Supplemental Indenture No. 7


    Exhibit
      4.1

     

    


    
      

      

    

    


    


    


    Supplemental
      Indenture No. 7

    


    _________________________

    


    


    TUCSON
      ELECTRIC POWER COMPANY

     

    to

     

    THE
      BANK OF NEW YORK,

     

    Trustee

    


    


    
      _________________________

    

    


    


    


    Dated
      as of December 1, 2006

    


    


    


    


    Supplemental
      to Indenture of Mortgage and Deed of Trust,

    dated
      as of December 1, 1992

     

    
      _________________________

    

    


    


    Creating
      A Series of Bonds Designated

    First
      Mortgage Bonds, Collateral Series F

    


    
      _________________________

    

    


     

    


    
      

      

    

    


    


    This
      instrument constitutes a mortgage, a deed of trust and a security
      agreement.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    SUPPLEMENTAL
      INDENTURE NO. 7,
      dated
      as of December 1, 2006, between Tucson
      Electric Power Company
      (hereinafter sometimes called the “Company”), a corporation organized and
      existing under the laws of the State of Arizona, having its principal office
      at
      One South Church Avenue, in the City of Tucson, Arizona, as trustor, and
The
      Bank
      of New York
      (successor in trust to Bank of Montreal Trust Company), a banking corporation
      organized and existing under the laws of the State of New York and having its
      principal office at 101 Barclay Street, in the Borough of Manhattan, The City
      of
      New York, New York, as trustee (hereinafter sometimes called the “Trustee”),
      under the Indenture of Mortgage and Deed of Trust, dated as of December 1,
      1992 (hereinafter called the “Original Indenture”), as heretofore amended and
      supplemented, this Supplemental Indenture No. 7 being supplemental thereto
      (the Original Indenture as heretofore amended and supplemented, and as
      supplemented hereby, and as it may from time to time be further supplemented,
      modified, altered or amended by any supplemental indenture entered into in
      accordance with and pursuant to the provisions thereof, is hereinafter called
      the “Indenture”).

     

    Recitals
      of the Company

     

    WHEREAS,
      the
      Original Indenture was authorized, executed and delivered by the Company to
      provide for the issuance from time to time of its Bonds (such term and all
      other
      capitalized terms used herein without definition having the meanings assigned
      to
      them in the Original Indenture), to be issued in one or more series as therein
      contemplated, and to provide security for the payment of the principal of and
      premium, if any, and interest, if any, on the Bonds; and

     

    WHEREAS,
      the
      Company proposes to establish a series of Bonds designated “First Mortgage
      Bonds, Collateral Series F” and to be limited in aggregate principal amount
      (except as contemplated in clause
      (b)
      of
      Section 2
      of
      Article II of
      the
      Original Indenture) to $490,600,000, such series of Bonds and such Bonds to
      be
      hereinafter sometimes called, respectively, “Series 7” and “Series 7
      Bonds”; and

     

    WHEREAS,
      all
      acts and proceedings required by law and by the articles of incorporation and
      by-laws of the Company, including all action requisite on the part of its
      shareholders, directors and officers, necessary to make the Series 7 Bonds,
      when executed by the Company, authenticated and delivered by the Trustee and
      duly issued, the valid, binding and legal obligations of the Company, and to
      constitute this Supplemental Indenture a valid, binding and legal instrument,
      in
      accordance with its and their terms, have been done and taken; and the execution
      and delivery of this Supplemental Indenture No. 7 have been in all respects
      duly authorized; and 

     

    WHEREAS,
      effective June 3, 1999, The Bank of New York succeeded to all of the corporate
      trust business of Bank of Montreal Trust Company, and, as a consequence, The
      Bank of New York, being otherwise qualified and eligible under Article
      XII
      of the
      Original Indenture, became the successor trustee under the Indenture without
      further act on the part of the parties thereto, as contemplated by Section
      11
      of
Article
      XII
      of the
      Original Indenture.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    Granting
      Clauses

     

    NOW,
      THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 7 WITNESSETH,
      that,
      in order to secure the payment of the principal of and premium, if any, and
      interest, if any, on all Bonds at any time Outstanding under the Indenture
      according to their tenor, purport and effect, and to secure the performance
      and
      observance of all the covenants and conditions therein and herein contained
      (except any covenant of the Company with respect to the refund or reimbursement
      of taxes, assessments or other governmental charges on account of the ownership
      of the Bonds of any series or the income derived therefrom, for which the
      Holders of the Bonds shall look only to the Company and not to the property
      hereby mortgaged or pledged), and to declare the terms and conditions upon
      and
      subject to which the Series 7 Bonds are to be issued, and for and in
      consideration of the premises and of the mutual covenants herein contained
      and
      of the purchase and acceptance of the Bonds by the Holders thereof, and of
      the
      sum of $1 duly paid to the Company by the Trustee at or before the ensealing
      and
      delivery hereof, and for other good and valuable consideration, the receipt
      and
      sufficiency whereof are hereby acknowledged, the Company has executed and
      delivered this Supplemental Indenture No. 7, and by these presents does grant,
      bargain, sell, release, convey, assign, transfer, mortgage, pledge, set over
      and
      confirm unto the Trustee, and grant to the Trustee a security interest
      in:

     

    All
      and
      singular the premises, property, assets, rights and franchises of the Company
      (except Excepted Property), whether now or hereafter owned, constructed or
      acquired, of whatever character and wherever situated including, among other
      things (but reference to or enumeration of any particular kinds, classes or
      items of property shall not be deemed to exclude from the operation and effect
      of this Supplemental Indenture No. 7 any kind, class or item not so referred
      to
      or enumerated), all right, title and interest of the Company in and to the
      property described as granted in “Schedule A” attached to this Supplemental
      Indenture No. 7 and made part of these Granting Clauses to the same extent
      as if fully set forth in the same, and all plants for the generation of
      electricity by water, steam and/or other power; all power houses, substations,
      transmission lines, and distributing systems; all offices, buildings and
      structures, and the equipment thereof; all machinery, engines, boilers, dynamos,
      machines, regulators, meters, transformers, generators and motors; all
      appliances whether electrical, gas or mechanical, conduits, cables and lines;
      all pipes, service pipes, fittings, valves and connections, poles, wires, tools,
      implements, apparatus, furniture, and chattels; all municipal franchises and
      other franchises; all lines for the transmission and/or distribution of electric
      current, including towers, poles, wires, cables, pipes, conduits, street
      lighting systems and all apparatus for use in connection therewith; all real
      estate, lands, and leaseholds; all easements, servitudes, licenses, permits,
      rights, powers, franchises, privileges, rights-of-way and other rights in or
      relating to real estate or the occupancy of the same and all the right, title
      and interest of the Company in and to all other property of any kind or nature
      appertaining to and/or used and/or occupied and/or enjoyed in connection with
      any property hereinbefore described; it being the intention of the parties
      that
      all property of every kind, real, personal or mixed (including, but not limited
      to, all property of the types hereinbefore described), other than Excepted
      Property, which may be acquired by the Company after the date hereof, shall,
      immediately upon the acquisition thereof by the Company, to the extent of such
      acquisition, and without any further conveyance or assignment, become and be
      subject to the direct lien of the Indenture as fully and completely as though
      now owned by the Company and described in said “Schedule A”; it further being
      the intention of the parties, however, that the lien of and security interest
      granted by this

     

    
      
        
        

      

      
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    Supplemental
      Indenture No. 7 shall not result in the Trustee having greater rights with
      respect to any property of the Company, real, personal or mixed (including,
      but
      not limited to, leasehold interests in property), than the rights of the Company
      with respect to such property.

     

    TOGETHER
      WITH all and singular the tenements, hereditaments and appurtenances belonging
      or in any wise appertaining to the aforesaid premises, property, assets, rights
      and franchises or any part thereof, with the reversion and reversions, remainder
      and remainders, and all the estate, right, title and interest and claim
      whatsoever, at law as well as in equity, which the Company now has or may
      hereafter acquire in and to the aforesaid premises, property, assets, rights
      and
      franchises and every part and parcel thereof.

     

    Subject,
      however, to
      the
      reservations, exceptions, limitations and restrictions contained in the several
      deeds, leases, servitudes, contracts, decrees, judgments, or other instruments
      through which the Company acquired or claims title to or enjoys the use of
      the
      aforesaid properties; and subject
      also to
      such
      easements, leases, reservations, servitudes, reversions and other rights and
      privileges of others and such mortgages, liens and other encumbrances in, on,
      over, across or through said properties as existed at the time of the
      acquisition of such properties by the Company or as have been granted by the
      Company to other persons at or prior to the time of the issuance and delivery
      of
      the Bonds of the Initial Series; and subject
      also to
      Permitted Encumbrances and, as to any property acquired by the Company after
      the
      time of the issuance and delivery of the Bonds of the Initial Series, to any
      easements, leases, reservations, servitudes, reversions and other rights and
      privileges of others and mortgages, liens or other encumbrances thereon
      existing, and to any mortgages, liens and other encumbrances for unpaid portions
      of the purchase money placed thereon, at the time of such acquisition; and
      subject
      also to
      the
      provisions of Article
      XI of
      the
      Original Indenture;

     

    TO
      HAVE
      AND TO HOLD the
      Trust
      Estate and all and singular the lands, properties, estates, rights, franchises,
      privileges and appurtenances hereby granted, bargained, sold, released,
      conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed,
      together with all the appurtenances thereunto appertaining, unto the Trustee
      and
      its successors and assigns, forever;

     

    BUT
      IN
      TRUST, NEVERTHELESS,
      for the
      equal and proportionate use, benefit, security and protection of those who
      from
      time to time shall hold the Bonds authenticated and delivered hereunder and
      under the Indenture and duly issued by the Company, without any discrimination,
      preference or priority of any one Bond over any other by reason of priority
      in
      the time of issue, sale or negotiation thereof or otherwise, except as provided
      in Section 2
      of
      Article IV
      of
      the
      Original Indenture, so that, subject to said provisions, each and all of said
      Bonds shall have the same right, lien and privilege under the Indenture and
      shall be equally secured thereby (except as any sinking, amortization,
      improvement, renewal or other fund, established in accordance with the
      provisions of the Indenture, may afford additional security for the Bonds of
      any
      particular series), and shall have the same proportionate interest and share
      in
      the Trust Estate, with the same effect as if all of the Bonds had been issued,
      sold and negotiated simultaneously on the date of the delivery hereof; and
      in
      trust for enforcing payment of the principal of the Bonds, and premium, if
      any,
      and interest, if any, thereon, according to the tenor, purport and effect of
      the
      Bonds and of the Indenture, and for enforcing the terms, provisions, covenants
      and agreements herein, in the Indenture and in the Bonds set forth;

     

    
      
        
        

      

      
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    UPON
      CONDITION that,
      until the happening of a Default, the Company shall be suffered and permitted
      to
      possess, use and enjoy the Trust Estate (except money, securities and other
      personal property pledged or deposited with or required to be pledged or
      deposited with the Trustee hereunder or under the Indenture) and to receive
      and
      use the rents, issues, income, revenues, earnings and profits therefrom, all
      as
      more specifically provided in Section 1
      of
      Article
      VII of the
      Original Indenture;

     

    AND
      UPON
      THE TRUSTS, USES AND PURPOSES and
      subject to the covenants, agreements and conditions hereinafter set forth and
      declared.

     

    ARTICLE I

     

    Additional
      Definitions

     

    Section
      1. Applicability
      of Article

     

    For
      all
      purposes of this Supplemental Indenture No. 7, except as otherwise
      expressly provided or unless the context otherwise requires, the terms defined
      in this Article shall have the meanings herein specified and include the plural
      as well as the singular.

     

    Section
      2. Additional
      Definitions.

     

    “Administrative
      Agent”
      means
      Union Bank of California, N.A., in its capacity as Administrative Agent under
      the Credit Agreement.

     

          “Credit
      Agreement” means the Amended and Restated Credit
      Agreement, dated as of August 11, 2006, among the Company, the Lenders party
      thereto, the Issuing Banks party thereto, the Co-Syndication Agents party
      thereto, the Co-Documentation Agents party thereto and Union Bank of California,
      N.A., as Administrative Agent, as amended, amended and restated, supplemented
      or
      otherwise modified from time to time.

     

           
      “Interest Payment Date”
      means
      the last day of each March, June, September and December; provided, however,
      that the first Interest Payment Date shall be December 31, 2006.

     

    “Maturity”
      means
      the date on which the principal of the Series 7 Bonds becomes due and
      payable, whether at stated maturity, upon redemption or acceleration, or
      otherwise.

     

    The
      following terms shall have the meanings specified in the Credit Agreement:
      “Aggregate
      Commitment”, “Alternate Base Rate”, “Issuing Bank”, “Letter of Credit”, “Loans”
and “Obligations”.

     

    A
      copy of
      the Credit Agreement is filed at the office of the Administrative Agent at
      445
      South Figueroa Street, 15th
      floor,
      Los Angeles, California 90071 and at the office of the Company at One South
      Church Avenue, Tucson, Arizona 85701.

     

    
      
        
        

      

      
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    ARTICLE II

     

    Series 7
      Bonds

     

    There
      is
      hereby established a series of Bonds having the following terms and
      characteristics (the lettered subdivisions set forth below corresponding to
      the
      lettered subdivisions of Section 2 of Article II of the Indenture):

     

    (a)  
      the
      title
      of the Bonds of such series shall be “First Mortgage Bonds, Collateral Series F”
(such Bonds being hereinafter sometimes called the “Series 7
      Bonds”);

     

    (b)  
      the
      aggregate principal amount of Series 7 Bonds which may be authenticated and
      delivered under the Indenture shall be limited to $490,600,000, except as
      contemplated in subdivision (b) of Section 2 of Article II of the Original
      Indenture;

     

    (c)   
      not
      applicable;

     

    (d)   
      the
      Series 7 Bonds shall mature on June 30, 2013;

     

    (e)  
      during
      the period from and including the date of the first authentication and delivery
      of the Series 7 Bonds to and including the day next preceding the first
      Interest Payment Date, the Series 7 Bonds shall bear interest at the rate
      of eight per centum (8%) per annum; thereafter, the Series 7 Bonds shall
      bear interest at a rate equal to the Alternate Base Rate from time to time
      in
      effect plus 300 basis points; interest on the Series 7 Bonds shall accrue
      from and including the date of the first authentication and delivery of the
      Series 7 Bonds, except as otherwise provided in the form of bond attached
      hereto as Exhibit A; interest on the Series 7 Bonds shall be payable
      on each Interest Payment Date and at Maturity, and the Regular Record Date
      for
      the interest payable on each Interest Payment Date shall be the day next
      preceding such Interest Payment Date; interest payable at Maturity shall be
      paid
      to the Person to whom principal shall be paid; and interest on the Series 7
      Bonds during any period for which payment is made shall be computed in
      accordance with the Credit Agreement;

     

    (f)   
      the
      office of the Trustee in New York, New York, shall be the office or agency
      of
      the Company in The City of New York where (i) the principal of the
      Series 7 Bonds and interest payable thereon at Maturity shall be payable
      upon presentation thereof, (ii) registration of transfer of the Series 7
      Bonds may be effected, (iii) exchanges of the Series 7 Bonds may be effected
      and
      (iv) notices and demands to or upon the Company in respect of the Series 7
      Bonds or the Indenture may be served; provided, however, that the Company
      reserves the right to change, by written notice to the Trustee, such office
      or
      agency in The City of New York; and provided, further, that the principal office
      of the Company in Tucson, Arizona shall be an additional financial office or
      agency where the principal of the Series 7 Bonds and interest payable
      thereon at Maturity shall be payable upon presentation thereof; interest payable
      on the Series 7 Bonds prior to Maturity shall be paid by the Company
      directly to the Holders thereof;

     

    
      
        
        

      

      
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    (g)  
      the
      Series 7 Bonds shall not be redeemable, in whole or in part, at the option
      of the Company;

     

    (h)
       upon
      (i) the occurrence of an Event of Default under the Credit Agreement, and
      further upon the condition that, in accordance with the terms of the Credit
      Agreement, the Aggregate Commitments shall have been or shall have terminated
      and the Loans shall have been declared to be or shall have otherwise become
      due
      and payable immediately and the Administrative Agent shall have delivered to
      the
      Company a notice demanding redemption of the Series 7 Bonds which notice
      states that it is being delivered pursuant to Article VII of the Credit
      Agreement or (ii) the occurrence of an Event of Default under clause (h) or
      (i) of Article VII of the Credit Agreement, then all Series 7 Bonds shall
      be redeemed immediately at the principal amount thereof plus accrued interest
      to
      the date of redemption;

     

    (i)   
      the
      Series 7 Bonds shall be issued in denominations of $1,000 and any amount in
      excess thereof;

     

    (j)   
      not
      applicable;

     

    (k)  
      not
      applicable;

     

    (l)   
      not
      applicable;

     

    (m) 
      not
      applicable;

     

    (n)  
      not
      applicable;

     

    (o)  
      not
      applicable;

     

    (p)  
      not
      applicable;

     

    
      (q)  
        the
        Series 7 Bonds are to be issued and delivered to the Administrative Agent
        in order to provide collateral security for the obligation of the Company
        under
        the Credit Agreement to pay the Obligations, as described in subdivision
        (u)
        below. The Series 7 Bonds are non-transferable, except to a successor
        Administrative Agent under the Credit Agreement;

       

      (r)    
        not
        applicable;

       

      (s)   
        no
        service charge shall be made for the registration of transfer or exchange
        of
        Series 7 Bonds;

       

      (t)    
        not
        applicable;

       

      (u)         
        (i) the
        Series 7 Bonds are to be issued and delivered to the Administrative Agent
        in order to provide collateral security for the obligation of the Company
        under
        the Credit Agreement to pay the Obligations, to the extent and subject to
        the
        limitations set forth in clauses (ii) and (iii) of this
        subdivision;

       

      
        
          
          

        

        
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      (ii) the
        obligation of the Company to pay interest on the Series 7 Bonds on any
        Interest Payment Date prior to Maturity (x) shall be deemed to have been
        satisfied and discharged in full in the event that all amounts then due in
        respect of the Obligations shall have been paid or (y) shall be deemed to
        remain unsatisfied in an amount equal to the aggregate amount then due in
        respect of the Obligations and remaining unpaid (not in excess, however,
        of the
        amount otherwise then due in respect of interest on the Series 7
        Bonds);

       

      (iii) the
        obligation of the Company to pay the principal of and accrued interest on
        the
        Series 7 Bonds at or after Maturity (x) shall be deemed to have been
        satisfied and discharged in full in the event that all amounts then due in
        respect of the Obligations shall have been paid and no Letter of Credit shall
        remain outstanding or (y) shall be deemed to remain unsatisfied in an
        amount equal to the aggregate amount then due in respect of the Obligations
        and
        remaining unpaid plus the aggregate stated amount of the outstanding Letters
        of
        Credit (not in excess, however, of the amount otherwise then due in respect
        of
        principal of and accrued interest on the Series 7 Bonds);

       

      (iv) the
        Trustee shall be entitled to presume that the obligation of the Company to
        pay
        the principal of and interest on the Series 7 Bonds as the same shall
        become due and payable shall have been fully satisfied and discharged unless
        and
        until it shall have received a written notice from the Administrative Agent,
        signed by an authorized officer thereof, stating that the principal of and/or
        interest on the Series 7 Bonds has become due and payable and has not been
        fully paid, and specifying the amount of funds required to make such
        payment;

       

      (v) in
        the
        event of an application by the Administrative Agent for payment or for a
        substituted Series 7 Bond pursuant to Section 11 of Article II of the
        Original Indenture, the Administrative Agent shall not be required to provide
        any indemnity or pay any expenses or charges as contemplated in said
        Section 11; and

       

      (vi) the
        Series 7 Bonds shall have such other terms as are set forth in the form of
        bond attached hereto as Exhibit A, which form is hereby designated as the
        form of the Series 7 Bonds.

       

      
        ARTICLE III

         

        Miscellaneous
          Provisions

         

        This
          Supplemental Indenture No. 7 is a supplement to the Original Indenture. As
          heretofore supplemented and further supplemented by this Supplemental Indenture
          No. 7, the Original Indenture is in all respects ratified, approved and
          confirmed, and the Original Indenture as heretofore supplemented and this
          Supplemental Indenture No. 7 shall together constitute one and the same
          instrument.

         

        The
          Trustee makes no representation as to the validity or sufficiency of this
          Supplemental Indenture No. 7. The statements and recitals herein are deemed
          to be those of the Company and not of the Trustee.

      

       

    

    
      
        
          
          

        

        
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    IN
      WITNESS WHEREOF,
      Tucson
      Electric Power Company has caused its corporate name to be hereunto affixed,
      and
      this instrument to be signed by one of its Vice Presidents, and its corporate
      seal to be hereunto affixed and attested by its Secretary or one of its
      Assistant Secretaries for and on its behalf; and The Bank of New York, as
      trustee, in evidence of its acceptance of the trust hereby created, has caused
      its corporate name to be hereunto affixed, and this instrument to be signed
      by
      one of its authorized signatories and its corporate seal to be hereunto affixed
      and attested by one of its authorized signatories, for and on its behalf, all
      as
      of the day and year first above written.

     

    Tucson
      Electric Power Company

     

    By
       /s/
      Kevin P. Larson       

    Senior
      Vice President

     

    Attest:

     

    /s/
      Linda Kennedy   

    Secretary

     

    
      
        
        

      

      
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    The
      Bank
      of New York,

    Trustee

     

    By /s/
      Stacey B. Poindexter   

    Authorized
      Signatory

     

    Attest:

     

    /s/
      Geovanni Barris       

    Authorized
      Signatory

     

    
      
        
        

      

      
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    State
      of
      Arizona            
)

                                             
      ) ss.:

    County
      of
      Pima             
)

     

    This
      instrument was acknowledged before me this 12th day of December 2006 by Kevin
      P.
      Larson, as Senior Vice President, and Linda Kennedy, as Secretary, of
Tucson
      Electric Power Company,
      an
      Arizona corporation, known to me to be the individuals who executed this
      instrument, and known to me to be a Vice President and the Secretary,
      respectively, of said corporation, and who personally acknowledged before me
      and
      stated that they executed said instrument on behalf of said corporation for
      the
      purposes and consideration therein expressed.

     

    


    /s/
      Melissa
      R. Martinez

    Notary
      Public

     

    
      
        
        

      

      
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    State
      of
      New York         )

                                            
      )
      ss.:

    County
      of
      New York     )

     

    This
      instrument was acknowledged before me this 8th
      day of
      December 2006 by Stacey B. Poindexter, as Authorized Signatory, and Geovanni
      Barris, as Authorized Signatory, of The
      Bank
      of New York,
      a New
      York banking corporation, known to me to be the individuals who executed this
      instrument, and known to me to be Authorized Signatories of said corporation,
      and who personally acknowledged before me and stated that they executed said
      instrument on behalf of said corporation for the purposes and consideration
      therein expressed.

     

    /s/
      Cheryl L. Clarke

    Notary
      Public

     

    
      
        
        

      

      
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    Exhibit
      A

    [Form
      of
      Bond]

    This
      bond
      is non-transferable,

    except
      to
      a successor Administrative Agent under the

    Credit
      Agreement referred to herein.

     

    No.
      ________________                                                                                                                                                                                               
$
                  

     

    TUCSON
      ELECTRIC POWER COMPANY

     

    FIRST
      MORTGAGE BOND, COLLATERAL SERIES F

     

    DUE
      JUNE
      30, 2013

     

    TUCSON
      ELECTRIC POWER COMPANY, a corporation of the State of Arizona (hereinafter
      sometimes called the "Company"), for value received, promises to pay
      to

     

    


     

    as
      Administrative Agent under the Credit Agreement hereinafter referred to or
      registered assigns, the principal sum of

     

    DOLLARS

     

    on
      June 30, 2013 in coin or currency of the United States of America which at
      the time of payment shall be legal tender for the payment of public and private
      debts, at the office or agency of the Company in The City of New York, or in
      the
      City of Tucson, Arizona, upon presentation hereof, and quarterly, on
      March 31, June 30, September 30 and December 31 in each
      year, commencing December 31, 2006 (each an “Interest Payment Date”), and at
      Maturity (as defined in Supplemental Indenture No. 7 hereinafter referred
      to), to pay interest thereon in like coin or currency at the rate specified
      below, from the Interest Payment Date next preceding the date of this bond
      (unless this bond be dated on an Interest Payment Date, in which case from
      the
      date hereof; or unless this bond be dated prior to the first Interest Payment
      Date, in which case from and including the date of the first authentication
      and
      delivery of the bonds of this series), until the Company’s obligation with
      respect to such principal sum shall be discharged.

     

    During
      the period from and including the date of the first authentication and delivery
      of the bonds of this series to and including the day next preceding the first
      Interest Payment Date, the bonds of this series shall bear interest at the
      rate
      of eight per centum (8%) per annum; thereafter, the bonds of this series shall
      bear interest at a rate equal to the Alternate Base Rate (as defined in
      Supplemental Indenture No. 7 hereinafter referred to) from time to time in
      effect plus 300 basis points. Interest on the bonds of this series during any
      period for which payment is made shall be computed in accordance with the Credit
      Agreement.

     

    This
      bond
      is one of an issue of bonds of the Company, issued and to be issued in one
      or
      more series under and equally and ratably secured (except as any sinking,
      amortization, improvement, renewal or other fund, established in accordance
      with
      the provisions of the

     

    
      
        
        

      

      
        A-1

        
          

        

      

      
        
        

      

    

     

    indenture
      hereinafter mentioned, may afford additional security for the bonds of any
      particular series) by the Indenture of Mortgage and Deed of Trust, dated as
      of
      December 1, 1992 (the “Original Indenture”), from the Company to The Bank
      of New York (successor in trust to Bank of Montreal Trust Company), as trustee
      (the “Trustee”), as supplemented by seven supplemental indentures including
      Supplemental Indenture No. 7, dated as of December 1, 2006 (the
      Original Indenture, as so supplemented, and such Supplemental Indenture being
      hereinafter called the “Indenture” and “Supplemental Indenture No. 7”,
      respectively), to which Indenture reference is hereby made for a description
      of
      the property mortgaged and pledged, the nature and extent of the security
      provided by the Indenture, the rights and limitations of rights of the Company,
      the Trustee and the holders of said bonds with respect to the security provided
      by the Indenture, the powers, duties and immunities of the Trustee, the terms
      and conditions upon which such bonds are and are to be secured, and the
      circumstances under which additional bonds may be issued. The acceptance of
      this
      bond shall be deemed to constitute the consent and agreement by the holder
      hereof to all of the terms and provisions of the Indenture. This bond is one
      of
      a series of bonds designated as the First Mortgage Bonds, Collateral Series
      F,
      of the Company.

     

    The
      Indenture permits, with certain exceptions as therein provided, the Trustee
      to
      enter into one or more supplemental indentures for the purpose of adding any
      provisions to, or changing in any manner or eliminating any of the provisions
      of, the Indenture with the consent of the holders of not less than sixty per
      centum (60%) in aggregate principal amount of the bonds of all series then
      outstanding under the Indenture, considered as one class; provided, however,
      that if there shall be bonds of more than one series outstanding under the
      Indenture and if a proposed supplemental indenture shall directly affect the
      rights of the holders of bonds of one or more, but less than all, of such
      series, then the consent only of the holders of bonds in aggregate principal
      amount of the outstanding bonds of all series so directly affected, considered
      as one class, shall be required; and provided, further, that if the bonds of
      any
      series shall have been issued in more than one tranche and if the proposed
      supplemental indenture shall directly affect the rights of the holder of bonds
      of one or more, but less than all, of such tranches, then the consent only
      of
      the holders of bonds in aggregate principal amount of the outstanding bonds
      of
      all tranches so directly affected, considered as one class, shall be required;
      and provided, further, that the Indenture permits the Trustee to enter into
      one
      or more supplemental indentures for limited purposes without the consent of
      any
      holders of bonds. Any such consent by the holder of this bond shall be
      conclusive and binding upon such holder and upon all future holders of this
      bond
      and of any bond issued upon the registration of transfer hereof or in exchange
      therefor or in lieu hereof, whether or not notation of such consent is made
      upon
      this bond.

     

    The
      Company has issued and delivered the bonds of this series to Union
      Bank of California, N.A., as Administrative Agent
      (the
“Administrative Agent”) under the Amended and Restated Credit Agreement, dated
      as of August 11, 2006, among the Company, the Lenders party
      thereto,
      the Issuing Banks party thereto, the Co-Syndication Agents party
      thereto,
      the
      Co-Documentation Agents party thereto and
      Union
      Bank of California, N.A., as Administrative Agent,
      as
      amended, amended and restated, supplemented or otherwise modified from time
      to
      time (the “Credit Agreement”), in order to provide collateral security for the
      obligation of the Company thereunder to pay the Obligations (as defined in
      Supplemental Indenture No. 7).

     

    Upon
      the
      occurrence of an Event of Default under the Credit Agreement, and further upon
      such additional conditions as are set forth in subdivision (h) of Article II
      of
      Supplemental

     

    
      
        
        

      

      
        A-2

        
          

        

      

      
        
        

      

    

     

    Indenture
      No. 7, then all bonds of this series shall be redeemed immediately at the
      principal amount thereof plus accrued interest to the date of
      redemption.

     

    The
      obligation of the Company to pay interest on the bonds of this series on any
      Interest Payment Date prior to Maturity (a) shall be deemed to have been
      satisfied and discharged in full in the event that all amounts then due in
      respect of the Obligations shall have been paid or (b) shall be deemed to
      remain unsatisfied in an amount equal to the aggregate amount then due in
      respect of the Obligations and remaining unpaid (not in excess, however, of
      the
      amount otherwise then due in respect of interest on the bonds of this
      series).

     

    The
      obligation of the Company to pay the principal of and accrued interest on the
      bonds of this series at or after Maturity (x) shall be deemed to have been
      satisfied and discharged in full in the event that all amounts then due in
      respect of the Obligations shall have been paid and no Letter of Credit (as
      defined in Supplemental Indenture No. 7) shall remain outstanding or
      (y) shall be deemed to remain unsatisfied in an amount equal to the
      aggregate amount then due in respect of the Obligations and remaining unpaid
      plus the aggregate stated amount of the outstanding Letters of Credit (not
      in
      excess, however, of the amount otherwise then due in respect of principal of
      and
      accrued interest on the bonds of this series).

     

    The
      principal of this bond and the interest accrued hereon may become or be declared
      due and payable before the stated maturity hereof, on the conditions, in the
      manner and at the times set forth in the Indenture, upon the happening of a
      default as therein provided.

     

    This
      bond
      is non-transferable except as required to effect transfer to any successor
      administrative agent under the Credit Agreement, any such transfer to be made
      at
      the office or agency of the Company in The City of New York, upon surrender
      and
      cancellation of this bond, and upon any such transfer a new bond of this series,
      for the same aggregate principal amount and having the same stated maturity
      date, will be issued to the transferee in exchange herefor. Prior to due
      presentment for registration of transfer, the Company and the Trustee may deem
      and treat the person in whose name this bond is registered as the absolute
      owner
      hereof for the purpose of receiving payment and for all other purposes. This
      bond, alone or with other bonds of this series, may in like manner be exchanged
      at such office or agency for one or more bonds of this series of the same
      aggregate principal amount and having the same stated maturity date and interest
      rate, all as provided in the Indenture.

     

    No
      recourse shall be had for the payment of the principal of or interest on this
      bond, or for any claim based hereon or otherwise in respect hereof or of the
      Indenture, against any incorporator, shareholder, director or officer, as such,
      past, present or future, of the Company or of any predecessor or successor
      corporation, either directly or through the Company or any predecessor or
      successor corporation, whether by virtue of any constitution, statute or rule
      of
      law, or by the enforcement of any assessment or penalty or by any legal or
      equitable proceeding or otherwise howsoever (including, without limiting the
      generality of the foregoing, any proceeding to enforce any claimed liability
      of
      shareholders of the Company, based upon any theory of disregarding the corporate
      entity of the Company or upon any theory that the Company was acting as the
      agent or instrumentality of the shareholders); all such liability being, by
      the
      acceptance hereof and as a part of the consideration for the issuance hereof,
      expressly waived

     

    
      
        
        

      

      
        A-3

        
          

        

      

      
        
        

      

    

     

    and
      released by every holder hereof, and being likewise waived and released by
      the
      terms of the Indenture under which this bond is issued, as more fully provided
      in said Indenture.

     

    This
      bond
      shall not be valid or become obligatory for any purpose until the certificate
      of
      authentication hereon shall have been signed by The Bank of New York, or its
      successor, as Trustee under the Indenture.

     

    
      
        
        

      

      
        A-4

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Company has caused this bond to be signed in its name by the manual or facsimile
      signature of its President or one of its Vice Presidents, and its corporate
      seal, or a facsimile thereof, to be impressed or imprinted hereon and attested
      by the manual or facsimile signature of its Secretary or one of its Assistant
      Secretaries.

     

    Dated:
      ___ __, 200_

     

    TUCSON
      ELECTRIC POWER COMPANY

     

    By:_____________________________       

    Attest:

    


    


    _________________________


     

    
      
        
        

      

      
        A-5

        
          

        

      

      
        
        

      

    


    [FORM
      OF
      TRUSTEE’S CERTIFICATE OF AUTHENTICATION]

     

    This
      is
      one of the bonds, of the series designated therein, described in the
      within-mentioned Indenture.

     

    


    Dated:
      ___ __, 200_

    


    The
      Bank
      of New York,

    Trustee

     

    By:_____________________________    

    


    
      
        
        

      

      
        A-6

        
          

        

      

      
        
        

      

    


    SCHEDULE
      A

     

    DESCRIPTION
      OF MORTGAGED PROPERTY

     

    Generic
      Description

     

    All
      electric generating plants, gas generating plant, gas holders, steam plant,
      gas
      regulating stations, substations and other properties of the Company, including
      all power houses, transmission lines, buildings, pipes, structures and works,
      and the lands of the Company on which the same are situated, and all the
      Company’s lands, easements, rights, rights-of-way, water rights, rights to the
      use of water, including all of the Company’s right, title and interest in and to
      any and all decrees therefor, permits, franchises, consents, privileges,
      licenses, poles, towers, wires, switch racks, insulators, pipes, machinery,
      engines, boilers, motors, regulators, meters, tools, appliances, equipment,
      appurtenances and supplies, forming a part of or appertaining to said plants,
      holders, sites, stations or other properties, or any of them, or used or enjoyed
      or capable of being used or enjoyed in conjunction or connection therewith;
      and


     

    All
      electric substations and substation sites of the Company including all
      buildings, structures, towers, poles, lines, and all equipment, appliances,
      and
      devices for transforming, converting and distributing electric energy, and
      all
      the right, title and interest of the Company in and to the land on which the
      same are situated, and all of the Company’s lands, easements, rights-of-way,
      rights, franchises, privileges, machinery, equipment, fixtures, appliances,
      devices, appurtenances and supplies forming a part of said substation or any
      of
      them, or used or enjoyed, or capable of being used or enjoyed, in conjunction
      or
      connection therewith; and 

     

    All
      warehouses, buildings, structures, works and sites and the Company’s lands on
      which the same are situated, and all easements, rights-of-way, permits,
      franchises, consents, privileges, licenses, machinery, equipment, furniture
      and
      fixtures, appurtenances and supplies forming a part of said warehouses,
      buildings, structures, works and sites, or any of them, or used or enjoyed
      or
      capable of being used or enjoyed in connection or conjunction therewith; and
      

     

    All
      electric distribution systems of the Company, including towers, poles, wires,
      insulators, appliances, devices, appurtenances and equipment, and all the
      Company’s other property, real, personal or mixed, forming a part of, or used,
      occupied or enjoyed in connection with or in any way appertaining to said
      distribution systems, or any of them, together with all of the Company’s
      rights-of-way, easements, permits, privileges, municipal or other franchises,
      licenses, consents and rights for or relating to the construction, maintenance
      or operation thereof through, over, under or upon any public streets or
      highways, or public or private lands; and also all branches, extensions,
      improvements and developments of or appertaining to or connected with said
      electric distribution systems, or any of them, and all other electric
      distribution systems of the Company and parts thereof wherever situated, and
      whether now owned or hereafter acquired, as well as all rights-of-way,
      easements, privileges, permits, municipal or other franchises, consents and
      rights for or relating to the construction, maintenance or operation thereof,
      or
      any part thereof, through, over, under or upon public or private lands, whether
      now owned or hereafter acquired; and 

     

    
      
        
        

      

      
        A-7

        
          

        

      

      
        
        

      

    

     

    All
      electric transmission and/or distribution lines of the Company, including the
      towers, poles, pole lines, wires, switch racks, insulators, supports, guys,
      telephone and telegraph lines and other appliances and equipment, and all other
      property of the Company, real, personal or mixed, forming a part thereof or
      appertaining thereto, together with all of the Company’s rights-of-way,
      easements, permits, privileges, municipal or other franchises, consents,
      licenses and rights, for or relating to the construction, maintenance or
      operation thereof, through, over, under or upon any public streets or highways
      or other lands, public or private; also all extension, branches, taps,
      developments and improvements of or to any and all of the above-described
      transmission and/or distribution lines, telephone and telegraph lines or any
      of
      them, as well as all rights-of-way, easements, permits, privileges, rights
      and
      municipal or other franchises, licenses and consents, for or relating to the
      construction, maintenance or operation of said lines or any of them, or any
      part
      thereof, through, over, under or upon any public streets or highways or any
      public or private lands, whether now owned or hereafter acquired; 

     

    Excepting,
      however, any property of the character of “Excepted Property” within the meaning
      of the Supplemental Indenture to which this Schedule A is attached.


     

    Specific
      Description of Any Additional Real Property

     

    Specific
      descriptions of additional portions of the Mortgaged Property which constitute
      real property, if any, are contained in Annex 1 to this Schedule A.


     

    
      
        
        

      

      
        A-8