’s obligations shall be released from all obligations hereunder and under each other Operative Document to which such transferor or guarantor is a party or by which such transferor Owner Participant or guarantor is bound to the extent such obligations are expressly assumed by a Transferee; provided, however, that in no event shall any such transfer waive or release the transferor or any guarantor of the transferor from any liability existing immediately prior to or occurring prior to or simultaneously with such transfer.

Section 9.2                      Status of Owner Participant. If the Owner Participant shall become (a) a “holding company” or a “subsidiary company” or an “affiliate” of a “holding company” within the meaning of PUHCA, (b) an “electric utility” or a “public utility” within the meaning of the Federal Power Act or (c) a “public service corporation” under Arizona law, the Owner Participant covenants that it (i) will notify each of the other Funding Parties thereof as soon as the Owner Participant shall have obtained knowledge of such fact and (ii) either take such action as may be necessary in order to cease to be one of the types described in clauses (a) through (c) of this Section 9.2 or transfer its interest in the Member Interest and the Operative Documents to a Person which will not be one of the types described in said clauses (a) through (c). Any such transfer will be made in accordance with the provisions of Section 9.1.

Section 9.3                      Owner Participant’s Liens. The Owner Participant covenants that it (a) will not directly or indirectly create, incur, assume or suffer to exist any Owner Participant’s Lien, (b) shall promptly notify the Company, the Owner Lessor and the Indenture Trustee in writing of the imposition of any Owner Participant’s Lien of which the Owner Participant has knowledge and (c) shall promptly, at its own expense, take such action as may be necessary to duly discharge any Owner Participant’s Lien.

Section 9.4                      Amendments or Revocation of LLC Agreement. (a) Notwithstanding anything to the contrary contained in the LLC Agreement, the Owner Participant

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covenants that it will not (a) amend, supplement or otherwise modify the LLC Agreement except for amendments required by the Operative Documents or by Applicable Laws or that are administrative or ministerial in nature without the prior written consent of (i) so long as no Significant Company Default or Company Event of Default has occurred and is continuing, the Company and (ii) so long as any Lessor Notes remain outstanding, the Indenture Trustee (acting on the instruction of the Required Noteholders) or (b) revoke, rescind, or otherwise waive compliance with or terminate the LLC Agreement without the prior written consent of (i) so long as no Significant Company Default or Company Event of Default has occurred and is continuing, the Company and (ii) so long as Lessor Notes remain outstanding, the Indenture Trustee (acting on the instruction of the Required Noteholders).

(b)                                 The Owner Participant will give the Company and the Indenture Trustee at least 5 Business Days’ prior notice of any proposed amendment or supplement to the LLC Agreement and deliver true, complete and fully executed copies to the Company and the Indenture Trustee of any amendment or supplement to the LLC Agreement.

Section 9.5                      Instructions. The Owner Participant covenants that (a) it will not instruct the Independent Manager or the Owner Lessor to take any action not permitted by this Agreement or any other Transaction Document and (b) that, in response to any request for instruction or confirmation or other similar notice received from the Independent Manager or the Owner Lessor, it will promptly instruct (or confirm) the Independent Manager or the Owner Lessor to take any action required to be taken by this Agreement or any other Transaction Document.

Section 9.6                      Appointment of Successor Independent Manager. Notwithstanding any other provision of this Agreement, a successor Independent Manager shall not be appointed by the Owner Participant without the consent of (A) so long as no Significant Company Default or Company Event of Default has occurred and is continuing, the Company and (B) so long as any Lessor Notes remain outstanding, the Indenture Trustee (acting on the instruction of the Required Noteholders) unless (a) such successor Independent Manager meets the requirements of the LLC Agreement (including the requirement that such successor be a Qualified Independent Manager) and (b) (A) so long as no Significant Company Default or Company Event of Default has occurred and is continuing, the Company and (B) so long as any Lessor Notes remain outstanding, the Indenture Trustee shall have received, at the expense of the Owner Participant (i) an opinion or opinions of counsel, such counsel and such opinion to be reasonably acceptable to the Indenture Trustee and the Company, covering the matters covered by the opinions required to be delivered by counsel to the Independent Manager pursuant to Section 3.1 (p) and (ii) such other documentation reasonably requested by the Company and the Indenture Trustee, as the case may be. Nothing in this Section 9.6 shall limit the ability of the Independent Manager to resign pursuant to Section 12.1 of the LLC Agreement.

Section 9.7                      Regulatory Event of Loss; Deemed Loss. The Owner Participant will promptly notify the Company of any event of which it is aware that would result in a Regulatory Event of Loss or any other type of Deemed Loss.

Section 9.8                      Quiet Enjoyment. The Owner Participant agrees that, notwithstanding any provision of any other Operative Document, (a) prior to the Lease

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Commencement Date, so long as no Significant Company Default or Company Event of Default (including by virtue of any failure or omission to obtain, or cause to be obtained, any Governmental Approval) has occurred and is continuing, neither the Owner Participant nor any party acting by, through or under the Owner Participant (other than the Indenture Trustee or the Noteholders) shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Construction Agent of the Facility and the Ground Interest conveyed by the Construction Agency Agreement and (b) after the Lease Commencement Date, so long as no Significant Company Default or Company Event of Default (including by virtue of any failure or omission to obtain, or cause to be obtained, any Governmental Approval) has occurred and is continuing, neither the Owner Participant nor any party acting by, through or under the Owner Participant (other than the Indenture Trustee or the Noteholders) shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Company of the Facility Interest conveyed by the Facility Lease or the Ground Interest conveyed by the Site Sublease.

Section 9.9                      Bankruptcy Filings. The Owner Participant covenants that it will not file a petition, or join in the filing of a petition, seeking reorganization, arrangement, adjustment or composition of, or take any action to subject, or in respect of, the Owner Lessor or the Lessor Estate under the provisions of the Bankruptcy Code, or any other applicable bankruptcy or insolvency law (as now or hereafter in effect).

Section 9.10               ERISA. The Owner Participant covenants that it is not and will not be funding its Equity Contributions, and is not and will not be performing its obligations, under the Operative Documents with Plan Assets.

ARTICLE X

COVENANTS OF THE INDENTURE

TRUSTEE AND THE NOTEHOLDERS

Section 10.1               Quiet Enjoyment. The Indenture Trustee and each Noteholder agree severally and with respect to itself only that, notwithstanding any provision of any other Operative Document, (a) prior to the Lease Commencement Date, so long as no Indenture Event of Default or Company Event of Default (including by virtue of any failure or omission to obtain, or cause to be obtained, any Governmental Approval) has occurred and is continuing, neither such Person nor any party acting by, through or under such Person shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Construction Agent of the Facility and the Ground Interest conveyed by the Construction Agency Agreement and (b) after the Lease Commencement Date, so long as no Indenture Event of Default or Company Event of Default (including by virtue of any failure or omission to obtain, or cause to be obtained, any Governmental Approval) has occurred and is continuing, neither such Person nor any party acting by, through or under such Person shall interfere with or interrupt the quiet enjoyment of the use, operation and possession by the Company of the Facility conveyed by the Facility Lease or the Ground Interest conveyed by the Site Sublease.

Section 10.2               Indenture Trustee’s Liens. The Indenture Trustee covenants that it (i) will not directly or indirectly create, incur, assume or suffer to exist any Indenture Trustee’s Lien, (ii) shall promptly notify the Company, the Owner Participant and the Owner Lessor in

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writing of the imposition of any Indenture Trustee’s Lien of which the Indenture Trustee has knowledge and (iii) shall promptly, at its own expense, take such action as may be necessary to duly discharge any Indenture Trustee’s Lien.

ARTICLE XI

COMPANY EVENTS OF DEFAULT

Section 11.1               Company Events of Default. Each of the following events shall constitute a “Company Event of Default” hereunder and under the other Operative Documents (whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order by any court or any order, rule or regulation of any Governmental Authority):

(a)                                 the Company shall fail to make any payment of Basic Lease Rent, Renewal Lease Rent, the EBO Amount, the FPO Amount, Termination Value (or amounts computed by reference to Termination Value) or any Project Costs constituting interest or principal on the Lessor Notes or Equity Yield on the Equity Contributions, after the same shall have become due and payable, and such failure shall have continued for a period of five (5) Business Days; or

(b)                                 the Company shall fail to make any payment of Supplemental Lease Rent or any other payment under the Operative Documents (other than Excepted Payments) after the same shall have become due and such failure shall have continued for a period of ten (10) days after receipt by the Company of written notice of such failure from the Owner Lessor or the Indenture Trustee; or

(c)                                  the Company shall fail to submit a Funding Request or a Final Funding Request to the Participants to Advance funds to the Owner Lessor for the timely payment of Project Costs pursuant to Section 2.3(c) or Section 4.2(b) or fails to make any certifications required in connection therewith; or

(d)                                 the Company shall fail to apply the proceeds of any Advance pursuant to any Funding Request or the Final Funding Request as required by the Operative Documents or fails to apply any funds distributed by the Owner Lessor, the Indenture Trustee or the Depositary Bank to it for the repair or restoration of the Facility to effect such repair or restoration and, in each case, such failure shall continue unremedied for a period of five (5) Business Days after the earlier to occur of the Company obtaining knowledge thereof or receipt by the Company of written notice of such failure from the Owner Lessor or the Indenture Trustee;

(e)                                  the Company shall fail to observe or perform its obligation to maintain (or cause to be maintained) insurance in the amounts and on the terms set forth in Schedule 7.29 and such failure shall have continued for a period of five (5) days after the earlier to occur of the Company obtaining knowledge thereof or receipt by the Company of written notice of such failure from the Owner Lessor or the Indenture Trustee; or

(f)                                   the Company shall fail to perform or observe any covenant, obligation or agreement to be performed or observed by it under this Agreement or any other Operative

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Document (other than any covenant, obligation or agreement referred to in clause (a), (b), (c), (d), (e) or (g) of this Article XI or contained in the Tax Indemnity Agreement) and such failure shall continue unremedied for 30 days after the earlier of (i) receipt by the Company of written notice thereof from the Owner Lessor or the Indenture Trustee or (ii) Actual Knowledge of such failure by the Company; provided, however, that if (i) such failure is capable of being remedied, but not within such 30-day period and (ii) the Company is diligently proceeding to cure such failure, then the period for cure shall be extended for the period necessary for the Company to cure such failure, but in no event shall the aggregate cure period under this Section 11(f) exceed 180 days; provided, further, that, in the case of the Company’s obligation set forth in Section 7.1(a)(i) of the Facility Lease, to the extent and for so long as a test, challenge, appeal or proceeding shall be prosecuted in good faith by the Company, the failure by the Company to comply with such requirement shall not constitute a Company Event of Default if such test, challenge, appeal or proceeding shall not involve (i) any danger of foreclosure, sale, forfeiture or loss of, or imposition of a Lien on, any part of the Facility or the impairment of the use, operation or maintenance of the Facility in any material respect (in each case, unless such risk is not material because appropriate reserves maintained in accordance with GAAP, if any, have been made, or such risk is appropriately bonded), (ii) any risk of criminal liability being asserted against any Funding Party (other than the Company) or their respective Affiliates or (iii) any material risk of the occurrence of any material adverse effect being incurred by any Funding Party (other than the Company), including subjecting the Owner Participant or the Owner Lessor or their Affiliates to regulation as a public utility under Applicable Law; and provided, further, that, in the case of the Company’s obligation set forth in Section 7.1(a)(i) of the Facility Lease, to the extent that, the noncompliance is not a type that can be immediately remedied, the failure to comply shall not be a Company Event of Default if the Company is taking all reasonable action to remedy such noncompliance and if, but only if, such noncompliance shall not involve any danger or risks described in clause (i), (ii) or (iii) of the preceding proviso; and provided. further, that such noncompliance, or such test, challenge, appeal or proceeding to review shall not extend beyond the date that is thirty-six (36) months prior to the scheduled expiration of the Basic Lease Term or, if either is then in effect or elected by the Company, the Renewal Lease Term or the FMV Renewal Lease Term; or

(g)                                  The Company shall fail to perform or observe or comply with the covenants set forth in Section 7.1 (except clause (iv) thereof), 7.9(a), 7.15, 7.17, 7.18, 7.19, 7.21, 7.22, 7.24, 7.25, 7.30 or 15.2 or Sections 18 or 21.4(c) of the Facility Lease;

(h)                                 any representation or warranty made by the Company in the Operative Documents or in any Officer’s Certificate delivered pursuant thereto shall prove to have been incorrect as of the date made in any material respect and shall continue to be material and the circumstances giving rise to such incorrect representation or warranty is unremedied for a period of thirty (30) days after the earlier to occur of the Company obtaining knowledge thereof or receipt by the Company of written notice thereof from the Owner Lessor or the Indenture Trustee; provided, however, that if (i) the circumstance giving rise to such incorrect representation or warranty is capable of being remedied, but not within such 30-day period and (ii) the Company is diligently proceeding to remedy such condition, then the period for cure shall be extended for the period necessary to remedy such condition, but in no event shall the aggregate cure period under this Section 11.1(h) exceed 180 days; or

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(i)                                     (i) the Company shall commence any case or other proceeding (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts or (B) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Company shall make a general assignment for the benefit of its creditors, (ii) there shall be commenced against the Company any case or other proceeding of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of sixty (60) days, (iii) there shall be commenced against the Company any case or other proceeding seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed or bonded pending appeal within sixty (60) days from the entry thereof, (iv) the Company shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or (iii) above or (v) the Company shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

(j)                                    the occurrence of any of the following before the Lease Commencement Date (i) a material breach or other default by the EPC Contractor under the EPC Contract shall occur in the performance of any of its obligations under the EPC Contract and such breach or default is not cured within the grace or cure period, if any, provided under the EPC Contract, (ii) any material provision of the EPC Contract shall at any time or for any reason cease to be valid and binding or in full force and effect or the EPC Contractor shall so assert in writing, (iii) any material provision of the EPC Contract shall be declared to be null and void or the validity or enforceability thereof shall be contested by the EPC Contractor or any Governmental Authority or (iv) the EPC Contractor shall deny that it has any further liability or obligation under the EPC Contract (except upon fulfillment of all of its obligations thereunder);

(k)                                 the termination or revocation of, or omission or failure to obtain, or cause a third-party to obtain, under any Transaction Document, any Governmental Approval required for the construction, use, maintenance and operation of the Facility which termination, revocation, omission or failure to obtain, or cause to be obtained, materially affects the Company’s ability to meet its financial or performance obligations under the Construction Agency Agreement or any other Operative Document to which it is a party unless (i) with respect to any such termination, revocation, omission or failure that occurs prior to the Lease Commencement Date, in the reasonable opinion of the Owner Participant and the Indenture Trustee (after consultation with the Company), such termination, revocation, omission or failure is curable in a time frame adequate to allow the Lease Commencement Date to occur by the Outside Completion Date, in which case such termination, revocation, omission or failure shall not constitute a Company Event of Default hereunder for so long as the Company is diligently taking action reasonably satisfactory to the Owner Participant and the Indenture Trustee to cure or remedy such termination, revocation, omission or failure; provided, that if such termination, revocation, omission or failure shall not have been cured or remedied prior to the Outside Completion Date, then such termination, revocation, omission or failure shall constitute a

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Company Event of Default on the Outside Completion Date or (ii) with respect to any such termination, revocation, omission or failure that occurs after the Lease Commencement Date, in the reasonable opinion of the Owner Participant and, if the Lien of Security Documents shall not have been terminated or otherwise discharged, the Indenture Trustee such termination, revocation, omission or failure is curable within 180 days after the earlier of the Company obtaining knowledge thereof or receipt by the Company of written notice thereof from the Owner Lessor or the Indenture Trustee, in which case such termination, revocation, omission or failure shall not constitute a Company Event of Default hereunder for so long as the Company is diligently taking action reasonably satisfactory to the Owner Participant and the Indenture Trustee to cure or remedy such termination, revocation, omission or failure; provided, that if such termination, revocation, omission or failure shall not have been cured or remedied within such 180-day period, then such termination, revocation, omission or failure shall constitute a Company Event of Default at the conclusion of such 180-day period; or

(l)                                     the Lease Commencement Date shall fail to occur on or prior to the Outside Completion Date; or

(m)                             the occurrence of a Construction Event of Loss or the declaration of a “Company Event of Default” under Section 14.1 or 14.2; or

(n)                                 with respect to any Operative Document (other than the Security Documents), (i) such Operative Document (A) ceases to be a valid and binding obligation of the parties thereto or (B) is declared unenforceable by a Governmental Authority or the Company contests the enforceability thereof or (ii) such Operative Document is terminated or ceases to be in full force or effect (prior to its normal expiration); or

(o)                                 any Lien granted pursuant to any Security Document shall cease to be a perfected Lien in favor of the Indenture Trustee on any portion of the Collateral described therein with the priority purported to be created by such Security Document; or

(p)                                 the Company shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation) on the scheduled or original due date with respect thereto, (ii) default in making any payment of interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (iii) default in the observance or performance of any other agreement or condition contained in the Master Indenture or the RUS Loan Agreement (other than any default arising in respect of any of Section 2.1(g), 2.1(1) or 6.14 of the RUS Loan Agreement), or any other event shall occur or condition exist and, with respect to any such default, event or condition occurring under any of clauses (i), (ii) and (iii) above, such default or other event or condition has caused or resulted in such Indebtedness becoming or being declared due and payable prior to its Stated Maturity Date or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the case of any Indebtedness constituting Guarantee Obligations) to become payable; provided, that a default, event or condition described in clauses (i), (ii) or (iii) of this Section 11 (p) that has resulted in the acceleration of such Indebtedness shall not at any time constitute a Company Event of Default unless, at such time, one or more defaults, events or conditions of the types described in clauses (i), (ii) or (iii) of this Section 11 (p) shall have occurred and be continuing and shall have resulted in the acceleration of

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Indebtedness, the outstanding principal amount of which exceeds in the aggregate $20,000,000, without such Indebtedness having been discharged or the acceleration having been rescinded or annulled; or

(q)                                 the Company shall (i) default in making any payment of any principal of any Indebtedness (including any Guarantee Obligation) under the Master Indenture or the RUS Loan Agreement on the scheduled or original due date with respect thereto or (ii) default in making any payment of interest on any such Indebtedness under the Master Indenture or the RUS Loan Agreement beyond the period of grace, if any, provided in the Master Indenture or the RUS Loan Agreement.

Section 11.2               Construction Period Events of Default. If any one or more Company Events of Default shall occur during the Construction Period, then, in any such event, the Owner Lessor may declare this Agreement and the other Operative Documents to be in default, and in the case of a Company Event of Default described in Section 11.1(i), a default under this Agreement and the other Operative Documents shall be deemed to have occurred immediately prior to the action, omission or commencement of proceedings that initially triggered such Default without any declaration of such default at such time.

Section 11.3               Survival of Construction Period Obligations. The termination of the Construction Agency Agreement shall in no event relieve the Company of its liability and obligations hereunder and thereunder that accrued prior to such termination or of any payment obligation under Section 11.4, all of which shall survive any such termination.

Section 11.4               Construction Period Purchase Option; Construction Period Remedies.

(a)                                 Purchase Option after a Company Event of Default during the Construction Period. The Company may purchase the Facility, the Ground Interest and the Project Document Interest after the occurrence and during the continuance of a Company Event of Default prior to the Lease Commencement Date at a price equal to the Construction Balance outstanding on the date of such purchase, if the Company shall have given written notice to the Owner Lessor and the Indenture Trustee of its intention to do so within ten (10) Business Days after the occurrence of such Company Event of Default (the “Notice of Construction Purchase”). The Notice of Construction Purchase shall specify the proposed date of purchase, which date shall in any event be no later than the date that is 90 days after the Notice of Construction Purchase is issued. The delivery of the Notice of Construction Purchase shall be deemed to constitute a Recourse Notification pursuant to Section 3.1 of the Construction Agency Agreement.

(b)                                 Construction Period Remedies. Prior to the Lease Commencement Date, but subject to the provisions of the last sentence of this Section 11.4(b). the Owner Lessor may exercise any of the following remedies at the Owner Lessor’s option and without limiting the Owner Lessor in the exercise of any other right or remedy the Owner Lessor may have on account of such default, including, subject to Section 11.5, any remedies under any other Operative Document:

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(i)                                     If a Company Event of Default shall have occurred and be continuing, then the Owner Lessor may, in addition to the other rights and remedies provided for in this Article XI, immediately terminate the Construction Agency Agreement in whole or in part by giving the Company written notice of such termination, and, upon the giving of such notice, all rights of the Company and all obligations of the Owner Lessor under the Construction Agency Agreement with respect to the portion of the Construction Agency Agreement being so terminated shall cease.

(ii)                                  If a Company Event of Default constituting a Full Recourse Event shall have occurred and be continuing, the Owner Lessor may require the Company to pay the Construction Balance, and upon payment in full of the Construction Balance, the Owner Lessor shall comply with the provisions of Section 11.7.

(iii)                               If a Company Event of Default constituting a Partial Recourse Event shall have occurred and be continuing the Owner Lessor may require the Company to pay to the Owner Lessor the Partial Recourse Amount and may require the Company to relinquish promptly all of its right, title and interest in, to and under the Facility, the Ground Interest and the Project Document Interest to the Owner Lessor in accordance with the provisions of Section 11.8. Simultaneously therewith or at any time thereafter, at the request of the Owner Lessor, the Company shall use commercially reasonable efforts to sell the Facility, the Ground Interest and the Project Document Interest on an “arm’s length” basis at the Fair Market Sales Value for cash and the sales proceeds of any such sale shall be applied in accordance with Section 4.2(b) of the Indenture.

(iv)                              If one or more Company Events of Default constituting Non-Recourse Events shall have occurred and be continuing and no Full Recourse Event or Partial Recourse Event shall have occurred and be continuing the Owner Lessor may require the Company to relinquish promptly all of its right, title and interest in, to and under the Facility, the Ground Interest and the Project Document Interest to the Owner Lessor in accordance with the provisions of Section 11.8. Simultaneously therewith or at any time thereafter, at the request of the Owner Lessor, the Company shall use commercially reasonable efforts to sell the Facility, the Ground Interest and the Project Document Interest on an “arm’s length” basis at the Fair Market Sales Value for cash and the sales proceeds of any such sale shall be applied in accordance with Section 4.2(b) of the Indenture.

(v)                                 The Owner Lessor may exercise, without notice to the Company or anyone claiming under the Company, and the Company waives notice of any application therefor, any other right or remedy that may be available to it under Applicable Laws or in equity or proceed by appropriate court action (legal or equitable) to enforce the terms or to recover damages for the breach of this Agreement or any of the other Operative Documents.

In the event the Company delivers a Notice of Construction Purchase in accordance with Section 11.4(a), the Owner Lessor may not exercise any remedy under this Section 11.4(b) to the extent such exercise would prevent the Company from being able to consummate its purchase obligation on the date designated in such Notice of Construction Purchase (it being understood

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and agreed the foregoing shall not constitute any further limitation on the exercise of remedies if the Company fails to pay the Construction Balance in full by the date specified in such Notice of Construction Purchase).

Section 11.5               Recourse Limitations. (a) Notwithstanding any other provision of the Operative Documents, if a Full Recourse Event shall have occurred and the Owner Lessor exercises any of the remedies set forth in Section 11.4, the Company’s aggregate recourse liability on account of the exercise of such remedies shall not be limited in any respect.

(b)                                 Notwithstanding any other provision of the Operative Documents, if a Company Event of Default constituting a Partial Recourse Event shall have occurred, no Full Recourse Event shall have occurred and the Owner Lessor exercises any of the remedies set forth in Section 11.4, the Company’s aggregate recourse liability on account of the exercise of such remedies by the Owner Lessor under this Agreement and the other Operative Documents shall be limited to the Partial Recourse Amount, together with interest thereon at the Overdue Rate from the date any such amounts were due until the date of payment, so long as the Company has complied with its obligations in Section 11.8 within ten (10) Business Days of demand by the Owner Lessor.

(c)                                  Notwithstanding any other provision of the Operative Documents, if one or more Company Events of Default constituting Non-Recourse Events shall have occurred and no Full Recourse Event or Partial Recourse Event shall have occurred and be continuing, the Company shall not have any recourse liability with respect thereto under the Operative Documents and, if the Owner Lessor exercises any of the remedies set forth in Section 11.4, the Company shall have no recourse liability under the Operative Documents on account of the exercise of such remedies, so long as the Company has complied with its obligations in Section 11.8 within ten (10) Business Days of demand by the Owner Lessor.

(d)                                 Upon the occurrence and continuance of a Company Event of Default, any Participant may elect to fund any Project Cost or otherwise attempt to achieve the Completion Date or to fund any other costs or expenses (whether pursuant to Section 2.3(c) or otherwise) and such payment or funding shall be deemed an Advance by the Owner Lessor on the date so advanced and shall be deemed to increase the amount owed under the Operative Documents by the Owner Lessor to each Participant by the amount so funded, and the Construction Balance shall, on such date, be increased by the aggregate amounts so advanced.

(e)                                  On and after the Lease Commencement Date, upon the occurrence and continuance of a Company Event of Default, the remedies, powers and privileges provided in Section 16 of the Facility Lease, and not in this Article XI (other than in Section 11.9 or 11.10) shall apply, together with any other remedies, powers and privileges provided in the other Operative Documents.

Section 11.6               Owner Lessor’s Right to Cure Company Defaults during the Construction Period. (a) The Owner Lessor, without waiving or releasing any obligation or Company Event of Default, may (but shall be under no obligation to), during the Construction Period, remedy any Company Event of Default for the account of and at the sole cost and expense of the Company (subject to the applicable recourse limitations set forth in Section 11.5

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above) and, in furtherance of such right, the Owner Lessor may make Funding Requests, execute the EPC Contract and otherwise exercise all rights and perform all duties of the Company under the Construction Agency Agreement, under the EPC Contract and of the Company hereunder with respect to the Project Obligations. Subject to the applicable recourse limitations set forth in Section 11.5, the Company shall pay to the Owner Lessor on demand all reasonable out of pocket costs and expenses incurred by the Owner Lessor in connection therewith (including reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Owner Lessor.

Section 11.7               Construction Purchase Procedures. In the case of any Construction Purchase by the Company pursuant to Section 11.4(a) or payment of the Construction Balance pursuant to Section 11.4(b)(ii), the Owner Lessor shall take the following actions promptly after the Owner Lessor’s receipt of all amounts due with respect to the Facility pursuant to Section 11.4 and all other amounts then due and owing pursuant to the terms of this Agreement, including Section 11.8, and of the other Operative Documents:

(a)                                 the Owner Lessor shall execute and deliver to the Company (or to the Company’s designee), at the Company’s cost and expense, (x) a quitclaim deed with respect to all of the interests of the Owner Lessor in real property constituting part of the Facility (if any) and; (y) a quitclaim ▇▇▇▇ of sale with respect to the interest of the Owner Lessor in all items of personalty or Equipment constituting part of the Facility and (z) a quitclaim assignment of the entire interest of the Owner Lessor in the Facility and the Ground Interest (which shall include an assignment of all of the right, title and interest of the Owner Lessor in and to the Site under the Site Lease and any Casualty Insurance Proceeds or Condemnation Proceeds with respect to the Facility not previously received by the Owner Lessor), in each case, in recordable form and otherwise in conformity with local custom and free and clear of the Lien of the Security Documents and any Owner Lessor’s Liens attributable to the Owner Lessor;

(b)                                 the Facility shall be conveyed to the Company (or to such Company’s designee) “AS IS” and in its then present physical condition without any other representations or warranties; and .

(c)                                  the Owner Lessor shall execute and deliver to the Company such certifications with respect to the termination of the Construction Agency Agreement as the Company may reasonably request.

Section 11.8               Construction Return Procedures. In the case of any Construction Return with respect to the Facility, the Company shall do each of the following on or prior to the Construction Return Date specified by the Owner Lessor in a written notice to the Company:

(a)                                 the Company shall, on or prior to the Construction Return Date, execute and deliver to the Owner Lessor (or to the Owner Lessor’s designee), in forms reasonably satisfactory to the Owner Lessor, (i) a deed with respect to all of the interest of the Company in real property constituting part of the Facility (if any) containing representations and covenants of the grantor thereof to the Owner Lessor (or such other Person) solely regarding the absence of Liens (other than Owner Lessor’s Liens and the Liens of the Security Documents and other than Permitted Liens of the types specified in clause (i), (ii), (iii), (iv)(A) (but only to the extent such

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Lien relates to real property taxes that relate to the Facility or the Site) or (viii) of the definition thereof), (ii) a ▇▇▇▇ of sale without warranty (except as to the absence of Liens other than Owner Lessor’s Liens and the Liens of the Security Documents and other than Permitted Liens of the types specified in clause (i), (ii), (iii), (iv)(A) (but only to the extent such Lien relates to real property taxes that relate to the Facility or the Site) or (viii) of the definition thereof) with respect to all of the interest of the Company in all personalty and Equipment constituting part of the Facility and (iii) an assignment of the Company’s entire interest in the Facility, all permits and licenses of any Governmental Authority or other Person that relate solely to the Facility (to the extent assignable) and all Casualty Insurance Proceeds, Condemnation Proceeds and awards, compensation and insurance proceeds payable in connection with any Force Majeure affecting the Facility and an assignment of leases of the Facility), in each case, in recordable form and otherwise in conformity with local custom and free and clear of any Liens attributable to the Company;

(b)                                 the Company shall, on the Construction Return Date, pay over to the Owner Lessor all awards, compensation and insurance proceeds previously received by the Company in connection with the Facility;

(c)                                  the Company shall, on or prior to the Construction Return Date, execute and deliver to the Owner Lessor and the Owner Lessor’s title insurance company an affidavit as to the absence of any Liens (other than Owner Lessor’s Liens and the Liens of the Security Documents) and shall execute and deliver to the Owner Lessor a statement of termination of the Construction Agency Agreement;

(d)                                 the Company shall, on or prior to the Construction Return Date, vacate the Facility and transfer possession of the Facility and Ground Interest to the Owner Lessor or any Person designated by the Owner Lessor, in each case, by surrendering the same into the possession of the Owner Lessor or such Person, as the case may be, “AS IS”, free and clear of all Liens (other than Owner Lessor’s Liens and the Liens of the Security Documents and other than Permitted Liens of the types specified in clause (i), (ii), (iii), (iv)(A) (but only to the extent such Lien relates to real property taxes that relate to the Facility or the Site) or (viii) of the definition thereof), in compliance with all Applicable Laws (including Environmental Laws); and

(e)                                  on or prior to the Construction Return Date, the Company shall deliver to the Owner Lessor or any Person designated by the Owner Lessor copies of all books and records regarding the construction and maintenance of the Facility and the Company’s interest in the Facility, a current copy of the Significant Design Documents, an assignment of all of its interests in all Construction Documents and all service agreements (to the extent any of the foregoing have been obtained and are assignable) necessary for the maintenance and Commercial Operation of the Facility.

Section 11.9               Other Remedies. Upon the occurrence of a Company Event of Default, the Indenture Trustee, the other Secured Parties, the Owner Lessor and the Owner Participant may exercise any and all rights and remedies in accordance with the provisions under Sections 11.2 through 11.8 (prior to the Lease Commencement Date), the Indenture, the Security Documents and the other applicable Operative Document and, on or after the Lease Commencement Date, under the Facility Lease, as well as all their rights and remedies that may

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be available under Applicable Law or in equity or proceed by appropriate court action (legal or equitable) to enforce the forms or recover damages for breach of this Agreement or any of the other Operative Documents.

Section 11.10        No Waiver; Remedies Cumulative. (a) No failure to exercise and no delay in exercising, on the part of any party hereto, any right, remedy, power or privilege under this Agreement or under the other Operative Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges provided in this Agreement are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

(b)                                 Any party’s consent to any request made by the Company shall not be deemed to constitute or preclude the necessity for obtaining such party’s consent in the future to all similar requests. No express or implied waiver by any party hereto of any Company Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Company Event of Default. To the extent permitted by any Applicable Laws, the Company hereby waives any rights now or hereafter conferred by statute or otherwise that may require the Owner Lessor to sell, lease or otherwise use the Facility, the Ground Interest or the Project Document Interest or any part or portion of a Facility, the Ground Interest or the Project Document Interest in mitigation of damages upon the occurrence of a Company Event of Default or that may otherwise limit or modify any of the Owner Lessor’s or any other party’s rights or remedies under the Operative Documents.

ARTICLE XII

INDEMNIFICATION BY THE LESSEE

Section 12.1               General Indemnity.

(a)                                 Claims Indemnified. Subject to the exclusions set forth in Section 12.1(b) and except as provided in Section 12.1(g), the Company agrees to indemnify, protect, defend and hold harmless, and does hereby indemnify each of the other Funding Parties, Wilmington Trust Company (in its individual capacity), the Lead Arranger and the Certificateholders and each such Person’s respective successors, assigns, agents, servants, shareholders, members, partners, directors, officers, employees and Affiliates of each of the foregoing (each an “Indemnitee”) from and against any and all Claims (whether or not any of the transactions contemplated by the Operative Documents are consummated) imposed on, incurred or suffered by or asserted against such Indemnitee in any way relating to or resulting from or arising out of or attributable to, in whole or in part:

(i)                                     the construction, financing (including the making of the Equity Contributions and the offering and issuance of the Lessor Notes and the Certificates), refinancing, acquisition, operation, rebuilding, warranty, ownership, use, possession, maintenance, repair, lease, condition, alteration, modification, restoration, refurbishing,

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return, purchase, sale or other disposition, insuring, sublease, or other use or non-use of the Facility, the Site or any Component or any portion thereof or any interest therein;

(ii)                                  the conduct of the business or affairs of the Company at the Facility and the Site;

(iii)                               the manufacture, design, purchase, acceptance, rejection, delivery or condition of, or improvement to, the Facility, the Site or any Component, or any portion of any thereof or any interest therein;

(iv)                              the Facility Lease, the Site Lease, the Site Sublease or any other Transaction Document, the execution or delivery thereof or the performance, enforcement, attempted enforcement or amendment, supplement or modification of any terms thereof, or the transactions contemplated thereby or resulting therefrom;

(v)                                 the reasonable costs and expenses of any Indemnitee (including the reasonable fees and expenses of their respective counsels) incurred in connection (A) with amendments, modifications, consents, waivers or supplements to the Transaction Documents whether or not such amendment, modification, consent, waiver or supplement is consummated, (B) any Event of Loss (including any Regulatory Event of Loss) or Deemed Loss or (C) any Company Event of Default;

(vi)                              the imposition of any Lien other than, with respect to a particular Indemnitee, a Lien arising by or through such Indemnitee or a Related Party (or any of their agents, employees, servants or Affiliates) that is prohibited by the terms of this Agreement or any other Operative Document;

(vii)                           any violation by, or liability relating to the Company of, or under, any Applicable Laws, whether now or hereafter in effect, or any action of any Governmental Authority or other Person taken with respect to the Facility or the Site, the Transaction Documents or the interest of any Indemnitee under the Transaction Documents;

(viii)                        the non-performance or breach by the Company of any obligation contained in this Agreement or any other Transaction Document to which the Company is a party or the falsity or inaccuracy of any representation or warranty of the Company contained in this Agreement or any other Transaction Document;

(ix)                              the applications of Part 4 and 5 of Subtitle B of Title I of ERISA (including any penalties under Section 502(i) of ERISA) and any excise taxes, charges or penalties under Section 4975 of the Code;

(x)                                 the offer or sale of any interest in the Member Interest, the Equity Contributions, the Lessor Notes or the Certificates, or the making of Equity Contributions and the offering and issuance of the Lessor Notes and the Certificates, in accordance with the Operative Documents;

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(xi)                              any Breakage Cost payable pursuant to any Operative Document and any Forward Fix Adjustment and Breakage Costs incurred under the Forward Fix Transaction Documents;

(xii)                           the continuing fees (if any) and expenses of the Independent Manager, the Indenture Trustee, the Pass Through Trustees and the Depositary Bank (including the reasonable fees and expenses of their respective counsel, accountants and other professional persons) and of the Engineering Consultant, the Appraiser, the Market and Fuel Consultant, the Environmental Consultant and the Insurance Consultant arising out of the discharge of their respective duties under or in connection with the Transaction Documents (including the preparation of any reports or certificates);

(xiii)                        the costs and expenses of any Indemnitee (including the fees and expenses of their respective counsel) incurred in connection with the enforcement or preservation of any rights against the Company under any Operative Document; and

(xiv)                       in any other way relating to the Facility, the Site and the Transaction Documents.

(b)                                 Claims Excluded. Any Claim, to the extent (A) directly relating to or directly resulting from, (B) arising out of or attributable to or (C) such Claim would not have occurred but for, any of the following, is excluded from the Company’s agreement to indemnify any Indemnitee under this Section 12.1:

(i)                                     acts, omissions or events (including violation of law or any change in the Environmental Condition of the Facility, the Site or any portion or Component thereof, or the use, storage, transportation, treatment or manufacture of any Hazardous Materials in, at, under or from the Facility or the Site) occurring after expiration or other termination of the Facility Lease and, where required by the Facility Lease, return of the Facility and the Ground Interest to the Owner Lessor (or its successors or assigns) in compliance with the provisions of the Facility Lease or the Site Sublease, as applicable;

(ii)                                  with respect to a particular Indemnitee or a Related Party, any offer, sale, assignment, transfer or other disposition (voluntary or involuntary) by or on behalf of (A) in the case of the Owner Participant, any of its interest in the Member Interest, (B) in the case of the Owner Lessor, all or any portion of the Facility or the Ground Interest or any other interest in the Lessor Estate, (C) with respect to any Noteholder, all or any portion of such Person’s interest in the Lessor Notes or the collateral therefor or (D) with respect to any Certificateholder, all or any portion of such Person’s interest in the Certificates or any collateral therefor, unless, in each case, such transfer is required by the terms of the Operative Documents or occurs in connection with the exercise of remedies during a Company Event of Default;

(iii)                               with respect to any Indemnitee (other than the Depositary Bank, the Indenture Trustee, the Pass Through Trustees or any Related Party thereof), any Claim attributable to the gross negligence or willful misconduct of the Indemnitee seeking indemnification or a Related Party of such Indemnitee;

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(iv)                              with respect to the Depositary Bank, the Indenture Trustee, the Pass Through Trustees or any Related Party thereof, the fraud, negligence or willful misconduct of such Person or any such Related Party;

(v)                                 as to any Indemnitee (other than the Depositary Bank, the Indenture Trustee, the Pass Through Trustees, the Initial Purchaser, the Lead Arranger or any Related Party thereof), any Claim attributable to the noncompliance of such Indemnitee or a Related Party with any of the terms of, or any misrepresentation or breach of warranty by such Indemnitee contained in, any Transaction Document or any breach by such Indemnitee or a Related Party of any covenant contained in any Transaction Document attributable to such Indemnitee or Related Party unless attributable to a breach by the Company of its obligations under the Transaction Documents;

(vi)                              any obligation or liability expressly borne, assumed or to be paid in any Operative Document by the Indemnitee (or a Related Party of such Indemnitee) seeking indemnification;

(vii)                           with respect to the Owner Lessor, the Independent Manager or the Trust Company, any Claim constituting or arising from an Owner Lessor’s Lien attributable to such Indemnitee or to a Related Party of such Indemnitee;

(viii)                        with respect to the Owner Participant, any Claim constituting or arising from an Owner Participant’s Lien attributable to such Indemnitee or to a Related Party of such Indemnitee;

(ix)                              with respect to the Indenture Trustee, any Claim constituting or arising from a Indenture Trustee’s Lien attributable to such Indemnitee or to a Related Party of such Indemnitee;

(x)                                 except to make payments on an After-Tax Basis, any Claim that is a Tax, or is a cost of contesting a Tax, whether or not the Company is required to indemnify therefor pursuant to Section 12.2 or pursuant to the Tax Indemnity Agreement;

(xi)                              any negligent failure on the part of the Independent Manager to distribute in accordance with the LLC Agreement any amounts received by it under the Operative Documents and distributable by it thereunder;

(xii)                           any Claim relating to the costs and expenses of any Indemnitee in connection with any amendments, supplements, modifications, consents or waivers to an Operative Document not requested by the Company or not required by the Operative Documents or by Applicable Law, except during, and executed in connection with, a Company Event of Default, as the case may be;

(xiii)                        any Claim that constitutes principal, premium and/or interest on the Lessor Notes;

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