Document:

Exhibit 4(c)

Exhibit
4(c)

 

INDENTURE OF TRUST

between

COCONINO COUNTY, ARIZONA

POLLUTION CONTROL CORPORATION

and

U.S. BANK TRUST NATIONAL ASSOCIATION

 

Dated as of October 1, 2009

 

Authorizing

Pollution Control Revenue Bonds,

2009 Series A

(Tucson Electric Power Company Navajo Project)

 

 

 

 

TABLE OF CONTENTS*

	 	 	 	 	 
	 	 	Page	 
	 
	Parties
	 	 	1	 
	Recitals
	 	 	1	 
	Granting Clause
	 	 	2	 
	 
	 	 	 	 
	ARTICLE I DEFINITIONS
	 	 	3	 
	Section 1.01. Definitions
	 	 	3	 
	ARTICLE II THE BONDS
	 	 	9	 
	Section 2.01. Creation of Bonds
	 	 	9	 
	Section 2.02. Form of Bonds
	 	 	9	 
	Section 2.03. Execution of Bonds
	 	 	10	 
	Section 2.04. Authentication of Bonds
	 	 	10	 
	Section 2.05. Bonds Not General Obligations
	 	 	10	 
	Section 2.06. Prerequisites to Authentication of Bonds
	 	 	11	 
	Section 2.07. Lost or Destroyed Bonds or Bonds Canceled in Error
	 	 	12	 
	Section 2.08. Transfer, Registration and Exchange of Bonds
	 	 	12	 
	Section 2.09. Other Obligations
	 	 	14	 
	Section 2.10. Temporary Bonds
	 	 	14	 
	Section 2.11. Cancellation of Bonds
	 	 	14	 
	Section 2.12. Payment of Principal and Interest
	 	 	15	 
	Section 2.13. Applicability of Book-Entry Provisions
	 	 	15	 
	ARTICLE III REDEMPTION OF BONDS
	 	 	15	 
	Section 3.01. Redemption Provisions
	 	 	15	 
	Section 3.02. Selection of Bonds to be Redeemed
	 	 	16	 
	Section 3.03. Procedure for Redemption
	 	 	17	 
	Section 3.04. Payment of Redemption Price
	 	 	18	 
	Section 3.05. No Partial Redemption After Default
	 	 	18	 
	ARTICLE IV THE BOND FUND
	 	 	18	 
	Section 4.01. Creation of Bond Fund
	 	 	18	 
	Section 4.02. Liens
	 	 	18	 
	Section 4.03. Deposits into Bond Fund
	 	 	18	 
	Section 4.04. Use of Moneys in Bond Fund
	 	 	19	 
	Section 4.05. Custody of Bond Fund; Withdrawal of Moneys
	 	 	19	 
	Section 4.06. Bonds Not Presented for Payment
	 	 	19	 
	Section 4.07. Moneys Held in Trust
	 	 	20	 
	ARTICLE V DISPOSITION OF PROCEEDS
	 	 	20	 
	Section 5.01. Disposition of Proceeds
	 	 	20	 
	ARTICLE VI INVESTMENTS
	 	 	20	 
	Section 6.01. Investments
	 	 	20	 
	ARTICLE VII GENERAL COVENANTS
	 	 	21	 

 

	 	 	 
	*	 	This table of contents is not part of the Indenture,
and is for convenience only. The captions herein are of no legal effect and do
not vary the meaning or legal effect of any part of the Indenture.

 

i

 

	 	 	 	 	 
	 	 	Page	 
	 
	Section 7.01. No General Obligations
	 	 	21	 
	Section 7.02. Performance of Covenants of the Pollution Control
Corporation; Representations
	 	 	21	 
	Section 7.03. Maintenance of Rights and Powers; Compliance with Laws
	 	 	22	 
	Section 7.04. Enforcement of Obligations of the Company; Amendments
	 	 	22	 
	Section 7.05. Further Instruments
	 	 	22	 
	Section 7.06. No Disposition of Trust Estate
	 	 	22	 
	Section 7.07. Financing Statements
	 	 	22	 
	Section 7.08. Tax Covenants; Rebate Fund
	 	 	22	 
	Section 7.09. Notices of Trustee
	 	 	23	 
	ARTICLE VIII DEFEASANCE
	 	 	24	 
	Section 8.01. Defeasance
	 	 	24	 
	ARTICLE IX DEFAULTS AND REMEDIES
	 	 	25	 
	Section 9.01. Events of Default
	 	 	25	 
	Section 9.02. Remedies
	 	 	26	 
	Section 9.03. Restoration to Former Position
	 	 	27	 
	Section 9.04. Owners’ Right to Direct Proceedings
	 	 	27	 
	Section 9.05. Limitation on Owners’ Right to Institute Proceedings
	 	 	27	 
	Section 9.06. No Impairment of Right to Enforce Payment
	 	 	28	 
	Section 9.07. Proceedings by Trustee without Possession of Bonds
	 	 	28	 
	Section 9.08. No Remedy Exclusive
	 	 	28	 
	Section 9.09. No Waiver of Remedies
	 	 	28	 
	Section 9.10. Application of Moneys
	 	 	28	 
	Section 9.11. Severability of Remedies
	 	 	29	 
	ARTICLE X TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
	 	 	29	 
	Section 10.01. Acceptance of Trusts
	 	 	29	 
	Section 10.02. No Responsibility for Recitals
	 	 	29	 
	Section 10.03. Limitations on Liability
	 	 	29	 
	Section 10.04. Compensation, Expenses and Advances
	 	 	30	 
	Section 10.05. Notice of Events of Default
	 	 	31	 
	Section 10.06. Action by Trustee
	 	 	31	 
	Section 10.07. Good Faith Reliance
	 	 	31	 
	Section 10.08. Dealings in Bonds and with the Pollution
Control Corporation and the Company
	 	 	31	 
	Section 10.09. Allowance of Interest
	 	 	32	 
	Section 10.10. Construction of Indenture
	 	 	32	 
	Section 10.11. Resignation of Trustee
	 	 	32	 
	Section 10.12. Removal of Trustee
	 	 	32	 
	Section 10.13. Appointment of Successor Trustee
	 	 	32	 
	Section 10.14. Qualifications of Successor Trustee
	 	 	33	 
	Section 10.15. Judicial Appointment of Successor Trustee
	 	 	33	 
	Section 10.16. Acceptance of Trusts by Successor Trustee
	 	 	33	 
	Section 10.17. Successor by Merger or Consolidation
	 	 	34	 
	Section 10.18. Standard of Care
	 	 	34	 
	Section 10.19. Notice to Owners of Bonds of Event of Default
	 	 	34	 
	Section 10.20. Intervention in Litigation of the Pollution Control Corporation
	 	 	34	 

 

ii

 

	 	 	 	 	 
	 	 	Page	 
	 
	Section 10.21. Paying Agent; Co-Paying Agents
	 	 	35	 
	Section 10.22. Qualifications of Paying Agent and Co-Paying Agents; Resignation; Removal
	 	 	35	 
	Section 10.23. Registrar
	 	 	36	 
	Section 10.24. Qualifications of Registrar; Resignation; Removal
	 	 	36	 
	Section 10.25. Several Capacities
	 	 	37	 
	ARTICLE XI EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND PROOF OF OWNERSHIP OF BONDS
	 	 	37	 
	Section 11.01. Execution of Instruments; Proof of Ownership
	 	 	37	 
	ARTICLE XII MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
	 	 	37	 
	Section 12.01. Limitations
	 	 	37	 
	Section 12.02. Supplemental Indentures without Owner Consent
	 	 	38	 
	Section 12.03. Supplemental Indentures with Consent of Owners
	 	 	39	 
	Section 12.04. Effect of Supplemental Indenture
	 	 	40	 
	Section 12.05. Consent of the Company
	 	 	40	 
	Section 12.06. Amendment of Loan Agreement without Consent of Owners
	 	 	40	 
	Section 12.07. Amendment of Loan Agreement with Consent of Owners
	 	 	41	 
	ARTICLE XIII MISCELLANEOUS
	 	 	41	 
	Section 13.01. Successors of the Pollution Control Corporation
	 	 	41	 
	Section 13.02. Parties in Interest
	 	 	41	 
	Section 13.03. Severability
	 	 	41	 
	Section 13.04. No Personal Liability of Pollution Control Corporation Officials
	 	 	41	 
	Section 13.05. Bonds Owned by the Pollution Control Corporation or the Company
	 	 	42	 
	Section 13.06. Counterparts
	 	 	42	 
	Section 13.07. Governing Law
	 	 	42	 
	Section 13.08. Notices
	 	 	42	 
	Section 13.09. Holidays
	 	 	43	 
	Section 13.10. Statutory Notice Regarding Cancellation of Contracts
	 	 	43	 
	 
	 	 	 	 
	Testimonium
	 	 	 	 
	Signatures
	 	 	 	 
	 
	 	 	 	 
	Exhibit A — Form of 2009 Series A Bond
	 	 	A-1	 
	Exhibit B — Form of Endorsement of Transfer
	 	 	B-1	 
	Exhibit C — Form of Certificate of Authentication
	 	 	C-1	 

 

iii

 

INDENTURE OF TRUST

THIS INDENTURE OF TRUST, dated as of October 1, 2009 (this “Indenture”), between COCONINO
COUNTY, ARIZONA POLLUTION CONTROL CORPORATION, an Arizona nonprofit corporation and a political
subdivision of the State of Arizona (hereinafter called the “Pollution Control Corporation”), and
U.S. Bank Trust National Association, as trustee (hereinafter called the “Trustee”),

W I T N E S S E T H :

WHEREAS, the Pollution Control Corporation is authorized and empowered under Title 35, Chapter
6, Arizona Revised Statutes, as amended (the “Act”), to issue its bonds in accordance with the Act
and to make secured or unsecured loans for the purpose of financing or refinancing the acquisition,
construction, improvement or equipping of pollution control facilities consisting of real and
personal properties, including but not limited to machinery and equipment whether or not now in
existence or under construction, which are used in whole or in part to control, prevent, abate,
alter, dispose or store, solid waste, thermal, noise, atmospheric or water pollutants, contaminants
or products therefrom, whether such facilities serve one or more purposes or functions in addition
to controlling, preventing, abating, altering, disposing or storing such pollutants, contaminants
or the products therefrom, and to charge and collect interest on such loans and pledge the proceeds
of loan agreements as security for the payment of the principal of and interest on bonds, or
designated issues of bonds, issued by the Pollution Control Corporation and any agreements made in
connection therewith, whenever the Board of Directors of the Pollution Control Corporation finds
such loans to be in furtherance of the purposes of the Pollution Control Corporation;

WHEREAS, the Pollution Control Corporation has heretofore issued and sold $14,700,000
aggregate principal amount of Coconino County, Arizona Pollution Control Corporation Pollution
Control Revenue Bonds, 1997 Series B (Tucson Electric Power Company Navajo Project), all of which
remain outstanding (the “1997 Bonds”), the proceeds of which were loaned to Tucson Electric Power
Company, an Arizona corporation (the “Company”), for the purpose of refunding $14,700,000 aggregate
principal amount of Coconino County, Arizona Pollution Control Corporation Pollution Control
Revenue Bonds, 1996 Series B (Tucson Electric Power Company Project); and

WHEREAS, the Pollution Control Corporation proposes to issue and sell its revenue bonds as
provided herein (the “Bonds”) for the purpose of refinancing, by the payment or redemption of the
1997 Bonds, or provision therefor, a portion of the costs of the acquisition, construction,
improvement and equipping of certain of the pollution control facilities (the “Facilities”)
described in Exhibit A to the Loan Agreement, dated as of October 1, 2009 (the “Loan Agreement”),
between the Pollution Control Corporation and the Company, previously refinanced with the proceeds
of the 1997 Bonds;

 

 

 

NOW, THEREFORE, for and in consideration of these premises and the mutual covenants herein
contained, of the acceptance by the Trustee of the trusts hereby created, of the purchase and
acceptance of the Bonds by the Owners (as hereinafter defined) thereof and of the sum of one dollar
lawful money of the United States of America, to it duly paid by the Trustee at
or before the execution and delivery of these presents, and for other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, in order to secure the
payment of the principal of and premium, if any, and interest on the Bonds at any time Outstanding
(as hereinafter defined) under this Indenture according to their tenor and effect and the
performance and observance by the Pollution Control Corporation of all the covenants and conditions
expressed or implied herein and contained in the Bonds, the Pollution Control Corporation does
hereby grant, bargain, sell, convey, mortgage, pledge and assign, and grant a security interest in,
the Trust Estate (as hereinafter defined) to the Trustee, its successors in trust and their assigns
forever;

TO HAVE AND TO HOLD all the same with all privileges and appurtenances hereby conveyed and
assigned, or agreed or intended so to be, to the Trustee, its successors in trust and their assigns
forever;

IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, first, for the equal and
proportionate benefit and security of all Owners of the Bonds issued under and secured by this
Indenture without preference, priority or distinction as to the lien of any Bonds over any other
Bonds;

PROVIDED, HOWEVER, that if, after the right, title and interest of the Trustee in and to the
Trust Estate shall have ceased, terminated and become void in accordance with Article VIII hereof,
the principal of and premium, if any, and interest on the Bonds shall have been paid to the Owners
thereof, or shall have been paid to the Company pursuant to Section 4.06 hereof, then and in that
case these presents and the estate and rights hereby granted shall cease, terminate and be void,
and thereupon the Trustee shall cancel and discharge this Indenture and execute and deliver to the
Pollution Control Corporation and the Company such instruments in writing as shall be requisite to
evidence the discharge hereof; otherwise this Indenture is to be and remain in full force and
effect.

 

2

 

THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly declared, that all Bonds
issued and secured hereunder are to be issued, authenticated and delivered, and the Trust Estate
and the other estate and rights hereby granted are to be dealt with and disposed of, under, upon
and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and
purposes as hereinafter expressed, and the Pollution Control Corporation has agreed and covenanted,
and does hereby agree and covenant, with the Trustee and with the respective Owners, from time to
time, of the Bonds, as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Definitions. The terms defined in this Article I shall, for all purposes of this Indenture, have the
meanings herein specified, unless the context clearly requires otherwise:

Act:

“Act” shall mean Title 35, Chapter 6, Arizona Revised Statutes, and all acts supplemental
thereto or amendatory thereof.

Administration Expenses:

“Administration Expenses” shall mean the reasonable expenses incurred by the Pollution Control
Corporation with respect to the Loan Agreement, this Indenture and any transaction or event
contemplated by the Loan Agreement or this Indenture, including the compensation and reimbursement
of expenses and advances payable to the Trustee, to the Paying Agent, any Co-Paying Agent and the
Registrar.

Authorized Company Representative:

“Authorized Company Representative” shall mean each person at the time designated to act on
behalf of the Company by written certificate furnished to the Pollution Control Corporation and the
Trustee containing the specimen signature of such person and signed on behalf of the Company by its
President, any Vice President or its Treasurer, together with its Secretary or any Assistant
Secretary.

Bond Counsel:

“Bond Counsel” shall mean any firm or firms of nationally recognized bond counsel experienced
in matters pertaining to the validity of, and exclusion from gross income for federal tax purposes
of interest on bonds issued by states and political subdivisions, selected by the Company and
acceptable to the Pollution Control Corporation.

Bond Fund:

“Bond Fund” shall mean the fund created by Section 4.01 hereof.

Bonds:

“Bond” or “Bonds” shall mean the bonds authorized to be issued under this Indenture.

Code:

“Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute
thereto. Each reference to a section of the Code herein shall be deemed to include the United
States Treasury Regulations proposed or in effect thereunder and applicable to the Bonds or the use
of proceeds thereof, unless the context clearly requires otherwise. References to any particular
Code section shall, in the event of a successor Code, be deemed to be a reference to the successor
to such Code section.

 

3

 

Company:

“Company” shall mean Tucson Electric Power Company, a corporation organized and existing under
the laws of the State of Arizona, its successors and their assigns, including without limitation,
any successor obligor under Section 6.01 or Section 7.01 of the Loan Agreement to the extent of the
obligations assumed thereunder.

Depositary:

“Depositary” shall mean The Depository Trust Company or any successor thereto as a securities
repository for the Bonds.

Facilities:

“Facilities” shall mean the real and personal properties, machinery and equipment currently
existing, under construction and to be constructed which are described in Exhibit A to the Loan
Agreement, as revised from time to time to reflect any changes therein, additions thereto,
substitutions therefor and deletions therefrom permitted by the terms of the Loan Agreement,
subject, however, to the provisions of Section 7.01 of the Loan Agreement.

Government Obligations:

“Government Obligations” shall mean:

(a) direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America entitled to the benefit of the
full faith and credit thereof; and

(b) certificates, depositary receipts or other instruments which evidence a direct
ownership interest in obligations described in clause (a) above or in any specific interest
or principal payments due in respect thereof; provided, however, that the custodian of such
obligations or specific interest or principal payments shall be a bank or trust company
organized under the laws of the United States of America or of any state or territory
thereof or of the District of Columbia, with a combined capital stock surplus and undivided
profits of at least $50,000,000; and provided, further, that except as may be otherwise
required by law, such custodian shall be obligated to pay to the holders of such
certificates, depositary receipts or other instruments the full amount received by such
custodian in respect of such obligations or specific payments and shall not be permitted to
make any deduction therefrom.

Indenture:

“Indenture” shall mean this Indenture of Trust, dated as of October 1, 2009, between the
Pollution Control Corporation and the Trustee, and any and all modifications, alterations,
amendments and supplements thereto.

 

4

 

Investment Securities:

“Investment Securities” shall mean any of the following obligations or securities on which
neither the Company nor any of its subsidiaries is the obligor: (a) Government Obligations; (b)
interest bearing deposit accounts (which may be represented by certificates of deposit) in
national, state or foreign banks having a combined capital and surplus of not less than
$10,000,000; (c) bankers’ acceptances drawn on and accepted by commercial banks having a combined
capital and surplus of not less than $10,000,000; (d) (i) direct obligations of, (ii) obligations
the principal of and interest on which are unconditionally guaranteed by, and (iii) any other
obligations the interest on which is exempt from federal income taxation issued by, any state of
the United States of America, the District of Columbia or the Commonwealth of Puerto Rico, or any
political subdivision, agency, authority or other instrumentality of any of the foregoing, which,
in any case, are rated by a nationally recognized rating agency in any of its three highest rating
categories; (e) obligations of any agency or instrumentality of the United States of America; (f)
commercial or finance company paper which is rated by a nationally recognized rating agency in any
of its three highest rating categories; (g) corporate debt securities issued by corporations having
debt securities rated by a nationally recognized rating agency in any of its three highest rating
categories; (h) repurchase agreements with banking or financial institutions having a combined
capital and surplus of not less than $10,000,000 with respect to any of the foregoing obligations
or securities; (i) shares or interests in registered investment companies whose assets consist of
obligations or securities which are described in any other clause of this sentence; and (j) any
other obligations which may lawfully be purchased by the Trustee. The commercial banks and banking
institutions referred to above may include the entities acting as Trustee, Paying Agent, Co-Paying
Agent and Registrar, hereunder if such entities shall otherwise satisfy the requirements set forth
above.

Loan Agreement:

“Loan Agreement” shall mean the Loan Agreement, dated as of October 1, 2009, between the
Pollution Control Corporation and the Company relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.

Loan Payments:

“Loan Payments” shall mean the payments required to be made by the Company pursuant to Section
5.01 of the Loan Agreement.

1954 Code:

“1954 Code” shall mean the Internal Revenue Code of 1954, as amended.

1997 Bonds:

“1997 Bonds” shall mean the $14,700,000 aggregate principal amount of the Coconino County,
Arizona Pollution Control Corporation Pollution Control Revenue Bonds, 1997 Series B (Tucson
Electric Power Company Navajo Project).

 

5

 

Notice by Mail:

“Notice by Mail” or “notice” of any action or condition “by Mail” shall mean a written notice
meeting the requirements of this Indenture mailed by first class mail to the Owners of specified
registered Bonds at the addresses shown in the registration books maintained pursuant to Section
2.08 hereof; provided, however, that if, because of the temporary or permanent suspension of
delivery of first class mail or for any other reason, it is impossible or impracticable to give
such notice by first class mail, then such giving of notice in lieu thereof, which may include
publication, as shall be made with the approval of the Trustee (or, if there be no trustee
hereunder, the Pollution Control Corporation) shall constitute a sufficient giving of such notice.

Notice by Publication:

“Notice by Publication” or “notice” of any action or condition “by Publication” shall mean
publication of a notice meeting the requirements of this Indenture in a newspaper or financial
journal of general circulation in the City of New York, New York, which carries financial news, is
printed in the English language and is customarily published on each business day; provided,
however, that any successive weekly publication of notice required hereunder may be made, unless
otherwise expressly provided herein, on the same or different days of the week and in the same or
different newspapers or financial journals; and provided, further, that if, because of the
temporary or permanent suspension of the publication or general circulation of any newspaper or
financial journal or for any other reason, it is impossible or impracticable to publish such notice
in the manner herein described, then such publication in lieu thereof as shall be made with the
approval of the Trustee (or, if there be no trustee hereunder, the Pollution Control Corporation)
shall constitute a sufficient publication of such notice.

Outstanding:

“Outstanding”, when used in reference to the Bonds, shall mean, as at any particular date, the
aggregate of all Bonds authenticated and delivered under this Indenture except:

(a) those canceled by the Trustee at or prior to such date or delivered to or acquired
by the Trustee at or prior to such date for cancellation;

(b) those paid pursuant to Section 2.07 hereof;

(c) those deemed to be paid in accordance with Article VIII hereof; and

(d) those in lieu of or in exchange or substitution for which other Bonds shall have
been authenticated and delivered pursuant to this Indenture, unless proof satisfactory to
the Trustee and the Company is presented that such Bonds are held by a bona fide holder in
due course.

Owner:

“Owner” shall mean the person in whose name any Bond is registered upon the registration books
maintained pursuant to Section 2.08 hereof. The Company may be an Owner.

 

6

 

Paying Agent; Co-Paying Agent; Principal Office thereof:

“Paying Agent” and “Co-Paying Agent” shall mean the paying agent and any co-paying agent
appointed in accordance with Section 10.21 hereof. “Principal Office” of the Paying Agent or any
Co-Paying Agent shall mean the office thereof designated in writing to the Trustee.

Plant:

“Plant” shall mean the Navajo Generating Station, an electric power generating plant near
Page, Arizona, in Coconino County, Arizona, and any additions or improvements thereto or
replacements thereof.

Pollution Control Corporation:

“Pollution Control Corporation” shall mean Coconino County, Arizona Pollution Control
Corporation, an Arizona nonprofit corporation and a political subdivision of the State of Arizona
incorporated for and with the approval of the County of Coconino, Arizona, pursuant to the
provisions of the Constitution of the State of Arizona and the Act, its successors and their
assigns.

Rebate Fund:

“Rebate Fund” shall mean the fund created by Section 7.08 hereof.

Receipts and Revenues of the Pollution Control Corporation from the Loan Agreement:

“Receipts and Revenues of the Pollution Control Corporation from the Loan Agreement” shall
mean all moneys paid or payable to the Trustee for the account of the Pollution Control Corporation
by the Company in respect of the Loan Payments and payments pursuant to Section 9.01 of the Loan
Agreement, and all receipts of the Trustee which, under the provisions of this Indenture, reduce
the amount of such payments.

Record Date:

“Record Date” shall mean the close of business on the fifteenth (15th) day (whether or not a
business day) of the calendar month immediately preceding each regularly scheduled interest payment
date.

Registrar; Principal Office thereof:

“Registrar” shall mean the registrar appointed in accordance with Section 10.23 hereof.
“Principal Office” of the Registrar shall mean the office thereof designated in writing to the
Trustee.

 

7

 

Supplemental Indenture:

“Supplemental Indenture” shall mean any indenture of the Pollution Control Corporation
modifying, altering, amending, supplementing or confirming this Indenture for any purpose, in
accordance with the terms hereof.

Supplemental Loan Agreement:

“Supplemental Loan Agreement” shall mean any agreement between the Pollution Control
Corporation and the Company modifying, altering, amending or supplementing the Loan Agreement, in
accordance with the terms thereof and hereof.

Tax Agreement:

“Tax Agreement” shall mean that tax certificate and agreement, dated the date of the initial
authentication and delivery of the Bonds, between the Pollution Control Corporation and the
Company, relating to the requirements of the 1954 Code, Title XIII of the Tax Reform Act of 1986,
and any and all modifications, alterations, amendments and supplements thereto.

Trust Estate:

“Trust Estate” shall mean at any particular time all right, title and interest of the
Pollution Control Corporation in and to the Loan Agreement (except its rights under Sections 5.03,
5.04, 6.03 and 8.05 thereof and any rights of the Pollution Control Corporation to receive notices,
certificates, requests, requisitions and other communications thereunder), including without
limitation, the Receipts and Revenues of the Pollution Control Corporation from the Loan Agreement
and the Bond Fund and all moneys and Investment Securities from time to time on deposit therein
(excluding, however, any moneys or Investment Securities held in the Rebate Fund), any and all
other moneys and obligations (other than Bonds) which at such time are deposited or are required to
be deposited with, or are held or are required to be held by or on behalf of, the Trustee, the
Paying Agent or any Co-Paying Agent in trust under any of the provisions of this Indenture and all
other rights, titles and interests which at such time are subject to the lien of this Indenture;
provided, however, that in no event shall there be included in the Trust Estate (a) moneys or
obligations deposited with or held by the Trustee in the Rebate Fund pursuant to Section 7.08
hereof or (b) moneys or obligations deposited with or paid to the Trustee for the redemption or
payment of Bonds which are deemed to have been paid in accordance with Article VIII hereof or
moneys held pursuant to Section 4.06 hereof.

Trustee; Principal Office thereof:

“Trustee” shall mean U.S. Bank Trust National Association, as trustee under this Indenture,
its successors in trust and their assigns. “Principal Office” of the Trustee shall mean the
principal corporate trust office of the Trustee, which office at the date of acceptance by the
Trustee of the duties and obligations imposed on the Trustee by this Indenture is located at the
address specified in Section 13.08 hereof.

 

8

 

ARTICLE II

THE BONDS

Section 2.01. Creation of Bonds. There is hereby authorized and created under this Indenture, for the purpose of providing
moneys to pay, or redeem or provide for the redemption therefore, of the 1997 Bonds, an issue of
Bonds, entitled to the benefit, protection and security of this Indenture, in the aggregate
principal amount of Fourteen Million Seven Hundred Thousand Dollars ($14,700,000). Each of the
Bonds shall be designated by the title “Coconino County, Arizona Pollution Control Corporation
Pollution Control Revenue Bond, 2009 Series A (Tucson Electric Power Company Navajo Project)”. The
Bonds shall mature, subject to prior redemption upon the terms and conditions hereinafter set
forth, on October 1, 2032 and shall bear interest from the date thereof until payment of the
principal or redemption price thereof shall have been made or provided for in accordance with the
provisions hereof, whether at maturity, upon redemption or otherwise, at the rate of FIVE POINT ONE
TWO FIVE PER CENTUM (5.125%) per annum, with interest thereon payable semi-annually on each April 1
and October 1, commencing April 1, 2010. Interest shall be calculated on the basis of a 360-day
year consisting of twelve 30-day months.

Section 2.02. Form of Bonds. Bonds shall be authenticated and delivered hereunder solely as fully registered bonds
without coupons in the denomination of $5,000 or integral multiples thereof. Bonds shall be
numbered as determined by the Trustee. Bonds authenticated prior to the first interest payment
date shall be dated October 8, 2009. Bonds authenticated on or subsequent to the first interest
payment date shall be dated the interest payment date next preceding the date of authentication
thereof, unless such date of authentication shall be an interest payment date to which interest on
the Bonds has been paid in full or duly provided for, in which case they shall be dated such date
of authentication; provided, however, that if, as shown by the records of the Trustee, interest on
the Bonds shall be in default, Bonds issued in exchange for Bonds surrendered for transfer or
exchange shall be dated the date to which interest has been paid in full on the Bonds surrendered.

Principal of and premium, if any, on the Bonds shall be payable to the Owners of such Bonds
upon presentation and surrender of such Bonds at the Principal Office of the Paying Agent or any
Co-Paying Agent. Interest on the Bonds shall be paid by check drawn upon the Paying Agent and
mailed to the Owners of such Bonds as of the close of business on the Record Date with respect to
each interest payment date at the registered addresses of such Owners as they shall appear as of
the close of business on such Record Date on the registration books maintained pursuant to Section
2.08 hereof notwithstanding the cancellation of any such Bond upon any exchange or registration of
transfer subsequent to such Record Date, except that if and to the extent that there should be a
default on the payment of interest on any Bond, such defaulted interest shall be paid to the Owners
in whose name such Bond (or any Bond or Bonds issued upon any exchange or registration of transfer
thereof) is registered as of the close of business on a date selected by the Trustee in its
discretion, but not more than fifteen (15) days or less than ten (10) days prior to the date of
payment of such defaulted interest; notwithstanding the foregoing, upon request to the Paying Agent
by an Owner of not less than $1,000,000 in aggregate principal amount of Bonds, interest on such
Bonds and, after presentation and
surrender of such Bonds, the principal thereof shall be paid to such Owner by wire transfer to
the account maintained within the continental United States specified by such Owner or, if such
Owner maintains an account with the entity acting as Paying Agent, by deposit into such account.
Payment as aforesaid shall be made in such coin or currency of the United States of America as, at
the respective times of payment, shall be legal tender for the payment of public and private debts.

 

9

 

The Bonds and the form for registration of transfer and the form of certificate of
authentication to be printed on the Bonds are to be in substantially the forms thereof set forth in
Exhibits A, B and C hereto, respectively, with necessary or appropriate variations, omissions and
insertions as permitted or required by this Indenture.

Section 2.03. Execution of Bonds. The Bonds shall be executed on behalf of the Pollution Control Corporation by the President
or a Vice President of the Pollution Control Corporation which shall be attested by the Secretary
or an Assistant Secretary of the Pollution Control Corporation. Each of the foregoing officers may
execute or cause to be executed with a facsimile signature in lieu of his manual signature the
Bonds, provided the signature of either the President or a Vice President of the Pollution Control
Corporation or the Secretary or Assistant Secretary of the Pollution Control Corporation shall, if
required by applicable laws, be manually subscribed.

In case any officer of the Pollution Control Corporation whose signature or a facsimile of
whose signature shall appear on the Bonds shall cease to be such officer before the authentication
by the Trustee and delivery of such Bonds, such signature or such facsimile shall nevertheless be
valid and sufficient for all purposes, the same as if such officer had remained in office until
delivery; and any Bond may be signed on behalf of the Pollution Control Corporation by such persons
as, at the time of execution of such Bond, shall be the proper officers of the Pollution Control
Corporation, even though at the date of such Bond or of the execution and delivery of this
Indenture any such person was not such officer.

Section 2.04. Authentication of Bonds. Only such Bonds as shall have endorsed thereon a certificate of authentication
substantially in the form set forth in Exhibit C hereto duly executed by the Trustee shall be
entitled to any right or benefit under this Indenture. No Bond shall be valid or obligatory for
any purpose unless and until such certificate of authentication shall have been duly executed by
the Trustee, and such executed certificate of authentication of the Trustee upon any such Bonds
shall be conclusive evidence that such Bond has been authenticated and delivered under this
Indenture. The Trustee’s certificate of authentication on any Bond shall be deemed to have been
executed by it if signed with an authorized signature of the Trustee, but it shall not be necessary
that the same person sign the certificate of authentication on all of the Bonds issued hereunder.
This Section 2.04 is subject to the provisions of Section 10.17 hereof.

Section 2.05. Bonds Not General Obligations. Any obligation or liability of the Pollution Control Corporation created by or arising out
of this Indenture or otherwise incurred in connection with the issuance of the Bonds (including
without limitation any liability created by or arising out of the representations, warranties or
covenants set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the
Pollution Control Corporation or the State of
Arizona or any political subdivision thereof, or a charge upon the general credit or taxing
powers of any of the foregoing, but shall be payable solely out of the Receipts and Revenues of the
Pollution Control Corporation from the Loan Agreement or other amounts payable by the Company to
the Pollution Control Corporation hereunder or otherwise (including without limitation any amounts
derived from indemnifications given by the Company).

 

10

 

Neither the issuance of the Bonds nor the delivery of this Indenture shall, directly or
indirectly or contingently, obligate the Pollution Control Corporation or the State or any
political subdivision thereof to levy any form of taxation therefor or to make any appropriation
for their payment. Nothing in the Bonds or in this Indenture or the proceedings of the Pollution
Control Corporation or the Coconino County Board of Supervisors authorizing the Bonds or in the Act
or in any other related document shall be construed to authorize the Pollution Control Corporation
to create a debt of the Pollution Control Corporation or the State or any political subdivision
thereof within the meaning of any constitutional or statutory provision of the State. The
principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the
funds pledged for their payment in accordance with the Indenture and available therefor under this
Indenture. Neither the Pollution Control Corporation, the County of Coconino, the State nor any
political subdivision thereof shall in any event be liable for the payment of the principal of,
premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or
agreement of any kind whatsoever which may be undertaken by the Pollution Control Corporation. No
breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the
Pollution Control Corporation or the State or any political subdivision thereof, or any charge upon
the general credit or against the taxing power of Coconino County, Arizona or the State or any
political subdivision thereof. The Pollution Control Corporation has no taxing power.

Section 2.06. Prerequisites to Authentication of Bonds. The Pollution Control Corporation shall execute and deliver to the Trustee and the Trustee
shall authenticate the Bonds and deliver said Bonds to the initial purchasers thereof as may be
directed hereinafter in this Section 2.06.

Prior to the delivery on original issuance by the Trustee of any authenticated Bonds, there
shall be or have been delivered to the Trustee:

(a) a duly certified copy of a resolution of the Board of Directors of the Pollution
Control Corporation authorizing the execution and delivery of this Indenture and the Loan
Agreement and the issuance of the Bonds;

(b) an original duly executed counterpart or a duly certified copy of the Loan Agreement;

(c) a request and authorization to the Trustee on behalf of the Pollution Control
Corporation, signed by its President or a Vice President, to authenticate and deliver the Bonds
in the aggregate principal amount determined by this Indenture to the purchaser or purchasers
therein identified upon payment to the Trustee, but for the account of the Pollution Control
Corporation, of a sum specified in such request and authorization plus any accrued interest on
such Bonds to the date of delivery; and

 

11

 

(d) a written statement on behalf of the Company, executed by the President, any Vice
President or the Treasurer, (i) approving the issuance and delivery of the Bonds and (ii)
consenting to each and every provision of this Indenture.

Section 2.07. Lost or Destroyed Bonds or Bonds Canceled in Error. If any Bond, whether in temporary or definitive form, is lost (whether by reason of theft
or otherwise), destroyed (whether by mutilation, damage, in whole or in part, or otherwise) or
canceled in error, the Pollution Control Corporation may execute and the Trustee may authenticate a
new Bond of like date and denomination and bearing a number not contemporaneously outstanding;
provided that (a) in the case of any mutilated Bond, such mutilated Bond shall first be surrendered
to the Trustee and (b) in the case of any lost Bond or Bond destroyed in whole, there shall be
first furnished to the Pollution Control Corporation, the Trustee and the Company evidence of such
loss or destruction. In every case, the applicant for a substitute Bond shall furnish the
Pollution Control Corporation, the Trustee and the Company such security or indemnity as may be
required by any of them. In the event any lost or destroyed Bond or a Bond canceled in error shall
have matured or is about to mature, or has been called for redemption, instead of issuing a
substitute Bond the Trustee may, in its discretion, pay the same without surrender thereof if there
shall be first furnished to the Pollution Control Corporation, the Trustee and the Company evidence
of such loss, destruction or cancellation, together with indemnity, satisfactory to them. Upon the
issuance of any substitute Bond, the Pollution Control Corporation and the Trustee may require the
payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto. The Trustee may charge the Owner of any such Bond with the Trustee’s reasonable
fees and expenses in connection with any transaction described in this Section 2.07.

Every substitute Bond issued pursuant to the provisions of this Section 2.07 by virtue of the
fact that any Bond is lost, destroyed or canceled in error shall constitute an additional
contractual obligation of the Pollution Control Corporation, whether or not the Bond so lost,
destroyed or canceled shall be at any time enforceable, and shall be entitled to all the benefits
of this Indenture equally and proportionately with any and all other Bonds duly issued hereunder.
All Bonds shall be held and owned upon the express condition that, to the extent permitted by law,
the foregoing provisions are exclusive with respect to the replacement or payment of lost,
destroyed or improperly canceled Bonds, notwithstanding any law or statute now existing or
hereafter enacted.

Section 2.08. Transfer, Registration and Exchange of Bonds. The Registrar shall maintain and keep, at its Principal Office, books for the registration
and registration of transfer of Bonds, which, at all reasonable times, shall be open for inspection
by the Pollution Control Corporation, the Trustee and the Company; and, upon presentation for such
purpose of any Bond entitled to registration or registration of transfer at the Principal Office of
the Registrar, the Registrar shall register or register the transfer in such books, under such
reasonable regulations as the Registrar may prescribe. The Registrar shall make all necessary
provisions to permit the exchange or registration of transfer of Bonds at its Principal Office.

The transfer of any Bond shall be registered upon the registration books of the Registrar at
the written request of the Owner thereof or his attorney duly authorized in writing, upon surrender
thereof at the Principal Office of the Registrar, together with a written instrument of
transfer satisfactory to the Registrar duly executed by the Owner or his duly authorized
attorney. Upon the registration of transfer of any such Bond or Bonds, the Pollution Control
Corporation shall issue in the name of the transferee, in authorized denominations, a new Bond or
Bonds in the same aggregate principal amount as the surrendered Bond or Bonds.

 

12

 

The Pollution Control Corporation, the Trustee, the Paying Agent, any Co-Paying Agent and the
Registrar may deem and treat the Owner of any Bond as the absolute Owner of such Bond, whether such
Bond shall be overdue or not, for the purpose of receiving payment of, or on account of, the
principal of and premium, if any, and, except as provided in Section 2.02 hereof, interest on such
Bond and for all other purposes, and neither the Pollution Control Corporation, the Trustee, the
Paying Agent, any Co-Paying Agent nor the Registrar shall be affected by any notice to the
contrary. All such payments so made to any such Owner or upon his order shall be valid and
effective to satisfy and discharge the liability upon such Bond to the extent of the sum or sums so
paid.

Bonds, upon surrender thereof at the Principal Office of the Registrar may, at the option of
the Owner thereof, be exchanged for an equal aggregate principal amount of Bonds of any authorized
denomination.

In all cases in which the privilege of exchanging Bonds or registering the transfer of Bonds
is exercised, the Pollution Control Corporation shall execute and the Trustee shall authenticate
and deliver Bonds in accordance with the provisions of this Indenture. For every such exchange or
registration of transfer of Bonds, whether temporary or definitive, the Pollution Control
Corporation, the Registrar, or the Trustee may make a charge sufficient to reimburse it for any tax
or other governmental charge required to be paid with respect to such exchange or registration of
transfer, which sum or sums shall be paid by the person requesting such exchange or registration of
transfer as a condition precedent to the exercise of the privilege of making such exchange or
registration of transfer. The Registrar shall not be obligated (a) to make any such exchange or
registration of transfer of Bonds during the fifteen (15) days next preceding the date on which
notice of any proposed redemption of Bonds is given or (b) to make any exchange or registration of
transfer of any Bonds called for redemption.

The Bonds are to be initially registered in the name of Cede & Co., as nominee for the
Depositary. Such Bonds shall not be transferable or exchangeable, nor shall any purported transfer
be registered, except as follows:

(a) such Bonds may be transferred in whole, and appropriate registration of transfer
effected, if such transfer is by such nominee to the Depositary, or by the Depositary to another
nominee thereof, or by any nominee of the Depositary to any other nominee thereof, or by the
Depositary or any nominee thereof to any successor securities depositary or any nominee thereof;
and

 

13

 

(b) such Bond may be exchanged for definitive Bonds registered in the respective names of
the beneficial holders thereof, and thereafter shall be transferable without restriction, if:

(i) the Depositary shall have notified the Company and the Trustee that it is unwilling
or unable to continue to act as securities depositary with respect to such Bonds and the
Trustee shall not have been notified by the Company within ninety (90) days of the identity
of a successor securities depositary with respect to such Bonds;

(ii) the Company shall have delivered to the Trustee a written instrument to the effect
that such Bonds shall be so exchangeable on and after a date specified therein; or

(iii) (1) an Event of Default shall have occurred and be continuing, (2) the Trustee
shall have given notice of such Event of Default pursuant to Section 10.19 hereof and (3)
there shall have been delivered to the Pollution Control Corporation, the Company and the
Trustee an opinion of counsel to the effect that the interests of the beneficial Owners of
such Bonds in respect thereof will be materially impaired unless such Owners become Owners
of definitive Bonds.

The Bonds delivered to the Depositary may contain a legend reflecting the foregoing
restrictions on registration of transfer and exchange.

Section 2.09. Other Obligations. The Pollution Control Corporation expressly reserves the right to issue, to the extent
permitted by law, but shall not be obligated to issue, obligations under another indenture or
indentures to provide additional funds to pay the cost of construction of the Facilities or to
refund all or any principal amount of the Bonds, or any combination thereof.

Section 2.10. Temporary Bonds. Pending the preparation of definitive Bonds, the Pollution Control Corporation may execute
and the Trustee shall authenticate and deliver temporary Bonds. Temporary Bonds shall be issuable
as registered Bonds without coupons, of any authorized denomination, and substantially in the form
of the definitive Bonds but with such omissions, insertions and variations as may be appropriate
for temporary Bonds, all as may be determined by the Pollution Control Corporation. Temporary
Bonds may contain such reference to any provisions of this Indenture as may be appropriate. Every
temporary Bond shall be executed by the Pollution Control Corporation and be authenticated by the
Trustee upon the same conditions and in substantially the same manner, and with like effect, as the
definitive Bonds. As promptly as practicable the Pollution Control Corporation shall execute and
shall furnish definitive Bonds and thereupon temporary Bonds may be surrendered in exchange
therefor without charge at the Principal Office of the Trustee, and the Trustee shall authenticate
and deliver in exchange for such temporary Bonds a like aggregate principal amount of definitive
Bonds of authorized denominations. Until so exchanged the temporary Bonds shall be entitled to the
same benefits under this Indenture as definitive Bonds.

Section 2.11. Cancellation of Bonds. All Bonds which shall have been surrendered to the Paying Agent or any Co-Paying Agent for
payment or redemption, and all Bonds which shall have been surrendered to the Registrar for
exchange or registration of transfer, shall be delivered to the Trustee for cancellation. All
Bonds delivered to or acquired by the Trustee for cancellation shall be canceled and destroyed by
the Trustee. The Trustee shall furnish to the
Pollution Control Corporation, the Paying Agent, the Registrar and the Company counterparts of
certificates evidencing such cancellation and destruction and specifying such Bonds by number.

 

14

 

Section 2.12. Payment of Principal and Interest. For the payment of interest on the Bonds,
the Pollution Control Corporation shall cause to be deposited in the Bond Fund, on each interest
payment date, solely out of the Receipts and Revenues of the Pollution Control Corporation from the
Loan Agreement and other moneys pledged therefor, an amount sufficient to pay the interest to
become due on such interest payment date. The obligation of the Pollution Control Corporation to
cause any such deposit to be made hereunder shall be reduced by the amount of moneys in the Bond
Fund available on such interest payment date for the payment of interest on the Bonds.

For the payment of the principal of the Bonds upon maturity, the Pollution Control Corporation
shall cause to be deposited in the Bond Fund, on the stated or accelerated date of maturity, solely
out of the Receipts and Revenues of the Pollution Control Corporation from the Loan Agreement and
other moneys pledged therefor, an amount sufficient to pay the principal of the Bonds. The
obligation of the Pollution Control Corporation to cause any such deposit to be made hereunder
shall be reduced by the amount of moneys in the Bond Fund available on the maturity date for the
payment of the principal of the Bonds.

Section 2.13. Applicability of Book-Entry Provisions. Anything in this Indenture to the
contrary notwithstanding, (a) the provisions of the Blanket Issuer Letter of Representations, dated
October 12, 1995, between the Pollution Control Corporation and The Depository Trust Company
relating to the manner of and procedures for payment and redemption of Bonds and related matters
shall apply so long as such Depositary shall be the Owner of all Outstanding Bonds and (b) the
Pollution Control Corporation, the Trustee or the Paying Agent, as applicable, may enter into a
similar agreement, on terms satisfactory to the Company, with any subsequent Depositary and the
provisions thereof shall apply so long as such Depositary shall be the Owner of all Outstanding
Bonds.

ARTICLE III

REDEMPTION OF BONDS

Section 3.01. Redemption Provisions. (a) The Bonds shall be subject to redemption by the
Pollution Control Corporation, at the direction of the Company, on any date on or after October 1,
2019 in whole at any time or in part from time to time, at 100% of the principal amount thereof
plus accrued interest, if any, to the redemption date.

(b) The Bonds shall be subject to redemption by the Pollution Control Corporation, at the
direction of the Company, in whole at any time at the principal amount thereof plus accrued
interest to the redemption date, if:

(i) the Company shall have determined that the continued operation of the Facilities or
the Plant is impracticable, uneconomical or undesirable for any reason;

 

15

 

(ii) all or substantially all of the Facilities or the Plant shall have been condemned
or taken by eminent domain; or

(iii) the operation of the Facilities or the Plant shall have been enjoined or shall
have otherwise been prohibited by, or shall conflict with, any order, decree, rule or
regulation of any court or of any federal, state or local regulatory body, administrative
agency or other governmental body.

(c) The Bonds shall be subject to mandatory redemption by the Pollution Control
Corporation, at the principal amount thereof plus accrued interest to the redemption date, on
the 180th day (or such earlier date as may be designated by the Company) after a final
determination by a court of competent jurisdiction or an administrative agency, to the effect
that, as a result of a failure by the Company to perform or observe any covenant, agreement or
representation contained in the Loan Agreement, the interest payable on the Bonds is included
for federal income tax purposes in the gross income of the Owners thereof, other than any Owner
of a Bond who is a “substantial user” of the Facilities or a “related person” within the meaning
of Section 103(b)(13) of the 1954 Code. No determination by any court or administrative agency
shall be considered final for the purposes of this Section 3.01(c) unless the Company shall have
been given timely notice of the proceeding which resulted in such determination and an
opportunity to participate in such proceeding, either directly or through an Owner of a Bond,
and until the conclusion of any appellate review sought by any party to such proceeding or the
expiration of the time for seeking such review. The Bonds shall be redeemed either in whole or
in part in such principal amount that, in the opinion of Bond Counsel, the interest payable on
the Bonds remaining outstanding after such redemption would not be included in the gross income
of any Owner thereof, other than an Owner of a Bond who is a “substantial user” of the
Facilities or a “related person” within the meaning of Section 103(b)(13) of the 1954 Code.

Section 3.02. Selection of Bonds to be Redeemed. If less than all the Bonds shall be called
for redemption under any provision of this Indenture permitting such partial redemption, the
particular Bonds or portions of Bonds to be redeemed shall be selected by the Trustee, in such
manner as the Trustee in its discretion may deem proper, in the aggregate principal amount
designated to the Trustee by the Company or otherwise as required by this Indenture; provided,
however, that if, as indicated in a certificate of an Authorized Company Representative delivered
to the Trustee, the Company shall have offered to purchase all Bonds then Outstanding and less than
all such Bonds have been tendered to the Company for such purchase, the Trustee, at the direction
of an Authorized Company Representative, shall select for redemption all such Bonds which shall not
have been so tendered; and provided, further, that the portion of any Bond to be redeemed shall be
in the principal amount of $5,000 or some integral multiple thereof and that, in selecting Bonds
for redemption, the Trustee shall treat each Bond as representing that number of Bonds which is
obtained by dividing the principal amount of such Bond by $5,000. If it is determined that one or
more, but not all, of the $5,000 units of principal amount represented by any such Bond is to be
called for redemption, then, upon notice of intention to redeem such $5,000 unit or units, the
Owner of such Bond shall forthwith surrender such Bond to the Paying Agent or any Co-Paying Agent
for (a) payment to such Owner of the redemption price (including the redemption premium, if any,
and accrued interest to the date fixed for redemption) of the $5,000 unit or units of principal
amount called for redemption and (b) delivery to such Owner of a new Bond or Bonds in the aggregate
principal amount of the unredeemed balance of the principal amount of any such Bond. Bonds
representing the unredeemed balance of the principal amount of any such Bond shall be delivered to
the Owner thereof, without charge therefor. If the
Owner of any such Bond of a denomination greater than $5,000 shall fail to present such Bond
to the Paying Agent or any Co-Paying Agent for payment and exchange as aforesaid, such Bond shall,
nevertheless, become due and payable on the date fixed for redemption to the extent of the $5,000
unit or units of principal amount called for redemption (and to that extent only).

 

16

 

Section 3.03. Procedure for Redemption. (a) In the event any of the Bonds are called for
redemption, the Trustee shall give notice, in the name of the Pollution Control Corporation, of the
redemption of such Bonds, which notice shall (i) specify the Bonds to be redeemed, the redemption
date, the redemption price, and the place or places where amounts due upon such redemption will be
payable (which shall be the Principal Office of the Paying Agent or any Co-Paying Agent) and, if
less than all of the Bonds are to be redeemed, the numbers of the Bonds to be redeemed, and the
portion of the principal amount of any Bond to be redeemed in part, (ii) state any condition to
such redemption and (iii) state that on the redemption date, and upon the satisfaction of any such
condition, the Bonds or portions thereof to be redeemed shall cease to bear interest. Such notice
may set forth any additional information relating to such redemption. Such notice shall be given
by Mail at least thirty (30) days prior to the date fixed for redemption to the Owners of the Bonds
to be redeemed; provided, however, that failure duly to give such Notice by Mail, or any defect
therein, shall not affect the validity of any proceedings for the redemption of Bonds as to which
there shall have been no such failure or defect. If a notice of redemption shall be unconditional,
or if the conditions of a conditional notice or redemption shall have been satisfied, then upon
presentation and surrender of Bonds so called for redemption at the place or places of payment,
such Bonds shall be redeemed. The Trustee shall promptly deliver to the Company a copy of each
such notice of redemption.

(b) With respect to any notice of redemption of Bonds in accordance with subsection (a) or
(b) of Section 3.01 hereof, unless, upon the giving of such notice, such Bonds shall be deemed
to have been paid within the meaning of Article VIII hereof, such notice shall state that such
redemption shall be conditional upon the receipt, by the Trustee at or prior to the opening of
business on the date fixed for such redemption, of moneys sufficient to pay the principal of and
premium, if any, and interest on such Bonds to be redeemed, and that if such moneys shall not
have been so received said notice shall be of no force and effect and the Pollution Control
Corporation shall not be required to redeem such Bonds. In the event that such notice of
redemption contains such a condition and such moneys are not so received, the redemption shall
not be made and the Trustee shall within a reasonable time thereafter give notice, in the manner
in which the notice of redemption was given, that such moneys were not so received.

(c) Any Bonds and portions of Bonds which have been duly selected for redemption shall
cease to bear interest on the specified redemption date provided that moneys sufficient to pay
the principal of, premium, if any, and interest on such Bonds shall be on deposit with the
Trustee on the date fixed for redemption so that such Bonds will be deemed to be paid in
accordance with Article VIII hereof.

 

17

 

Section 3.04. Payment of Redemption Price. For the redemption of any of the Bonds, the
Pollution Control Corporation shall cause to be deposited in the Bond Fund, on the redemption date,
solely out of the Receipts and Revenues of the Pollution Control Corporation from the Loan
Agreement, an amount sufficient to pay the principal of and premium, if any, and
interest to become due on such redemption date. The obligation of the Pollution Control
Corporation to cause any such deposit to be made hereunder shall be reduced by the amount of moneys
in the Bond Fund available on such redemption date for payment of the principal of and premium, if
any, and accrued interest on the Bonds to be redeemed.

Section 3.05. No Partial Redemption After Default. Anything in this Indenture to the contrary
notwithstanding, if there shall have occurred and be continuing an Event of Default defined in
clause (a) or (b) of the first paragraph of Section 9.01 hereof, there shall be no redemption of
less than all of the Bonds at the time Outstanding other than a partial redemption in connection
with an offer by the Company to purchase all Bonds Outstanding as contemplated in the first proviso
to the first sentence of Section 3.02 hereof.

ARTICLE IV

THE BOND FUND

Section 4.01. Creation of Bond Fund. There is hereby created and established with the Trustee
a trust fund in the name of the Pollution Control Corporation to be designated “Coconino County,
Arizona Pollution Control Corporation Pollution Control Revenue Bonds, 2009 Series A (Tucson
Electric Power Company Navajo Project) Bond Fund” (herein called the “Bond Fund”). The Trustee
shall establish and maintain within the Bond Fund such segregated subaccounts as may be requested
by an Authorized Company Representative. The Bond Fund, and all moneys and certificated securities
therein, shall be kept in the possession of the Trustee.

Section 4.02. Liens. The Pollution Control Corporation shall not create any lien upon the
Bond Fund or upon the Receipts and Revenues of the Pollution Control Corporation from the Loan
Agreement other than the lien hereby created.

Section 4.03. Deposits into Bond Fund. (a) There shall be deposited into the Bond Fund:

(i) the accrued interest, if any, on the Bonds accrued to the date of delivery thereof
and paid by the initial purchasers thereof;

(ii) all Loan Payments; and

(iii) all other moneys received by the Trustee under and pursuant to any provision of
the Loan Agreement, other than Sections 5.03, 5.04 and 8.05 thereof, or from any other
source when accompanied by directions by the Company that such moneys are to be paid into
the Bond Fund.

(b) All income or other gain from the investment of moneys in the Bond Fund shall be
deposited into the Bond Fund.

 

18

 

Section 4.04. Use of Moneys in Bond Fund. Moneys, if any, paid into the Bond Fund pursuant to
clause (i) of Section 4.03(a) hereof shall be applied to the payment of interest
on the Bonds. Except as otherwise provided in Sections 4.06, 9.01 and 10.04 hereof, all other
moneys in the Bond Fund constituting part of the Trust Estate shall be used solely for the payment
of the principal of and premium, if any, and interest on the Bonds as the same shall become due and
payable at maturity, upon redemption or otherwise.

Section 4.05. Custody of Bond Fund; Withdrawal of Moneys. The Bond Fund shall be in the
custody of the Trustee but in the name of the Pollution Control Corporation and the Pollution
Control Corporation hereby authorizes and directs the Trustee to withdraw from the Bond Fund and
furnish to the Paying Agent funds constituting part of the Trust Estate sufficient to pay the
principal of and premium, if any, and interest on the Bonds as the same shall become due and
payable, and to withdraw from the Bond Fund funds sufficient to pay any other amounts payable
therefrom as the same shall become due and payable.

Section 4.06. Bonds Not Presented for Payment. In the event any Bonds shall not be presented
for payment when the principal thereof and premium, if any, thereon become due, either at maturity
or at the date fixed for redemption thereof or otherwise, if moneys sufficient to pay such Bonds
are held by the Paying Agent or any Co-Paying Agent for the benefit of the Owners thereof, the
Paying Agent shall segregate and hold such moneys in trust, without liability for interest thereon,
for the benefit of the Owners of such Bonds, who shall, except as provided in the following
paragraph, thereafter be restricted exclusively to such fund or funds for the satisfaction of any
claim of whatever nature on their part under this Indenture or relating to said Bonds.

Any moneys which the Paying Agent shall segregate and hold in trust for the payment of the
principal of and premium, if any, or interest on any Bond and remaining unclaimed for one (1) year
after such principal, premium, if any, or interest has become due and payable shall, upon the
Company’s written request to the Paying Agent, be paid to the Company, with notice to the Trustee
of such action; provided, however, that before the Paying Agent shall be required to make any such
repayment, the Paying Agent may, and at the request of the Trustee shall, at the expense of the
Company cause notice to be given once by Publication to the effect that such money remains
unclaimed and that, after a date specified therein, which shall not be less than thirty (30) days
from the date of such notice by Publication, any unclaimed balance of such moneys then remaining
will be paid to the Company. After the payment of such unclaimed moneys to the Company, the Owner
of such Bond shall thereafter look only to the Company for the payment thereof, and all liability
of the Pollution Control Corporation, the Trustee and the Paying Agent with respect to such moneys
shall thereupon cease.

 

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Section 4.07. Moneys Held in Trust. All moneys and Investment Securities held by the Trustee
in the Bond Fund, and all moneys required to be deposited with or paid to the Trustee for deposit
into the Bond Fund, and all moneys withdrawn from the Bond Fund and held by the Trustee, the Paying
Agent or any Co-Paying Agent, shall be held by the Trustee, the Paying Agent or any Co-Paying
Agent, as the case may be, in trust, and such moneys and Investment Securities (other than moneys
held pursuant to Section 4.06 hereof and moneys or Investment Securities held in the Rebate Fund
established in furtherance of the obligations of the Company under clause (b) of Section 6.04 of
the Loan Agreement), while so held or so required to be deposited or paid, shall constitute part of
the Trust Estate and be subject to the lien and security interest created hereby in favor of the
Trustee for the benefit of the Owners from time to time of
the Bonds. The Company shall have no right, title or interest in the Bond Fund, except such
rights as may arise after the right, title and interest of the Trustee in and to the Trust Estate
and all covenants, agreements and other obligations of the Pollution Control Corporation under this
Indenture shall have ceased, terminated and become void and shall have been satisfied and
discharged in accordance with Article VIII hereof.

ARTICLE V

DISPOSITION OF PROCEEDS

Section 5.01. Disposition of Proceeds. The proceeds from the issuance and sale of the Bonds
shall be applied as provided in Section 4.03 of the Loan Agreement.

ARTICLE VI

INVESTMENTS

Section 6.01. Investments. The moneys in the Bond Fund shall, at the direction of the
Company, be invested and reinvested in Investment Securities. Any Investment Securities may be
purchased subject to options or other rights in third parties to acquire the same. Subject to the
further provisions of this Section 6.01, such investments shall be made by the Trustee as directed
and designated by the Company in a certificate of, or telephonic advice promptly confirmed by a
certificate of, an Authorized Company Representative. As and when any amounts thus invested may be
needed for disbursements from the Bond Fund, the Trustee shall request the Company to designate
such investments to be sold or otherwise converted into cash to the credit of the Bond Fund as
shall be sufficient to meet such disbursement requirements and shall then follow any directions in
respect thereto of an Authorized Company Representative. As long as no Event of Default (as
defined in Section 9.01 hereof) shall have occurred and be continuing, the Company shall have the
right to designate the investments to be sold and to otherwise direct the Trustee in the sale or
conversion to cash of the investments made with the moneys in the Bond Fund, provided that the
Trustee shall be entitled to conclusively assume the absence of any such Event of Default unless it
has notice thereof within the meaning of Section 10.05 hereof.

 

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ARTICLE VII

GENERAL COVENANTS

Section 7.01. No General Obligations. Any obligation or liability of the Pollution Control
Corporation created by or arising out of this Indenture or otherwise incurred in connection with
the issuance of the Bonds (including without limitation any liability created by or arising out of
the representations, warranties or covenants set forth herein or otherwise) shall
not impose a debt or pecuniary liability upon the Pollution Control Corporation or the State
of Arizona or any political subdivision thereof, or a charge upon the general credit or taxing
powers of any of the foregoing, but shall be payable solely out of the Receipts and Revenues of the
Pollution Control Corporation from the Loan Agreement or other amounts payable by the Company to
the Pollution Control Corporation hereunder or otherwise (including without limitation any amounts
derived from indemnifications given by the Company).

Neither the issuance of the Bonds nor the delivery of this Indenture shall, directly or
indirectly or contingently, obligate the Pollution Control Corporation or the State or any
political subdivision thereof to levy any form of taxation therefor or to make any appropriation
for their payment. Nothing in the Bonds or in this Indenture or the proceedings of the Pollution
Control Corporation or the Coconino County Board of Supervisors authorizing the Bonds or in the Act
or in any other related document shall be construed to authorize the Pollution Control Corporation
to create a debt of the Pollution Control Corporation or the State or any political subdivision
thereof within the meaning of any constitutional or statutory provision of the State. The
principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the
funds pledged for their payment in accordance with the Indenture and available therefor under this
Indenture. Neither the Pollution Control Corporation, the County of Coconino, the State nor any
political subdivision thereof shall in any event be liable for the payment of the principal of,
premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or
agreement of any kind whatsoever which may be undertaken by the Pollution Control Corporation. No
breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the
Pollution Control Corporation or the State or any political subdivision thereof, or any charge upon
the general credit or against the taxing power of Coconino County, Arizona or the State or any
political subdivision thereof. The Pollution Control Corporation has no taxing power.

Section 7.02. Performance of Covenants of the Pollution Control Corporation; Representations.
The Pollution Control Corporation shall faithfully perform at all times any and all covenants,
undertakings, stipulations and provisions contained in this Indenture, in any and every Bond
executed, authenticated and delivered hereunder, and in all proceedings pertaining thereto. The
Pollution Control Corporation represents that it is duly authorized under the Constitution and laws
of the State of Arizona to issue the Bonds authorized hereby, to enter into the Loan Agreement and
this Indenture, and to pledge and assign to the Trustee the Trust Estate, and that the Bonds in the
hands of the Owners thereof are and will be valid and binding limited obligations of the Pollution
Control Corporation.

 

21

 

Section 7.03. Maintenance of Rights and Powers; Compliance with Laws. The Pollution Control
Corporation shall at all times use its best efforts to maintain its corporate existence or assure
the assumption of its obligations under this Indenture by any public body succeeding to its powers
under the Act; and it shall at all times use its best efforts to comply with all valid acts, rules,
regulations, orders and directions of any legislative, executive, administrative or judicial body
known to it to be applicable to the Loan Agreement and this Indenture.

Section 7.04. Enforcement of Obligations of the Company; Amendments. Upon receipt of written
notification from the Trustee, the Pollution Control Corporation shall cooperate
with the Trustee in enforcing the obligation of the Company to pay or cause to be paid all the
payments and other costs and charges payable by the Company under the Loan Agreement. The
Pollution Control Corporation shall not enter into any agreement with the Company amending the Loan
Agreement without the prior written consent of the Trustee and compliance with Sections 12.06 and
12.07 of this Indenture (a revision to Exhibit A to the Loan Agreement not being deemed an
amendment for purposes of this Section).

Section 7.05. Further Instruments. The Pollution Control Corporation shall, upon the
reasonable request of the Trustee, from time to time execute and deliver such further instruments
and take such further action as may be reasonable and as may be required to carry out the purposes
of this Indenture; provided, however, that no such instruments or actions shall pledge the credit
or taxing power of the State of Arizona, the County of Coconino, the Pollution Control Corporation
or any other political subdivision of said State.

Section 7.06. No Disposition of Trust Estate. Except as permitted by this Indenture, the
Pollution Control Corporation shall not sell, lease, pledge, assign or otherwise dispose of or
encumber its interest in the Trust Estate and will promptly pay or cause to be discharged or make
adequate provision to discharge any lien or charge on any part thereof not permitted hereby.

Section 7.07. Financing Statements. The Pollution Control Corporation and the Trustee shall
cooperate with the Company in causing appropriate financing statements and continuation statements,
naming the Trustee as pledgee of the Receipts and Revenues of the Pollution Control Corporation
from the Loan Agreement and of the other moneys pledged under the Indenture for the payment of the
principal of and premium, if any, and interest on the Bonds, and as pledgee and assignee of the
balance of the Trust Estate, and the Pollution Control Corporation shall cooperate with the Trustee
and the Company in causing appropriate continuation statements to be duly filed and recorded in the
appropriate state and county offices as required by the provisions of the Uniform Commercial Code
or other similar law as adopted in the State of Arizona and any other applicable jurisdiction, as
from time to time amended, in order to perfect and maintain the security interests created by this
Indenture.

Section 7.08. Tax Covenants; Rebate Fund. (a) The Pollution Control Corporation covenants
for the benefit of all Owners from time to time of the Bonds that it will not directly or
indirectly use, or (to the extent within its control) permit the use of, the proceeds of any of the
Bonds or any other funds of the Pollution Control Corporation, or take or omit to take any other
action, if and to the extent that such use, or the taking or omission to take such action, would
cause any of the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code or
otherwise subject to federal income taxation by reason of failing to qualify under Section 103 of
the 1954 Code and Title XIII of the Tax Reform Act of 1986, as applicable, and any applicable
regulations promulgated thereunder. To that end, the Pollution Control Corporation covenants to
comply with all covenants set forth in the Tax Agreement, which is hereby incorporated herein by
reference as though fully set forth herein.

 

22

 

(b) The Trustee shall establish and maintain a fund separate from any other fund
established and maintained hereunder designated the “Coconino County, Arizona Pollution Control
Corporation Pollution Control Revenue Bonds, 2009 Series A (Tucson Electric Power Company Navajo
Project) Rebate Fund” (herein called the “Rebate Fund”) in
accordance with the provisions of the Tax Agreement. Within the Rebate Fund, the Trustee
shall maintain such accounts as shall be directed by the Company in order for the Pollution
Control Corporation and the Company to comply with the provisions of the Tax Agreement. Subject
to the transfer provisions provided in paragraph (c) below, all money at any time deposited in
the Rebate Fund shall be held by the Trustee in trust, to the extent required to satisfy the
Rebate Requirement (as defined in the Tax Agreement), for payment to the United States of
America, and neither the Company, the Pollution Control Corporation or the Owners shall have any
rights in or claim to such moneys. All amounts deposited into or on deposit in the Rebate Fund
shall be governed by this Section 7.08, by Section 6.04 of the Loan Agreement and by the Tax
Agreement. The Trustee shall conclusively be deemed to have complied with such provisions if it
follows the directions of the Company, including supplying all necessary information in the
manner set forth in the Tax Agreement, and shall not be required to take any actions thereunder
in the absence of written directions from the Company.

(c) Upon receipt of the Company’s written instructions, the Trustee shall remit part or all
of the balances in the Rebate Fund to the United States of America, as so directed. In
addition, if the Company so directs, the Trustee shall deposit moneys into or transfer moneys
out of the Rebate Fund from or into such accounts or funds as directed by the Company’s written
directions. Any funds remaining in the Rebate Fund after all of the Bonds shall have been paid
and any Rebate Requirement shall have been satisfied, or provision therefor reasonably
satisfactory to the Trustee shall have been made, shall be withdrawn and remitted to the
Company.

(d) Notwithstanding any provision of this Indenture, the obligation to remit the Rebate
Requirement to the United States of America and to comply with all other requirements of this
Section 7.08, Section 6.04 of the Loan Agreement and the Tax Agreement shall survive the payment
of the Bonds and the satisfaction and discharge of this Indenture.

Section 7.09. Notices of Trustee. The Trustee shall give notice to both the Pollution Control
Corporation and the Company whenever it is required hereby to give notice to either and,
additionally, shall furnish to the Pollution Control Corporation and the Company copies of any
Notice by Mail or Publication given by it pursuant to any provision hereof.

 

23

 

ARTICLE VIII

DEFEASANCE

Section 8.01. Defeasance. If the Pollution Control Corporation shall pay or cause to be paid
to the Owner of any Bond secured hereby the principal of and premium, if any, and interest due and
payable, and thereafter to become due and payable, upon such Bond or any portion of such Bond in
the principal amount of $5,000 or any integral multiple thereof, such Bond or portion thereof shall
cease to be entitled to any lien, benefit or security under this Indenture. If the Pollution
Control Corporation shall pay or cause to be paid to the Owners of all
the Bonds secured hereby the principal of and premium, if any, and interest due and payable,
and thereafter to become due and payable, thereon, and shall pay or cause to be paid all other sums
payable hereunder including, without limitation, amounts payable pursuant to Section 10.04 hereof,
then, and in that case, the right, title and interest of the Trustee in and to the Trust Estate
shall thereupon cease, terminate and become void. In such event, the Trustee shall assign,
transfer and turn over to the Company the Trust Estate, including, without limitation, any surplus
in the Bond Fund and any balance remaining in any other fund created under this Indenture.

All or any portion of Outstanding Bonds or portions of Bonds in principal amounts of $5,000 or
any integral multiple thereof, shall prior to the maturity or redemption date thereof be deemed to
have been paid within the meaning and with the effect expressed in this Article VIII, and the
entire indebtedness of the Pollution Control Corporation with respect thereof shall be satisfied
and discharged, when:

(a) in the event said Bonds or portions thereof have been selected for redemption in
accordance with Section 3.02 hereof, the Trustee shall have given, or the Company shall have
given, to the Trustee in form satisfactory to it irrevocable instructions to give, on a date in
accordance with the provisions of Section 3.03 hereof, notice of redemption of such Bonds or
portions thereof,

(b) there shall have been deposited with the Trustee either moneys in an amount which shall
be sufficient, or Government Obligations which shall not contain provisions permitting the
redemption thereof at the option of the issuer, the principal of and the interest on which, when
due, and without regard to any reinvestment thereof, will provide moneys which, together with
the moneys, if any, deposited with or held by the Trustee, shall be sufficient, to pay when due
the principal of and premium, if any, and interest due and to become due on said Bonds or
portions thereof on and prior to the redemption date or maturity date thereof, as the case may
be, and

(c) in the event said Bonds or portions thereof do not mature and are not to be redeemed
within the next succeeding sixty (60) days, the Company shall have given the Trustee in form
satisfactory to it irrevocable instructions to give, as soon as practicable in the same manner
as a notice of redemption is given pursuant to Section 3.03 hereof, a notice to the Owners of
said Bonds or portions thereof that the deposit required by clause (b) above has been made with
the Trustee and that said Bonds or portions thereof are deemed to have been paid in accordance
with this Article VIII and stating the maturity or redemption date upon which moneys are to be
available for the payment of the principal of and premium, if any, and interest on said Bonds or
portions thereof.

 

24

 

Neither the Government Obligations nor moneys deposited with the Trustee pursuant to this
Article VIII nor principal or interest payments on any such Government Obligations shall be
withdrawn or used for any purpose other than, and such Government Obligations, moneys and principal
or interest payments shall be held in trust for, the payment of the principal of and premium, if
any, and interest on said Bonds or portions thereof; provided, that any cash received from such
principal or interest payments on such Government Obligations deposited with the Trustee, if not
then needed for such purposes, shall, to the extent practicable, be invested in Government
Obligations of the type described in clause (b) of the preceding paragraph maturing
at times and in amounts sufficient to pay when due the principal of and premium, if any, and
interest to become due on said Bonds or portions thereof on and prior to such redemption date or
maturity date thereof, as the case may be, and interest earned from such reinvestments shall be
paid over to the Company, as received by the Trustee, free and clear of any trust, lien or pledge
hereunder. If payment of less than all the Bonds is to be provided for in the manner and with the
effect provided in this Article VIII, the Trustee shall select such Bonds or portions of Bonds in
the manner specified by Section 3.02 hereof for selection for redemption of less than all Bonds in
the principal amount designated to the Trustee by the Company. At or prior to the time of the
deposit of any Government Obligations with the Trustee pursuant to this Section 8.01, the Company
shall provide the Trustee with a certificate of an accountant or an accounting firm as to the
sufficiency of such Government Obligations to pay when due the principal of and premium, if any,
and interest due and to become due as set forth in clause (b) of the preceding paragraph.

ARTICLE IX

DEFAULTS AND REMEDIES

Section 9.01. Events of Default. Each of the following events shall constitute and is
referred to in this Indenture as an “Event of Default”:

(a) a failure to pay the principal of or premium, if any, on any of the Bonds when the same
shall become due and payable at maturity, upon redemption or otherwise;

(b) a failure to pay an installment of interest on any of the Bonds after such interest
shall have become due and payable for a period of thirty (30) days;

(c) a failure by the Pollution Control Corporation to observe and perform any covenant,
condition, agreement or provision (other than as specified in clauses (a) and (b) of this
Section 9.01) contained in the Bonds or in this Indenture on the part of the Pollution Control
Corporation to be observed or performed, which failure shall continue for a period of sixty (60)
days after written notice, specifying such failure and requesting that it be remedied, shall
have been given to the Pollution Control Corporation and the Company by the Trustee, which may
give such notice in its discretion and which shall give such notice at the written request of
Owners of not less than a majority of the principal amount of the Bonds then Outstanding, unless
the Trustee, or the Trustee and Owners of a principal amount of Bonds not less than the
principal amount of Bonds the Owners of which requested that such notice be given, as the case
may be, shall agree in writing to an extension of such period prior to its expiration; provided,
however, that the Trustee, or the Trustee and the Owners of such principal amount of Bonds, as
the case may be, shall be deemed to have agreed to an extension of such period if corrective
action is initiated by the Pollution Control Corporation, or the Company on behalf of the
Pollution Control Corporation, within such period and is being diligently pursued.

 

25

 

Upon the occurrence and continuance of any Event of Default described in clause (a) or (b) of
the preceding paragraph, the Trustee may, and at the written request of Owners of not less than a
majority of the principal amount of Bonds then Outstanding shall, by written notice to the
Pollution Control Corporation and the Company, declare the Bonds to be immediately due and
payable, whereupon they shall, without further action, become and be immediately due and payable,
anything in this Indenture or in the Bonds to the contrary notwithstanding, and the Trustee shall
give notice thereof by Mail to all Owners of Outstanding Bonds.

The provisions of the preceding paragraph, however, are subject to the condition that if,
after the principal of the Bonds shall have been so declared to be due and payable, and before any
judgment or decree for the payment of the moneys due shall have been obtained or entered as
hereinafter provided, the Pollution Control Corporation shall cause to be deposited with the
Trustee a sum sufficient to pay all matured installments of interest upon all Bonds and the
principal of any and all Bonds which shall have become due otherwise than by reason of such
declaration (with interest upon such principal and, to the extent permissible by law, on overdue
installments of interest, at the rate per annum borne by the Bonds) and such amounts as shall be
sufficient to cover reasonable compensation and reimbursement of expenses payable to the Trustee
and any predecessor Trustee, and all Events of Default hereunder other than nonpayment of the
principal of Bonds which shall have become due by said declaration shall have been remedied, then,
in every such case, such Event of Default shall be deemed waived and such declaration and its
consequences rescinded and annulled, and the Trustee shall promptly give written notice of such
waiver, rescission and annulment to the Pollution Control Corporation and the Company, and, if
notice of the acceleration of the Bonds shall have been given to the Owners of the Bonds, shall
give notice thereof by Mail to all Owners of Outstanding Bonds; but no such waiver, rescission and
annulment shall extend to or affect any subsequent Event of Default or impair any right or remedy
consequent thereon.

Section 9.02. Remedies. Upon the occurrence and continuance of any Event of Default, then and
in every such case the Trustee in its discretion may, and upon the written request of Owners of not
less than a majority in principal amount of the Bonds then Outstanding and receipt of indemnity to
its satisfaction shall, in its own name and as the Trustee of an express trust:

(a) by mandamus, or other suit, action or proceeding at law or in equity, enforce all
rights of the Owners of the Bonds, and require the Pollution Control Corporation or the Company
to carry out any agreements with or for the benefit of such Owners and to perform its or their
duties under the Act, the Loan Agreement and this Indenture;

(b) bring suit upon the Bonds; or

(c) by action or suit in equity enjoin any acts or things which may be unlawful or in
violation of the rights of the Owners of the Bonds.

 

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Section 9.03. Restoration to Former Position. In the event that any proceeding taken by the
Trustee to enforce any right under this Indenture shall have been discontinued or abandoned for any
reason, or shall have been determined adversely to the Trustee, then the Pollution Control
Corporation, the Trustee and the Owners shall be restored, subject to any determination in such
proceeding, to their former positions and rights hereunder, respectively, and all rights, remedies
and powers of the Trustee shall continue as though no such proceeding had been taken.

Section 9.04. Owners’ Right to Direct Proceedings. Anything in this Indenture to the contrary
notwithstanding, the Owners of a majority in principal amount of the Bonds then Outstanding
hereunder shall have the right, by an instrument in writing executed and delivered to the Trustee,
to direct the time, method and place of conducting all remedial proceedings available to the
Trustee under this Indenture or exercising any trust or power conferred on the Trustee by this
Indenture; provided, however, that such direction shall not be otherwise than in accordance with
law and the provisions of this Indenture and that the Trustee shall have the right (but not the
obligation) to decline to follow any such direction if the Trustee, being advised by counsel, shall
determine that the action or proceeding so directed may not lawfully be taken, or if the Trustee in
good faith shall determine that the action or proceedings so directed would involve the Trustee in
personal liability or if the Trustee in good faith shall so determine that the actions or
forbearances specified in or pursuant to such direction would be unduly prejudicial to the
interests of Owners not joining in the giving of said direction, it being understood that the
Trustee shall have no duty to ascertain whether or not such actions or forbearances are unduly
prejudicial to such Owners.

Section 9.05. Limitation on Owners’ Right to Institute Proceedings. No Owner of Bonds shall
have any right to institute any suit, action or proceeding in equity or at law for the execution of
any trust or power hereunder, or any other remedy hereunder or on said Bonds, unless such Owner
previously shall have given to the Trustee written notice of an Event of Default as hereinabove
provided and unless the Owners of not less than a majority in principal amount of the Bonds then
Outstanding shall have made written request of the Trustee so to do, after the right to institute
said suit, action or proceeding shall have accrued, and shall have afforded the Trustee a
reasonable opportunity to proceed to institute the same in either its or their name, and unless
there also shall have been offered to the Trustee security and indemnity satisfactory to it against
the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee shall not
have complied with such request within a reasonable time; and such notification, request and offer
of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions
precedent to the institution of said suit, action or proceeding; it being understood and intended
that no one or more of the Owners of the Bonds shall have any right in any manner whatever by his
or their action to affect, disturb or prejudice the security of this Indenture, or to enforce any
right hereunder or under the Bonds, except in the manner herein provided, and that all suits,
actions and proceedings at law or in equity shall be instituted, had and maintained in the manner
herein provided and for the equal benefit of all Owners of the Bonds.

 

27

 

Section 9.06. No Impairment of Right to Enforce Payment. Notwithstanding any other provision
in this Indenture, the right of any Owner of a Bond to receive payment of the principal of and
premium, if any, and interest on such Bond, on or after the respective due dates expressed therein,
or to institute suit for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of such Owner.

Section 9.07. Proceedings by Trustee without Possession of Bonds. All rights of action under
this Indenture or under any of the Bonds secured hereby which are enforceable by the Trustee may be
enforced by it without the possession of any of the Bonds, or the production thereof on the trial
or other proceedings relative thereto, and any such suit, action or proceeding
instituted by the Trustee shall be brought in its name for the equal and ratable benefit of
the Owners of the Bonds, subject to the provisions of this Indenture.

Section 9.08. No Remedy Exclusive. No remedy herein conferred upon or reserved to the Trustee
or to the Owners of the Bonds is intended to be exclusive of any other remedy or remedies, and each
and every such remedy shall be cumulative, and shall be in addition to every other remedy given
hereunder or under the Loan Agreement, now or hereafter existing at law or in equity or by statute.

Section 9.09. No Waiver of Remedies. No delay or omission of the Trustee or of any Owner of a
Bond to exercise any right or power accruing upon any default shall impair any such right or power
or shall be construed to be a waiver of any such default, or an acquiescence therein; and every
power and remedy given by this Article IX to the Trustee and to the Owners of the Bonds,
respectively, may be exercised from time to time and as often as may be deemed expedient.

Section 9.10. Application of Moneys. Any moneys received by the Trustee, by any receiver or
by any Owner of a Bond pursuant to any right given or action taken under the provisions of this
Article IX, after payment of the costs and expenses of the proceedings resulting in the collection
of such moneys and of all amounts due to the Trustee and any predecessor Trustee under Section
10.04 hereof, shall be deposited in the Bond Fund and all moneys so deposited in the Bond Fund
during the continuance of an Event of Default (other than moneys for the payment of Bonds which had
matured or otherwise become payable prior to such Event of Default or for the payment of interest
due prior to such Event of Default) shall be applied as follows:

(a) Unless the principal of all the Bonds shall have become due and payable, all such
moneys shall be applied (i) first, to the payment to the persons entitled thereto of all
installments of interest then due on the Bonds, with interest on overdue installments, if
lawful, at the rate per annum borne by the Bonds, in the order of maturity of the installments
of such interest and, if the amount available shall not be sufficient to pay in full any
particular installment of interest, then to the payment ratably, according to the amounts due on
such installment, and (ii) second, to the payment to the persons entitled thereto of the unpaid
principal of any of the Bonds which shall have become due (other than Bonds called for
redemption for the payment of which money is held pursuant to the provisions of this Indenture),
with interest on such Bonds at their rate from the respective dates upon which they became due
and, if the amount available shall not be sufficient to pay in full Bonds due on any particular
date, together with such interest, then to the payment ratably, according to the amount of
principal and interest due on such date, in each case to the persons entitled thereto, without
any discrimination or privilege.

 

28

 

(b) If the principal of all the Bonds shall have become due and payable, all such moneys
shall be applied to the payment of the principal and interest then due and unpaid upon the
Bonds, with interest on overdue interest and principal, as aforesaid, without preference or
priority of principal over interest or of interest over principal, or of any installment of
interest over any other installment of interest, or of any Bond over any other
Bond, ratably, according to the amounts due respectively for principal and interest, to the
persons entitled thereto without any discrimination or privilege.

(c) If the principal of all the Bonds shall have become due and payable, and if
acceleration of the maturity of the Bonds by reason of such Event of Default shall thereafter
have been rescinded and annulled under the provisions of this Article IX, then, subject to the
provisions of clause (b) of this Section 9.10 which shall be applicable in the event that the
principal of all the Bonds shall later become due and payable, the moneys shall be applied in
accordance with the provisions of clause (a) of this Section 9.10.

Section 9.11. Severability of Remedies. It is the purpose and intention of this Article IX to
provide rights and remedies to the Trustee and the Owners which may be lawfully granted under the
provisions of the Act, but should any right or remedy herein granted be held to be unlawful, the
Trustee and the Owners shall be entitled, as above set forth, to every other right and remedy
provided in this Indenture and by law.

ARTICLE X

TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR

Section 10.01. Acceptance of Trusts. The Trustee hereby accepts and agrees to execute the
trusts hereby created, but only upon the additional terms set forth in this Article X, to all of
which the Pollution Control Corporation agrees and the respective Owners agree by their acceptance
of delivery of any of the Bonds.

Section 10.02. No Responsibility for Recitals. The recitals, statements and representations
contained in this Indenture or in the Bonds, save only the Trustee’s authentication upon the Bonds,
are not made by the Trustee, and the Trustee does not assume, and shall not have, any
responsibility or obligation for the correctness of any thereof. The Trustee makes no
representation as to the validity or sufficiency of this Indenture or the Bonds.

Section 10.03. Limitations on Liability. The Trustee may execute any of the trusts or powers
hereof and perform the duties required of it hereunder by or through attorneys, agents, receivers,
or employees, and shall be entitled to advice of counsel concerning all matters of trust and its
duty hereunder, and the Trustee shall not be answerable for the default or misconduct of any such
attorney, agent, receiver, or employee selected by it with reasonable care. The Trustee shall not
be answerable for the exercise of any discretion or power under this Indenture or for anything
whatsoever in connection with the trust created hereby, except only for its own negligence or bad
faith.

 

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Anything in this Indenture to the contrary notwithstanding, the Trustee shall in no event be
required to expend or risk its own funds or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its rights or powers, if there shall
be reasonable grounds for believing that the repayment of such funds or adequate indemnity against
such liability is not reasonably assured to it.

Section 10.04. Compensation, Expenses and Advances. The Trustee, the Paying Agent and any
Co-Paying Agent, and the Registrar under this Indenture shall be entitled to reasonable
compensation for their services rendered hereunder (not limited by any provision of law regarding
the compensation of the trustee of an express trust) and to reimbursement for their actual out of
pocket expenses (including counsel fees) reasonably incurred in connection therewith except as a
result of their negligence or bad faith, including, without limitation, compensation for any
services rendered, and reimbursement for any expenses incurred, at and subsequent to the time the
Bonds are deemed to have been paid in accordance with Article VIII hereof. If the Pollution
Control Corporation shall fail to perform any of the covenants or agreements contained in this
Indenture, other than the covenants or agreements in respect of the payment of the principal of and
premium, if any, and interest on the Bonds, the Trustee may, in its uncontrolled discretion and
without notice to the Owners of the Bonds, at any time and from time to time, make advances to
effect performance of the same on behalf of the Pollution Control Corporation, but the Trustee
shall be under no obligation so to do; and any and all such advances may bear interest at a rate
per annum not exceeding the base rate then in effect for 90 day commercial loans by the Trustee or
a commercial banking affiliate of the Trustee designated as such by the Trustee in the city in
which is located the Principal Office of the Trustee (or such affiliate, as the case may be) to
borrowers of the highest credit standing; but no such advance shall operate to relieve the
Pollution Control Corporation from any default hereunder. In Section 5.03 of the Loan Agreement,
the Company has agreed that it will pay to the Trustee (including any predecessor Trustee), the
Paying Agent and any Co-Paying Agent and the Registrar such compensation and reimbursement of
expenses and advances, but the Company may, without creating a default hereunder, contest in good
faith the reasonableness of any such services, expenses and advances. If the Company shall have
failed to make any payment to the Trustee or any predecessor Trustee under Section 5.03 of the Loan
Agreement and such failure shall have resulted in an Event of Default under the Loan Agreement, the
Trustee, and any predecessor Trustee, shall have, in addition to any other rights hereunder, a
claim, prior to the claim of the Owners, for the payment of its compensation and the reimbursement
of its expenses and any advances made by it, as provided in this Section 10.04, upon the moneys and
obligations in the Bond Fund; provided, however, that neither the Trustee nor any predecessor
Trustee shall have any such claim upon moneys or obligations deposited with or paid to the Trustee
for the redemption or payment of Bonds which are deemed to have been paid in accordance with
Article VIII hereof.

In Section 5.04 of the Loan Agreement, the Company has agreed to indemnify the Trustee and any
predecessor Trustee to the extent provided therein.

 

30

 

Section 10.05. Notice of Events of Default. The Trustee shall not be required to take notice,
or be deemed to have notice, of any default or Event of Default under this Indenture other than an
Event of Default under clause (a) or (b) of the first paragraph of Section 9.01 hereof, unless an
officer assigned by the Trustee to administer its corporate trust business has been specifically
notified in writing of such default or Event of Default by Owners of at least a majority of the
principal amount of the Bonds then Outstanding. The Trustee may, however, at any time, in its
discretion, require of the Pollution Control Corporation and the Company full information and
advice as to the performance of any of the covenants, conditions and agreements contained herein.

Section 10.06. Action by Trustee. The Trustee shall be under no obligation to take any action
in respect of any default or Event of Default hereunder or toward the execution or enforcement of
any of the trusts hereby created, or to institute, appear in or defend any suit or other proceeding
in connection therewith, unless requested in writing so to do by Owners of at least a majority in
principal amount of the Bonds then Outstanding, and, if in its opinion such action may tend to
involve it in expense or liability, unless furnished, from time to time as often as it may require,
with security and indemnity satisfactory to it. The foregoing provisions are intended only for the
protection of the Trustee, and shall not affect any discretion or power given by any provisions of
this Indenture to the Trustee to take action in respect of any default or Event of Default without
such notice or request from the Owners of the Bonds, or without such security or indemnity.

Section 10.07. Good Faith Reliance. The Trustee shall be protected and shall incur no
liability in acting or proceeding in good faith upon any resolution, notice, telegram, telex,
facsimile transmission, request, consent, waiver, certificate, statement, affidavit, voucher, bond,
requisition or other paper or document which it shall in good faith believe to be genuine and to
have been passed or signed by the proper board, body or person or to have been prepared and
furnished pursuant to any of the provisions of this Indenture or the Loan Agreement, or upon the
written opinion of any attorney, engineer, accountant or other expert believed by the Trustee to be
qualified in relation to the subject matter, and the Trustee shall be under no duty to make any
investigation or inquiry as to any statements contained or matters referred to in any such
instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy
of such statements. Neither the Trustee, the Paying Agent, any Co-Paying Agent nor the Registrar
shall be bound to recognize any person as an Owner of a Bond or to take any action at his request
unless the ownership of such Bond is proved as contemplated in Section 11.01 hereof.

Section 10.08. Dealings in Bonds and with the Pollution Control Corporation and the Company.
The Trustee, the Paying Agent, any Co-Paying Agent or the Registrar, in its individual or any other
capacity, may in good faith buy, sell, own, hold and deal in any of the Bonds issued hereunder, and
may join in any action which any Owner of a Bond may be entitled to take with like effect as if it
did not act in any capacity hereunder. The Trustee, the Paying Agent, any Co-Paying Agent or the
Registrar, in its individual or any other capacity, either as principal or agent, may also engage
in or be interested in any financial or other transaction with the Pollution Control Corporation or
the Company, and may act as depositary, trustee, or agent for any committee or body of Owners of
Bonds secured hereby or other obligations of the Pollution Control Corporation as freely as if it
did not act in any capacity hereunder.

 

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Section 10.09. Allowance of Interest. The Trustee may, but shall not be obligated to, allow
and credit interest upon any moneys which it may at any time receive under any of the provisions of
this Indenture, at such rate, if any, as it customarily allows upon similar funds of similar size
and under similar conditions. All interest allowed on any such moneys shall be credited as
provided in Article IV with respect to interest on investments.

Section 10.10. Construction of Indenture. The Trustee may construe any of the provisions of
this Indenture insofar as the same may appear to be ambiguous or inconsistent with
any other provision hereof, and any construction of any such provisions hereof by the Trustee
in good faith shall be binding upon the Owners of the Bonds.

Section 10.11. Resignation of Trustee. The Trustee may resign and be discharged of the trusts
created by this Indenture by executing an instrument in writing resigning such trust and specifying
the date when such resignation shall take effect, and filing the same with the President of the
Pollution Control Corporation and with the Company, not less than forty-five (45) days before the
date specified in such instrument when such resignation shall take effect, and by giving notice of
such resignation by Mail to all Owners of Bonds. Such resignation shall take effect on the later
to occur of (i) the day specified in such instrument and notice, unless previously a successor
Trustee shall have been appointed as hereinafter provided, in which event such resignation shall
take effect immediately upon the appointment of such successor Trustee and (ii) the appointment of
a successor Trustee.

So long as no event which is, or after notice or lapse of time, or both, would become, an
Event of Default shall have occurred and be continuing, if the Pollution Control Corporation shall
have delivered to the Trustee (i) an instrument appointing a successor Trustee, effective as of a
date specified therein and (ii) an instrument of acceptance of such appointment, effective as of
such date, by such successor Trustee in accordance with Section 10.16, the Trustee shall be deemed
to have resigned as contemplated in this Section, the successor Trustee shall be deemed to have
been appointed pursuant to subsection (b) of Section 10.13 and such appointment shall be deemed to
have been accepted as contemplated in Section 10.16, all as of such date, and all other provisions
of this Article X shall be applicable to such resignation, appointment and acceptance except to the
extent inconsistent with this paragraph. The Pollution Control Corporation shall deliver any such
instrument of appointment at the direction of the Company.

Section 10.12. Removal of Trustee. The Trustee may be removed at any time by filing with the
Trustee so removed, and with the Pollution Control Corporation and the Company, an instrument or
instruments in writing, appointing a successor, or an instrument or instruments in writing,
consenting to the appointment by the Pollution Control Corporation (at the direction of the
Company) of a successor and accompanied by an instrument of appointment by the Pollution Control
Corporation (at the direction of the Company) of such successor, and in any event executed by
Owners of not less than a majority in principal amount of the Bonds then Outstanding, such filing
to be made by any Owner of a Bond or his duly authorized attorney.

Section 10.13. Appointment of Successor Trustee. (a) In case at any time the Trustee shall
be removed, or be dissolved, or if its property or affairs shall be taken under the control of any
state or federal court or administrative body because of insolvency or bankruptcy, or for any other
reason, then a vacancy shall forthwith and ipso facto exist and a successor may be appointed, and
in case at any time the Trustee shall resign or be deemed to have resigned, then a successor may be
appointed, by filing with the Pollution Control Corporation and the Company an instrument in
writing appointing such successor Trustee executed by Owners of not less than a majority in
principal amount of Bonds then Outstanding. Copies of such instrument shall be promptly delivered
by the Pollution Control Corporation to the predecessor Trustee, to the Trustee so appointed and
the Company.

 

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(b) Until a successor Trustee shall be appointed by the Owners of the Bonds as herein
authorized, the Pollution Control Corporation, shall appoint a successor Trustee as directed by
the Company. After any appointment by the Pollution Control Corporation, it shall cause notice
of such appointment to be given by Mail to all Owners of Bonds. Any new Trustee so appointed by
the Pollution Control Corporation shall immediately and without further act be superseded by a
Trustee appointed by the Owners of the Bonds in the manner above provided.

(c) No resignation or removal of the Trustee and no appointment of a successor Trustee
pursuant to this Article shall become effective until the acceptance of appointment by the
successor Trustee.

Section 10.14. Qualifications of Successor Trustee. Every successor Trustee (a) shall be a
bank or trust company duly organized under the laws of the United States or any state or territory
thereof authorized by law to perform all the duties imposed upon it by this Indenture and (b) shall
have (or the parent holding company of which shall have) a combined capital stock, surplus and
undivided profits of at least $100,000,000 if there can be located, with reasonable effort, such an
institution willing and able to accept the trust on reasonable and customary terms.

Section 10.15. Judicial Appointment of Successor Trustee. In case at any time the Trustee
shall resign and no appointment of a successor Trustee shall be made pursuant to the foregoing
provisions of this Article X prior to the date specified in the notice of resignation as the date
when such resignation is to take effect, the retiring Trustee may forthwith apply to a court of
competent jurisdiction for the appointment of a successor Trustee. If no appointment of a
successor Trustee shall be made pursuant to the foregoing provisions of this Article X within six
(6) months after a vacancy shall have occurred in the office of Trustee, any Owner of a Bond may
apply to any court of competent jurisdiction to appoint a successor Trustee. Such court may
thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor
Trustee.

Section 10.16. Acceptance of Trusts by Successor Trustee. Any successor Trustee appointed
hereunder shall execute, acknowledge and deliver to the Pollution Control Corporation an instrument
accepting such appointment hereunder, and thereupon such successor Trustee, without any further
act, deed or conveyance, shall become duly vested with all the estates, property, rights, powers,
trusts, duties and obligations of its predecessor in the trust hereunder, with like effect as if
originally named Trustee herein. Upon request of such Trustee, such predecessor Trustee and the
Pollution Control Corporation shall execute and deliver an instrument transferring to such
successor Trustee all the estates, property, rights, powers and trusts hereunder of such
predecessor Trustee and, subject to the provisions of Section 10.04 hereof, such predecessor
Trustee shall pay over to the successor Trustee all moneys and other assets at the time held by it
hereunder.

 

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Section 10.17. Successor by Merger or Consolidation. Any corporation or association into
which any Trustee hereunder may be merged or converted or with which it may be consolidated, or any
corporation or association resulting from any merger or consolidation to which any Trustee
hereunder shall be a party or any corporation or association succeeding to all or substantially all
of the corporate trust business of the Trustee, shall be the successor Trustee
under this Indenture, without the execution or filing of any paper or any further act on the
part of the parties hereto, anything in this Indenture to the contrary notwithstanding.

If, at the time any such successor to the Trustee shall succeed to the trusts created by this
Indenture, any of the Bonds shall have been authenticated but not delivered, such successor Trustee
may adopt the certificate of authentication of any predecessor Trustee and deliver such Bonds so
authenticated; and if at that time, any of the Bonds shall not have been authenticated, such
successor Trustee may authenticate such Bonds either in the name of any such predecessor hereunder
or in the name of such successor; and, in all such cases, such certificate of authentication shall
have the full force which it is anywhere in the Bonds or in this Indenture provided that the
certificate of authentication of the Trustee shall have; provided, however, that the right to adopt
the certificate of authentication of any predecessor Trustee or to authenticate Bonds in the name
of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or
consolidation.

Section 10.18. Standard of Care. Notwithstanding any other provisions of this Article X, the
Trustee shall, during the existence of an Event of Default of which the Trustee has actual notice,
exercise such of the rights and powers vested in it by this Indenture and use the same degree of
skill and care in their exercise as a prudent man would use and exercise under the circumstances in
the conduct of his own affairs.

Section 10.19. Notice to Owners of Bonds of Event of Default. If an Event of Default occurs
of which the Trustee by Section 10.05 hereof is required to take notice and deemed to have notice,
or any other Event of Default occurs of which the Trustee has been specifically notified in
accordance with Section 10.05 hereof, and any such Event of Default shall continue for at least two
(2) days after the Trustee acquires actual notice thereof, unless the Trustee shall have
theretofore given a notice of acceleration pursuant to Section 9.01 hereof, the Trustee shall give
Notice by Mail to all Owners of Outstanding Bonds.

Section 10.20. Intervention in Litigation of the Pollution Control Corporation. In any
judicial proceeding to which the Pollution Control Corporation is a party and which in the opinion
of the Trustee and its counsel has a substantial bearing on the interests of the Owners of Bonds,
the Trustee may intervene on behalf of the Owners of the Bonds and shall, upon receipt of indemnity
satisfactory to it, do so if requested in writing by Owners of at least a majority in principal
amount of the Bonds then Outstanding if permitted by the court having jurisdiction in the premises.

 

34

 

Section 10.21. Paying Agent; Co-Paying Agents. The Pollution Control Corporation shall, with
the approval of the Company, appoint the Paying Agent for the Bonds and may at any time or from
time to time, with the approval of the Company, appoint one or more Co-Paying Agents for the Bonds,
subject to the conditions set forth in Section 10.22 hereof. The Paying Agent and each Co-Paying
Agent shall designate to the Trustee its Principal Office and signify its acceptance of the duties
and obligations imposed upon it hereunder by a written instrument of acceptance delivered to the
Pollution Control Corporation and the Trustee in which such Paying Agent or Co-Paying Agent will
agree, particularly:

(a) to hold all sums held by it for the payment of the principal of and premium, if any, or
interest on Bonds in trust for the benefit of the Owners of the Bonds until such sums shall be
paid to such Owners or otherwise disposed of as herein provided;

(b) to keep such books and records as shall be consistent with prudent industry practice,
to make such books and records available for inspection by the Pollution Control Corporation,
the Trustee and the Company at all reasonable times and, in the case of a Co-Paying Agent, to
promptly furnish copies of such books and records to the Paying Agent; and

(c) in the case of a Co-Paying Agent, upon the request of the Paying Agent, to forthwith
deliver to the Paying Agent all sums so held in trust by such Co-Paying Agent.

The Pollution Control Corporation shall cooperate with the Trustee and the Company to cause
the necessary arrangements to be made and to be thereafter continued whereby funds derived from the
sources specified in Sections 4.03 and 4.04 hereof will be made available to the Paying Agent and
each Co-Paying Agent for the payment when due of the principal of, premium, if any, and interest on
the Bonds.

Section 10.22. Qualifications of Paying Agent and Co-Paying Agents; Resignation; Removal. The
Paying Agent and any Co-Paying Agent shall be a corporation or association duly organized under the
laws of the United States of America or any state or territory thereof, having a combined capital
stock, surplus and undivided profits of at least $15,000,000 and authorized by law to perform all
the duties imposed upon it by this Indenture. The Paying Agent and any Co-Paying Agent may at any
time resign and be discharged of the duties and obligations created by this Indenture by giving at
least sixty (60) days’ notice to the Pollution Control Corporation, the Company and the Trustee.
The Paying Agent and any Co-Paying Agent may be removed at any time, at the direction of the
Company, by an instrument, signed by the Pollution Control Corporation, filed with the Paying Agent
or such Co-Paying Agent, as the case may be, and with the Trustee.

In the event of the resignation or removal of the Paying Agent or any Co-Paying Agent, the
Paying Agent or such Co-Paying Agent, as the case may be, shall pay over, assign and deliver any
moneys held by it in such capacity to its successor or, if there be no successor, to the Trustee.

In the event that the Pollution Control Corporation shall fail to appoint a Paying Agent
hereunder, or in the event that the Paying Agent shall resign or be removed, or be dissolved, or if
the property or affairs of the Paying Agent shall be taken under the control of any state or
federal court or administrative body because of bankruptcy or insolvency, or for any other reason,
and the Pollution Control Corporation shall not have appointed its successor as Paying Agent, the
Trustee shall ipso facto be deemed to be the Paying Agent for all purposes of this Indenture until
the appointment by the Pollution Control Corporation of the Paying Agent or successor Paying Agent,
as the case may be.

 

35

 

Upon the appointment of a successor Paying Agent, the Trustee shall give notice thereof by
Mail to all Owners of Bonds.

Section 10.23. Registrar. The Pollution Control Corporation shall, with the approval of the
Company, appoint the Registrar for the Bonds, subject to the conditions set forth in Section 10.24
hereof. The Registrar shall designate to the Trustee its Principal Office and signify its
acceptance of the duties imposed upon it hereunder by a written instrument of acceptance delivered
to the Pollution Control Corporation and the Trustee in which such Registrar will agree,
particularly, to keep such books and records as shall be consistent with prudent industry practice
and to make such books and records available for inspection by the Pollution Control Corporation,
the Trustee and the Company at all reasonable times.

The Pollution Control Corporation shall cooperate with the Trustee and the Company to cause
the necessary arrangements to be made and to be thereafter continued whereby Bonds, executed by the
Pollution Control Corporation and authenticated by the Trustee, shall be made available for
exchange, registration and registration of transfer at the Principal Office of the Registrar. The
Pollution Control Corporation shall cooperate with the Trustee, the Registrar and the Company to
cause the necessary arrangements to be made and thereafter continued whereby the Paying Agent and
any Co-Paying Agent shall be furnished such records and other information, at such times, as shall
be required to enable the Paying Agent and such Co-Paying Agent to perform the duties and
obligations imposed upon them hereunder.

Section 10.24. Qualifications of Registrar; Resignation; Removal. The Registrar shall be a
corporation or association duly organized under the laws of the United States of America or any
state or territory thereof, having a combined capital stock, surplus and undivided profits of at
least $15,000,000 and authorized by law to perform all the duties imposed upon it by this
Indenture. The Registrar may at any time resign and be discharged of the duties and obligations
created by this Indenture by giving at least sixty (60) days’ notice to the Pollution Control
Corporation, the Trustee and the Company. The Registrar may be removed at any time, at the
direction of the Company, by an instrument signed by the Pollution Control Corporation filed with
the Registrar and the Trustee.

In the event of the resignation or removal of the Registrar, the Registrar shall deliver any
Bonds held by it in such capacity to its successor or, if there be no successor, to the Trustee.

In the event that the Pollution Control Corporation shall fail to appoint a Registrar
hereunder, or in the event that the Registrar shall resign or be removed, or be dissolved, or if
the property or affairs of the Registrar shall be taken under the control of any state or federal
court or administrative body because of bankruptcy or insolvency, or for any other reason, and the
Pollution Control Corporation shall not have appointed its successor as Registrar, the Trustee
shall ipso facto be deemed to be the Registrar for all purposes of this Indenture until the
appointment by the Pollution Control Corporation of the Registrar or successor Registrar, as the
case may be.

 

36

 

Upon the appointment of a successor Registrar, the Trustee shall give notice thereof by Mail
to all Owners of Bonds.

Section 10.25. Several Capacities. Anything herein to the contrary notwithstanding, the same
entity may serve hereunder as the Trustee, the Paying Agent or a Co-Paying Agent and the Registrar,
and in any combination of such capacities to the extent permitted by law.

ARTICLE XI

EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND

PROOF OF OWNERSHIP OF BONDS

Section 11.01. Execution of Instruments; Proof of Ownership. Any request, direction, consent
or other instrument in writing, whether or not required or permitted by this Indenture to be signed
or executed by Owners of the Bonds, may be in any number of concurrent instruments of similar tenor
and may be signed or executed by Owners of the Bonds or by an agent appointed by an instrument in
writing. Proof of the execution of any such instrument and of the ownership of Bonds shall be
sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee with
regard to any action taken by it under such instrument if made in the following manner:

(a) The fact and date of the execution by any person of any such instrument may be proved
by the certificate of any officer in any jurisdiction who, by the laws thereof, has power to
take acknowledgments within such jurisdiction, to the effect that the person signing such
instrument acknowledged before him the execution thereof, or by an affidavit of a witness to
such execution.

(b) The ownership or former ownership of Bonds shall be proved by the registration books
kept under the provisions of Section 2.08 hereof.

Nothing contained in this Article XI shall be construed as limiting the Trustee to such proof,
it being intended that the Trustee may accept any other evidence of matters herein stated which it
may deem sufficient. Any request or consent of any Owner of a Bond shall bind every future Owner
of the same Bond or any Bond or Bonds issued in lieu thereof in respect of anything done by the
Trustee or the Pollution Control Corporation in pursuance of such request or consent.

ARTICLE XII

MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT

Section 12.01. Limitations. Neither this Indenture nor the Loan Agreement shall be modified or amended in any respect
subsequent to the original issuance of the Bonds except as provided in and in accordance with and
subject to the provisions of this Article XII and Section 7.04 hereof.

 

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The Trustee may, but shall not be obligated to, enter into any Supplemental Indenture which
affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

Section 12.02. Supplemental Indentures without Owner Consent. The Pollution Control
Corporation and the Trustee may, from time to time and at any time, without the consent of or
notice to the Owners of the Bonds, enter into Supplemental Indentures as follows:

(a) to cure any formal defect, omission, inconsistency or ambiguity in this Indenture,
provided, however, that such cure shall not materially and adversely affect the interests of the
Owners of the Bonds;

(b) to grant to or confer or impose upon the Trustee for the benefit of the Owners of the
Bonds any additional rights, remedies, powers, authority, security, liabilities or duties which
may lawfully be granted, conferred or imposed;

(c) to add to the covenants and agreements of, and limitations and restrictions upon, the
Pollution Control Corporation in this Indenture other covenants, agreements, limitations and
restrictions to be observed by the Pollution Control Corporation;

(d) to confirm, as further assurance, any pledge under, and the subjection to any claim,
lien or pledge created or to be created by, this Indenture, of the Receipts and Revenues of the
Pollution Control Corporation from the Loan Agreement or of any other moneys, securities or
funds;

(e) to authorize a different denomination or denominations of the Bonds and to make
correlative amendments and modifications to this Indenture regarding exchange ability of Bonds
of different denominations, redemptions of portions of Bonds of particular denominations and
similar amendments and modifications of a technical nature;

(f) to modify, alter, supplement or amend this Indenture in such manner as shall permit the
qualification hereof under the Trust Indenture Act of 1939, as from time to time amended;

(g) to modify, alter, supplement or amend this Indenture in such manner as shall be
necessary, desirable or appropriate in order to provide for or eliminate the registration and
registration of transfer of the Bonds through a book entry or similar method, whether or not the
Bonds are evidenced by certificates;

(h) to modify, alter, amend or supplement this Indenture in any other respect which is not
materially adverse to the Owners and which does not involve a change described in clause (i),
(ii), (iii) or (iv) of Section 12.03(a) hereof; and

(i) to provide any additional procedures, covenants or agreements necessary or desirable to
maintain the tax-exempt status of interest on the Bonds.

 

38

 

Before the Pollution Control Corporation and the Trustee shall enter into any Supplemental
Indenture pursuant to this Section 12.02, there shall have been delivered to the Trustee an opinion
of Bond Counsel stating that such Supplemental Indenture is authorized or permitted by this
Indenture and the Act, complies with their respective terms, will, upon the execution and delivery
thereof, be valid and binding upon the Pollution Control Corporation in accordance with its terms
and will not, in and of itself, adversely affect the exclusion from gross income for federal tax
purposes of the interest on the Bonds.

Section 12.03. Supplemental Indentures with Consent of Owners. (a) Except for any
Supplemental Indenture entered into pursuant to Section 12.02 hereof, subject to the terms and
provisions contained in this Section 12.03 and Section 12.05 hereof and not otherwise, Owners of
not less than a majority in aggregate principal amount of the Bonds then Outstanding which would be
adversely affected thereby shall have the right from time to time to consent to and approve the
execution and delivery by the Pollution Control Corporation and the Trustee of any Supplemental
Indenture deemed necessary or desirable by the Pollution Control Corporation for the purposes of
modifying, altering, amending, supplementing or rescinding, in any particular, any of the terms or
provisions contained in this Indenture; provided, however, that, unless approved in writing by the
Owners of all the Bonds then Outstanding which would be adversely affected thereby, nothing herein
contained shall permit, or be construed as permitting, (i) a change in the times, amounts or
currency of payment of the principal of or premium, if any, or interest on any Outstanding Bond, a
reduction in the principal amount or redemption price of any Outstanding Bond or a change in the
rate of interest thereon, or any impairment of the right of any Owner to institute suit for the
payment of any Bond owned by it, or (ii) the creation of a claim or lien upon, or a pledge of, the
Receipts and Revenues of the Pollution Control Corporation from the Loan Agreement ranking prior to
or on a parity with the claim, lien or pledge created by this Indenture (except as referred to in
Section 10.04 hereof), or (iii) a preference or priority of any Bond or Bonds over any other Bond
or Bonds, or (iv) a reduction in the aggregate principal amount of Bonds the consent of the Owners
of which is required for any such Supplemental Indenture or which is required, under Section 12.07
hereof, for any modification, alteration, amendment or supplement to the Loan Agreement.

(b) If at any time the Pollution Control Corporation shall request the Trustee to enter
into any Supplemental Indenture for any of the purposes of this Section 12.03, the Trustee shall
cause notice of the proposed Supplemental Indenture to be given by Mail to all Owners of
Outstanding Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental
Indenture and shall state that a copy thereof is on file at the Principal Office of the Trustee
for inspection by all Owners of Bonds.

(c) Within two (2) years after the date of the first mailing of such notice, the Pollution
Control Corporation and the Trustee may enter into such Supplemental Indenture in substantially
the form described in such notice only if there shall have first been delivered to the Trustee
(i) the required consents, in writing, of Owners of Bonds and (ii) an opinion of Bond Counsel
stating that such Supplemental Indenture is authorized or permitted by this Indenture and the
Act, complies with their respective terms and, upon the execution and delivery thereof, will be
valid and binding upon the Pollution Control Corporation in accordance with its terms and will
not, in and of itself, adversely affect the exclusion from gross income for federal tax purposes
of the interest on the Bonds.

 

39

 

(d) If Owners of not less than the percentage of Bonds required by this Section 12.03 shall
have consented to and approved the execution and delivery thereof as herein provided, no Owner
shall have any right to object to the execution and delivery of such Supplemental Indenture, or
to object to any of the terms and provisions contained therein or the operation thereof, or in
any manner to question the propriety of the execution and delivery thereof, or to enjoin or
restrain the Pollution Control Corporation or the Trustee from executing and delivering the same
or from taking any action pursuant to the provisions thereof.

Section 12.04. Effect of Supplemental Indenture. Upon the execution and delivery of any
Supplemental Indenture pursuant to the provisions of this Article XII, this Indenture shall be, and
be deemed to be, modified, altered, amended or supplemented in accordance therewith, and the
respective rights, duties and obligations under this Indenture of the Pollution Control
Corporation, the Trustee and Owners of all Bonds then Outstanding shall thereafter be determined,
exercised and enforced under this Indenture subject in all respects to such modifications,
alterations, amendments and supplements.

Section 12.05. Consent of the Company. Anything herein to the contrary notwithstanding, any
Supplemental Indenture under this Article XII which affects any rights, powers, agreements or
obligations of the Company under the Loan Agreement or requires a revision of the Loan Agreement
shall not become effective unless and until the Company shall have consented to such Supplemental
Indenture.

Section 12.06. Amendment of Loan Agreement without Consent of Owners. Without the consent of
or notice to the Owners of the Bonds, the Pollution Control Corporation may enter into any
Supplemental Loan Agreement, and the Trustee may consent thereto, as may be required (a) by the
provisions of the Loan Agreement and this Indenture, (b) for the purpose of curing any formal
defect, omission, inconsistency or ambiguity therein, (c) to provide any additional procedures,
covenants or agreements necessary or desirable to maintain the tax-exempt status of interest on the
Bonds, or (d) in connection with any other change therein which is not materially adverse to the
Owners of the Bonds. A revision of Exhibit A to the Loan Agreement pursuant to Section 3.02
thereof, shall not be deemed a Supplemental Loan Agreement for purposes of this Indenture.

Before the Pollution Control Corporation shall enter into, and the Trustee shall consent to,
any Supplemental Loan Agreement pursuant to this Section 12.06, there shall have been delivered to
the Trustee an opinion of Bond Counsel stating that such Supplemental Loan Agreement is authorized
or permitted by this Indenture and the Act, complies with their respective terms, will, upon the
execution and delivery thereof, be valid and binding upon the Pollution Control Corporation and the
Company in accordance with its terms and will not, in and of itself, adversely affect the exclusion
from gross income for federal tax purposes of interest on the Bonds.

 

40

 

Section 12.07. Amendment of Loan Agreement with Consent of Owners. Except in the case of
Supplemental Loan Agreements referred to in Section 12.06 hereof, the Pollution Control Corporation
shall not enter into, and the Trustee shall not consent to, any Supplemental Loan Agreement without
the written approval or consent of the Owners of not less than a majority in aggregate principal
amount of the Bonds then Outstanding which would be adversely
affected thereby, given and procured as provided in Section 12.03 hereof; provided, however,
that, unless approved in writing by the Owners of all Bonds then Outstanding which would be
adversely affected thereby, nothing herein contained shall permit, or be construed as permitting, a
change in the obligations of the Company under Section 5.01 of the Loan Agreement. If at any time
the Pollution Control Corporation or the Company shall request the consent of the Trustee to any
such proposed Supplemental Loan Agreement, the Trustee shall cause notice of such proposed
Supplemental Loan Agreement to be given in the same manner as provided by Section 12.03 hereof with
respect to Supplemental Indentures. Such notice shall briefly set forth the nature of such
proposed Supplemental Loan Agreement and shall state that copies of the instrument embodying the
same are on file at the Principal Office of the Trustee for inspection by all Owners of the Bonds.
The Pollution Control Corporation may enter into, and the Trustee may consent to, any such proposed
Supplemental Loan Agreement subject to the same conditions, and with the same effect, as provided
by Section 12.03 hereof with respect to Supplemental Indentures.

ARTICLE XIII

MISCELLANEOUS

Section 13.01. Successors of the Pollution Control Corporation. In the event of the
dissolution of the Pollution Control Corporation, all the covenants, stipulations, promises and
agreements in this Indenture contained, by or on behalf of, or for the benefit of, the Pollution
Control Corporation, shall bind or inure to the benefit of the successors of the Pollution Control
Corporation from time to time and any entity, officer, board, commission, agency or instrumentality
to whom or to which any power or duty of the Pollution Control Corporation shall be transferred.

Section 13.02. Parties in Interest. Except as herein otherwise specifically provided, nothing
in this Indenture expressed or implied is intended or shall be construed to confer upon any person,
firm or corporation other than the Pollution Control Corporation, the Company and the Trustee and
their successors and assigns and the Owners of the Bonds any right, remedy or claim under or by
reason of this Indenture, this Indenture being intended to be for the sole and exclusive benefit of
the Pollution Control Corporation, the Company and the Trustee and their successors and assigns and
the Owners of the Bonds.

Section 13.03. Severability. In case any one or more of the provisions of this Indenture or
of the Loan Agreement or of the Bonds shall, for any reason, be held to be illegal or invalid, such
illegality or invalidity shall not affect any other provisions of this Indenture or of the Loan
Agreement or of such Bonds, and this Indenture and the Loan Agreement and such Bonds shall be
construed and enforced as if such illegal or invalid provisions had not been contained herein or
therein.

Section 13.04. No Personal Liability of Pollution Control Corporation Officials. No covenant
or agreement contained in the Bonds or in this Indenture shall be deemed to be the covenant or
agreement of any director, official, officer, agent, or employee of the Pollution
Control Corporation in his individual capacity, and neither the members of the Board of
Directors of the Pollution Control Corporation nor any official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or accountability by reason of the
issuance thereof.

 

41

 

Section 13.05. Bonds Owned by the Pollution Control Corporation or the Company. In
determining whether Owners of the requisite aggregate principal amount of the Bonds have concurred
in any direction, consent or waiver under this Indenture, Bonds which are owned by the Pollution
Control Corporation or the Company or by any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company (unless the Pollution
Control Corporation, the Company or such person owns all Bonds which are then Outstanding,
determined without regard to this Section 13.05) shall be disregarded and deemed not to be
Outstanding for the purpose of any such determination, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, consent or waiver, only
Bonds which the Trustee knows are so owned shall be so disregarded. Upon the request of the
Trustee, the Company and the Pollution Control Corporation shall furnish to the Trustee a
certificate identifying all Bonds, if any, actually known to either of them to be owned or held by
or for the account of any of the above described persons, and the Trustee shall be entitled to rely
on such certificate as conclusive evidence of the facts set forth therein and that all other Bonds
are Outstanding for the purposes of such determination. Bonds so owned which have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee’s right so to act with respect to such Bonds and that the pledgee is not the
Pollution Control Corporation or the Company or any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. In case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.

Section 13.06. Counterparts. This Indenture may be executed in any number of counterparts,
each of which, when so executed and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Indenture.

Section 13.07. Governing Law. The laws of the State of Arizona shall govern the construction
and enforcement of this Indenture and of all Bonds, except that the laws of the State of New York
shall govern the construction and enforcement of the rights and duties of the Trustee hereunder and
the construction of Section 13.09 hereof and the computation of any period of grace provided
herein.

Section 13.08. Notices. Except as otherwise provided in this Indenture, all notices,
certificates, requests requisitions or other communications by the Pollution Control Corporation,
the Company, the Trustee, the Paying Agent, any Co-Paying Agent or the Registrar pursuant to this
Indenture shall be in writing and shall be sufficiently given and shall be deemed given when mailed
by registered mail, postage prepaid, addressed as follows: If to the Pollution Control Corporation,
c/o Mangum, Wall, Stoops & Warden P.L.L.C., 100 North Elden Street, P.O. Box 10, Flagstaff, Arizona
86002-0010, Attention: President; if to the Company, at One South Church Avenue, Suite 100, Tucson,
Arizona 85701, Attention: Treasurer; if to the Trustee, at 100 Wall Street, Suite 1600, New York,
New York 10005, Attention: Vice President; and if to the Paying Agent, any Co-Paying Agent or the
Registrar, at the address designated in the
acceptance of appointment or engagement. Any of the foregoing may, by notice given hereunder
to each of the others, designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent hereunder.

 

42

 

Section 13.09. Holidays. If the date for making any payment or the last date for performance
of any act or the exercising of any right, as provided in this Indenture, shall be a Saturday,
Sunday or a public holiday in the city in which is located the Principal Office of the Trustee,
such payment may be made or act performed or right exercised on the next succeeding business day,
with the same force and effect as if done on the nominal date provided in this Indenture, and no
interest shall accrue for the period after such nominal date. If the last day of any period of
grace, as provided in this Indenture, shall be a Saturday, Sunday or a public holiday in the city
in which is located the Principal Office of the Trustee, the last day of such period of grace shall
be deemed to be the next succeeding business day.

Section 13.10. Statutory Notice Regarding Cancellation of Contracts. As required by the
provisions of Section 38-511, Arizona Revised Statutes, as amended, notice is hereby given that
political subdivisions of the State of Arizona or any of their departments or agencies may, within
three (3) years of its execution, cancel any contract, without penalty or further obligation, made
by the political subdivisions or any of their departments or agencies on or after September 30,
1988, if any person significantly involved in initiating, negotiating, securing, drafting or
creating the contract on behalf of the political subdivisions or any of their departments or
agencies is, at any time while the contract or any extension of the contact is in effect, an
employee or agent of any other party to the contract in any capacity or a consultant to any other
party of the contract with respect to the subject matter of the contract.

The Trustee covenants and agrees not to employ as an employee, agent or, with respect to the
subject matter of this Indenture, a consultant, any person actually known by the Trustee to be
significantly involved in initiating, negotiating, securing, drafting or creating such Indenture on
behalf of the Pollution Control Corporation within three (3) years from the execution hereof,
unless a waiver is provided by the Pollution Control Corporation.

[Remainder of Page Intentionally Left Blank]

 

43

 

IN WITNESS WHEREOF, Coconino County, Arizona Pollution Control Corporation has caused this
Indenture to be executed by its Secretary and U.S. Bank Trust National Association has caused this
Indenture to be executed on its behalf by its Vice President, all as of the day and year first
above written.

	 	 	 	 	 
	 	COCONINO COUNTY, ARIZONA 

POLLUTION CONTROL CORPORATION

 	 
	 	By:  	/s/ Bruce Crozier
 	 
	 	 	Name:  	Bruce Crozier 	 
	 	 	Title:  	Secretary 	 
	 
	 	U.S. BANK TRUST NATIONAL ASSOCIATION	 
	 
	 	By:  	/s/ Patrick J. Crowley
 	 
	 	 	Name:  	Patrick J. Crowley 	 
	 	 	Title:  	Vice President 	 

Signature Page to Indenture of Trust

 

 

 

EXHIBIT A

(FORM OF BOND)

No.

Coconino County, Arizona

Pollution Control Corporation

Pollution Control Revenue Bond,

2009 Series A

(Tucson Electric Power Company Navajo Project)

	 	 	 
	Interest Rate (per annum):
	 	 
	Maturity Date:

	 	Dated:
	Cusip:
	 	 
	Registered Owner:
	 	 
	Principal Amount:

	 	Dollars

Coconino County, Arizona Pollution Control Corporation, a political subdivision of the State
of Arizona (the “Pollution Control Corporation”), for value received, hereby promises to pay (but
only out of the Receipts and Revenues of the Pollution Control Corporation from the Loan Agreement,
as hereinafter defined, and other moneys pledged therefor) to the Registered Owner identified above
or registered assigns, on the Maturity Date set forth above, upon the presentation and surrender
hereof, the Principal Amount set forth above and to pay (but only out of the Receipts and Revenues
of the Pollution Control Corporation from the Loan Agreement and other moneys pledged therefor),
interest on said Principal Amount until payment of said Principal Amount has been made or duly
provided for, from the date hereof, at the Interest Rate set forth above, semi-annually on the
first days of April and October in each year, commencing on April 1, 2010. Interest will be
calculated on the basis of a 360-day year of twelve 30-day months.

The principal of and premium, if any, on this Bond are payable at the principal office of U.S.
Bank Trust National Association, as Paying Agent, or at the principal office of any Co-Paying Agent
appointed in accordance with the Indenture (as hereinafter defined), at the option of the
Registered Owner hereof. Interest on this Bond is payable by check drawn upon the Paying Agent and
mailed to the Registered Owner of this Bond as of the close of business on the Record Date (as
defined in the Indenture), at the registered address of such Registered Owner; notwithstanding the
foregoing, upon request to the Paying Agent by a Registered Owner of not less than $1,000,000 in
aggregate principal amount of Bonds, interest on such Bonds and, after presentation and surrender
of such Bonds, the principal thereof shall be paid to such Registered Owner by wire transfer to the
account maintained within the continental United States specified by such Registered Owner or, if
such Registered Owner maintains an account with the entity acting as Paying Agent, by deposit into
such account. Payment of the principal of and premium, if any, and interest on this Bond shall be
in any coin or currency of the United States of America as, at the respective times of payment,
shall be legal tender for the payment of public and private debts.

 

A-1

 

This Bond is one of the duly authorized Coconino County, Arizona Pollution Control Corporation
Pollution Control Revenue Bonds, 2009 Series A (Tucson Electric Power Company Navajo Project) (the
“Bonds”) of the Pollution Control Corporation, aggregating Fourteen Million Seven Hundred Thousand
Dollars ($14,700,000) in principal amount, issued under and pursuant to the Constitution and laws
of the State of Arizona, particularly Title 35, Chapter 6, Arizona Revised Statutes, as amended
(the “Act”), and the Indenture of Trust, dated as of October 1, 2009 (the “Indenture”), between the
Pollution Control Corporation and U.S. Bank Trust National Association, as trustee (the “Trustee”),
for the purpose of financing and refinancing a portion of the costs of the acquisition,
construction, improvement and equipping of certain pollution control facilities (the “Facilities”)
at the Navajo Generating Station (the “Plant”). Pursuant to the Loan Agreement, dated as of
October 1, 2009 (the “Loan Agreement”), between the Pollution Control Corporation and Tucson
Electric Power Company, a corporation organized and existing under the laws of the State of Arizona
(the “Company”), the proceeds of the Bonds, other than accrued interest, if any, paid by the
initial purchasers thereof, will be loaned from time to time to the Company.

Any obligation or liability of the Pollution Control Corporation created by or arising out of
the Indenture or otherwise incurred in connection with the issuance of the Bonds (including without
limitation any liability created by or arising out of the representations, warranties or covenants
set forth herein or otherwise) shall not impose a debt or pecuniary liability upon the Pollution
Control Corporation or the State of Arizona or any political subdivision thereof, or a charge upon
the general credit or taxing powers of any of the foregoing, but shall be payable solely out of the
Receipts and Revenues of the Pollution Control Corporation from the Loan Agreement or other amounts
payable by the Company to the Pollution Control Corporation hereunder or otherwise (including
without limitation any amounts derived from indemnifications given by the Company).

Neither the issuance of the Bonds nor the delivery of the Indenture shall, directly or
indirectly or contingently, obligate the Pollution Control Corporation or the State or any
political subdivision thereof to levy any form of taxation therefor or to make any appropriation
for their payment. Nothing in the Bonds or in the Indenture or the proceedings of the Pollution
Control Corporation or the Coconino County Board of Supervisors authorizing the Bonds or in the Act
or in any other related document shall be construed to authorize the Pollution Control Corporation
to create a debt of the Pollution Control Corporation or the State or any political subdivision
thereof within the meaning of any constitutional or statutory provision of the State. The
principal of, and premium, if any, and interest on, the Bonds shall be payable solely from the
funds pledged for their payment in accordance with the Indenture and available therefor under the
Indenture. Neither the Pollution Control Corporation, the County of Coconino, the State nor any
political subdivision thereof shall in any event be liable for the payment of the principal of,
premium, if any, or interest on, the Bonds or for the performance of any pledge, obligation or
agreement of any kind whatsoever which may be undertaken by the Pollution Control Corporation. No
breach of any such pledge, obligation or agreement may impose any pecuniary liability upon the
Pollution Control Corporation or the State or any political subdivision thereof, or any charge upon
the general credit or against the taxing power of Coconino County, Arizona or the State or any
political subdivision thereof. The Pollution Control Corporation has no taxing power.

 

A-2

 

The Bonds are equally and ratably secured, to the extent provided in the Indenture, by the
pledge thereunder of the “Receipts and Revenues of the Pollution Control Corporation from the Loan
Agreement”, which term is used herein as defined in the Indenture and which as therein defined
means all moneys paid or payable to the Trustee for the account of the Pollution Control
Corporation by the Company in respect of the loan payments, including all receipts of the Trustee
which, under the provisions of the Indenture, reduce the amounts of such payments. The Pollution
Control Corporation has also pledged and assigned to the Trustee as security for the Bonds all
other rights and interests of the Pollution Control Corporation under the Loan Agreement (other
than its rights to indemnification and its administrative expenses and certain other rights).

The transfer of this Bond shall be registered upon the registration books kept at the
principal office of U.S. Bank Trust National Association, as Registrar, at the written request of
the Registered Owner hereof or his attorney duly authorized in writing, upon surrender of this Bond
at said office, together with a written instrument of transfer satisfactory to the Registrar duly
executed by the Registered Owner or his duly authorized attorney.

In the manner and with the effect provided in the Indenture, each of the Bonds may be redeemed
prior to maturity, as follows:

(a) The Bonds shall be subject to redemption by the Pollution Control Corporation, at the
direction of the Company, on any date on or after October 1, 2019 in whole at any time or in
part from time to time, at 100% of the principal amount thereof plus accrued interest, if any,
to the redemption date.

(b) The Bonds shall be subject to redemption by the Pollution Control Corporation, at the
direction of the Company, in whole at any time at the principal amount thereof plus accrued
interest to the redemption date, if:

(i) the Company shall have determined that the continued operation of the Facilities or
the Plant is impracticable, uneconomical or undesirable for any reason;

(ii) all or substantially all of the Facilities or the Plant shall have been condemned
or taken by eminent domain; or

(iii) the operation of the Facilities or the Plant shall have been enjoined or shall
have otherwise been prohibited by, or shall conflict with, any order, decree, rule or
regulation of any court or of any federal, state or local regulatory body, administrative
agency or other governmental body.

 

A-3

 

(c) The Bonds shall be subject to mandatory redemption by the Pollution Control
Corporation, at the principal amount thereof plus accrued interest to the redemption date, on
the 180th day (or such earlier date as may be designated by the Company) after a final
determination by a court of competent jurisdiction or an administrative agency, to the effect
that, as a result of a failure by the Company to perform or observe any covenant, agreement or
representation contained in the Loan Agreement, the interest payable on the Bonds is included
for federal income tax purposes in the gross income of the Owners thereof, other
than any Owner of a Bond who is a “substantial user” of the Facilities or a “related
person” within the meaning of Section 103(b)(13) of the Internal Revenue Code of 1954, as
amended (the “1954 Code”). No determination by any court or administrative agency shall be
considered final for the purposes of this paragraph (c) unless the Company shall have been given
timely notice of the proceeding which resulted in such determination and an opportunity to
participate in such proceeding, either directly or through an Owner of a Bond, and until the
conclusion of any appellate review sought by any party to such proceeding or the expiration of
the time for seeking such review. The Bonds shall be redeemed either in whole or in part in such
principal amount that, in the opinion of Bond Counsel, the interest payable on the Bonds
remaining outstanding after such redemption would not be included in the gross income of any
Owner thereof, other than an Owner of a Bond who is a “substantial user” of the Facilities or a
“related person” within the meaning of Section 103(b)(13) of the 1954 Code.

If less than all of the Bonds at the time outstanding are to be called for redemption, the
particular Bonds or portions of Bonds to be redeemed shall be selected by the Trustee, in such
manner as the Trustee in its discretion may deem proper, in the principal amounts designated to the
Trustee by the Company or otherwise as required by the Indenture.

In the event any of the Bonds are called for redemption, the Trustee shall give notice, in the
name of the Pollution Control Corporation, of the redemption of such Bonds. Such notice shall be
given by mailing a copy of the redemption notice by first class mail at least thirty (30) days
prior to the date fixed for redemption to the Registered Owners of the Bonds to be redeemed at the
addresses shown on the registration books; provided, however, that failure duly to give such notice
by mailing, or any defect therein, shall not affect the validity of any proceedings for the
redemption of the Bonds as to which there shall be no such failure or defect.

With respect to any notice of redemption of Bonds in accordance with the redemption provisions
lettered (a) or (b) above, unless, upon the giving of such notice, such Bonds shall be deemed to
have been paid within the meaning of the Indenture, such notice shall state that such redemption
shall be conditional upon the receipt by the Trustee on or prior to the opening of business on the
date fixed for such redemption of moneys sufficient to pay the principal of and premium, if any,
and interest on such Bonds to be redeemed, and that if such moneys shall not have been so received
said notice shall be of no force and effect and the Pollution Control Corporation shall not be
required to redeem such Bonds. In the event that such notice of redemption contains such a
condition and such moneys are not so received, the redemption shall not be made and the Trustee
shall within a reasonable time thereafter give notice, in the manner in which the notice of
redemption was given, that such moneys were not so received.

If a notice of redemption shall be unconditional, or if the conditions of a conditional notice
of redemption shall have been satisfied, then upon presentation and surrender of Bonds so called
for redemption at the place or places of payment, such Bonds shall be redeemed.

Any Bonds and portions of Bonds which have been duly selected for redemption shall cease to
bear interest on the specified redemption date provided that moneys sufficient to pay the principal
of, premium, if any, and interest on such Bonds shall be on deposit with the Trustee on the date
fixed for redemption so that such Bonds will be deemed to be paid in accordance with
the Indenture and such Bonds shall thereafter cease to be entitled to any lien, benefit or
security under the Indenture.

 

A-4

 

The Registered Owner of this Bond shall have no right to enforce the provisions of the
Indenture, or to institute action to enforce the covenants therein, or to take any action with
respect to any default under the Indenture, or to institute, appear in or defend any suit or other
proceeding with respect thereto, except as provided in the Indenture.

With certain exceptions as provided therein, the Indenture and the Loan Agreement may be
modified or amended only with the consent of the Registered Owners of a majority in aggregate
principal amount of all Bonds outstanding under the Indenture which would be adversely affected
thereby.

Reference is hereby made to the Indenture and the Loan Agreement, copies of which are on file
with the Trustee, for the provisions, among others, with respect to the nature and extent of the
rights, duties and obligations of the Pollution Control Corporation, the Company, the Trustee and
the Registered Owners of the Bonds. The Registered Owner of this Bond, by the acceptance hereof,
is deemed to have agreed and consented to the terms and provisions of the Indenture and the Loan
Agreement.

Among other things, as provided in the Indenture and subject to certain limitations therein
set forth, this Bond or any portion of the principal amount hereof will be deemed to have been paid
within the meaning and with the effect expressed in the Indenture, and the entire indebtedness of
the Pollution Control Corporation in respect thereof shall be satisfied and discharged, if there
has been irrevocably deposited with the Trustee, in trust, money in an amount which will be
sufficient and/or Government Obligations (as defined in the Indenture), the principal of and
interest on which, when due, without regard to any reinvestment thereof, will provide moneys which,
together with moneys deposited with or held by the Trustee, will be sufficient, to pay when due the
principal of and premium, if any, and interest on this Bond or such portion of the principal amount
hereof when due.

Among other things, the Loan Agreement contains terms, provisions and conditions relating to
the consolidation or merger of the Company with or into, and the sale, transfer or other
disposition of assets to, another Person (as defined in the Loan Agreement), to the assumption by
such other Person, in certain circumstances, of all of the obligations of the Company under the
Loan Agreement and to the release and discharge of the Company, in certain circumstances, from such
obligations.

The Pollution Control Corporation, the Trustee, the Registrar, the Paying Agent and any
Co-Paying Agent may deem and treat the person in whose name this Bond is registered as the absolute
Owner hereof for all purposes, whether or not this Bond is overdue, and neither the Pollution
Control Corporation, the Trustee, the Paying Agent nor any Co-Paying Agent shall be affected by any
notice to the contrary.

 

A-5

 

It is hereby certified, recited and declared that all acts, conditions and things required by
the Constitution and laws of the State of Arizona to exist, to have happened and to have been
performed, precedent to and in the execution and delivery of the Indenture and the issuance of
this Bond, do exist, have happened and have been performed in regular and due form as required
by law.

No covenant or agreement contained in this Bond or the Indenture shall be deemed to be a
covenant or agreement of any official, officer, agent or employee of the Pollution Control
Corporation in his individual capacity, and neither the members of the Board of Directors of the
Pollution Control Corporation, nor any official executing this Bond, shall be liable personally on
this Bond or be subject to any personal liability or accountability by reason of the issuance or
sale of this Bond.

This Bond shall not be entitled to any right or benefit under the Indenture, or be valid or
become obligatory for any purpose, until this Bond shall have been authenticated by the execution
by the Trustee, or its successor as Trustee, of the certificate of authentication inscribed hereon.

 

A-6

 

IN WITNESS WHEREOF, Coconino County, Arizona Pollution Control Corporation has caused this
Bond to be executed with the manual or facsimile signature of its President or Vice President and
attested with the manual or facsimile signature of its Secretary or Assistant Secretary.

	 	 	 	 	 	 	 
	 	 	COCONINO COUNTY, ARIZONA	 	 
	 	 	POLLUTION CONTROL CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By: 	 	 	 
	 

	 	 	Name: 
	 	 	 
	 

	 	 	Title: 	 	 	 
	 
	 	 	 	 	 	 
	ATTEST:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	
 

Secretary

	 	 
	 	 
	 	 

 

A-7

 

EXHIBIT B

(FORM FOR ORDINARY REGISTRATION OF TRANSFER)

COMPLETE AND SIGN THIS FORM FOR ORDINARY

REGISTRATION OF TRANSFER

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

Please Insert Social Security Or Other Identifying Number of Assignee

Please print or typewrite name and address including postal zip code of assignee

this bond and all rights thereunder, hereby irrevocably constituting and appointing
attorney to register such transfer on the registration books in the principal office of the
Registrar, with full power of substitution in the premises.

	 	 	 	 
	Dated:
	 	 	 
	 	
 

	 	 
	 
	 	 	 
	 

	 	 	NOTE: The signature on this assignment must correspond with the name as
written on the face of this Bond in every particular, without alteration,
enlargement or any change whatsoever.

 

B-1

 

EXHIBIT C

(FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION)

CERTIFICATE OF AUTHENTICATION

This is to certify that this Bond is one of the Bonds described in the within-mentioned
Indenture.

	 	 	 	 	 	 	 	 
	 	 		U.S. BANK TRUST NATIONAL ASSOCIATION	 	 
	 	 		as Trustee	 	 
	 
	 		 	 	 	 	 
	 

	 		By:	 	 	 	 
	 

	 		 	 	Authorized Officer	 	 
	Date of Authentication:
	 		 	 	 	 	 
	 	 

		 
	 	 	 	 

 

C-1Exhibit 4(d)

Exhibit 4(d) 

 

LOAN AGREEMENT

between

COCONINO COUNTY, ARIZONA

POLLUTION CONTROL CORPORATION

and

TUCSON ELECTRIC POWER COMPANY

 

Dated as of October 1, 2009

Relating To

Pollution Control Revenue Bonds,

2009 Series A

(Tucson Electric Power Company Navajo Project)

 

 

 

TABLE OF CONTENTS*

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	ARTICLE I
	 	 	 	 
	 
	 	 	 	 
	DEFINITIONS
	 	 	 	 
	SECTION 1.01. Definitions
	 	 	2	 
	SECTION 1.02. Incorporation of Certain Definitions by Reference
	 	 	5	 
	ARTICLE II
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	SECTION 2.01. Representations and Warranties of the Pollution Control Corporation
	 	 	5	 
	SECTION 2.02. Representations and Warranties of the Company
	 	 	6	 
	ARTICLE III
	 	 	 	 
	 
	 	 	 	 
	THE FACILITIES
	 	 	 	 
	SECTION 3.01. Facilities; Property of the Company
	 	 	7	 
	SECTION 3.02. Maintenance of Facilities; Remodeling
	 	 	7	 
	SECTION 3.03. Insurance
	 	 	7	 
	SECTION 3.04. Condemnation
	 	 	7	 
	ARTICLE IV
	 	 	 	 
	 
	 	 	 	 
	ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS
OF THE BONDS
	 	 	 	 
	SECTION 4.01. Issuance of the Bonds
	 	 	7	 
	SECTION 4.02. Issuance of Other Obligations
	 	 	8	 
	SECTION 4.03. The Loan; Disposition of Bond Proceeds
	 	 	8	 
	SECTION 4.04. Investment of Moneys in Funds and Accounts
	 	 	8	 
	ARTICLE V
	 	 	 	 
	 
	 	 	 	 
	LOAN PAYMENTS; OTHER OBLIGATIONS
	 	 	 	 
	SECTION 5.01. Loan Payments
	 	 	8	 
	SECTION 5.02. Payments Assigned; Obligation Absolute
	 	 	9	 
	SECTION 5.03. Payment of Expenses
	 	 	9	 
	SECTION 5.04. Indemnification
	 	 	9	 
	SECTION 5.05. Payment of Taxes; Discharge of Liens
	 	 	10	 
	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 
	SPECIAL COVENANTS
	 	 	 	 
	SECTION 6.01. Maintenance of Legal Existence
	 	 	10	 
	SECTION 6.02. Permits or Licenses
	 	 	11	 
	SECTION 6.03. Pollution Control Corporation’s Access to Facilities
	 	 	11	 

 

	 	 	 
	*	 	This table of contents is not part of the Loan
Agreement, and is for convenience only. The captions herein are of no legal
effect and do not vary the meaning or legal effect of any part of the Loan
Agreement.

 

i

 

	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	SECTION 6.04. Tax-Exempt Status of Interest on Bonds
	 	 	11	 
	SECTION 6.05. Use of Facilities
	 	 	13	 
	SECTION 6.06. Financing Statements
	 	 	13	 
	ARTICLE VII
	 	 	 	 
	 
	 	 	 	 
	ASSIGNMENT, LEASING AND SELLING
	 	 	 	 
	SECTION 7.01. Conditions
	 	 	13	 
	SECTION 7.02. Instrument Furnished to the Pollution Control Corporation and Trustee
	 	 	15	 
	SECTION 7.03. Limitation
	 	 	15	 
	ARTICLE VIII
	 	 	 	 
	 
	 	 	 	 
	EVENTS OF DEFAULT AND REMEDIES
	 	 	 	 
	SECTION 8.01. Events of Default
	 	 	15	 
	SECTION 8.02. Force Majeure
	 	 	16	 
	SECTION 8.03. Remedies
	 	 	16	 
	SECTION 8.04. No Remedy Exclusive
	 	 	17	 
	SECTION 8.05. Reimbursement of Attorneys’ and Agents’ Fees
	 	 	17	 
	SECTION 8.06. Waiver of Breach
	 	 	17	 
	ARTICLE IX
	 	 	 	 
	 
	 	 	 	 
	REDEMPTION OF BONDS
	 	 	 	 
	SECTION 9.01.Redemption of Bonds
	 	 	18	 
	SECTION 9.02.Compliance with the Indenture
	 	 	18	 
	ARTICLE X
	 	 	 	 
	 
	 	 	 	 
	MISCELLANEOUS
	 	 	 	 
	SECTION 10.01. Term of Agreement
	 	 	18	 
	SECTION 10.02. Notices
	 	 	18	 
	SECTION 10.03. Parties in Interest
	 	 	19	 
	SECTION 10.04. Amendments
	 	 	19	 
	SECTION 10.05. Counterparts
	 	 	19	 
	SECTION 10.06. Severability
	 	 	19	 
	SECTION 10.07. Governing Law
	 	 	19	 
	SECTION 10.08. Notice Regarding Cancellation of Contracts
	 	 	20	 
	 
	 	 	 	 
	Signatures
	 	 	21	 
	Exhibit A — Description of the Facilities
	 	 	A-1	 

 

ii

 

LOAN AGREEMENT

THIS LOAN AGREEMENT (2009 Series A), dated as of October 1, 2009 (this “Agreement”), between
COCONINO COUNTY, ARIZONA POLLUTION CONTROL CORPORATION, an Arizona nonprofit corporation and a
political subdivision of the State of Arizona (hereinafter called the “Pollution Control
Corporation”), and TUCSON ELECTRIC POWER COMPANY, a corporation organized and existing under the
laws of the State of Arizona (hereinafter called the “Company”),

W I T N E S S E T H :

WHEREAS, the Pollution Control Corporation is authorized and empowered under Title 35, Chapter
6, Arizona Revised Statutes, as amended (the “Act”), to issue its bonds in accordance with the Act
and to make secured or unsecured loans for the purpose of financing or refinancing the acquisition,
construction, improvement or equipping of pollution control facilities consisting of real and
personal properties, including but not limited to machinery and equipment whether or not now in
existence or under construction, which are used in whole or in part to control, prevent, abate,
alter, dispose or store, solid waste, thermal, noise, atmospheric or water pollutants, contaminants
or products therefrom, whether such facilities serve one or more purposes or functions in addition
to controlling, preventing, abating, altering, disposing or storing such pollutants, contaminants
or the products therefrom, and to charge and collect interest on such loans and pledge the proceeds
of loan agreements as security for the payment of the principal of and interest on bonds, or
designated issues of bonds, issued by the Pollution Control Corporation and any agreements made in
connection therewith, whenever the Board of Directors of the Pollution Control Corporation finds
such loans to be in furtherance of the purposes of the Pollution Control Corporation;

WHEREAS, the Pollution Control Corporation has heretofore issued and sold $14,700,000
aggregate principal amount of Coconino County, Arizona Pollution Control Corporation Pollution
Control Revenue Bonds, 1997 Series B (Tucson Electric Power Company Navajo Project), all of which
remain outstanding (the “1997 Bonds”), the proceeds of which were loaned to Tucson Electric Power
Company, an Arizona corporation (the “Company”), for the purpose of refunding $14,700,000 aggregate
principal amount of Coconino County, Arizona Pollution Control Corporation Pollution Control
Revenue Bonds, 1996 Series B (Tucson Electric Power Company Project);

WHEREAS, the Pollution Control Corporation proposes to issue and sell its revenue bonds (the
“Bonds”) for the purpose of refinancing, by the payment or redemption of the 1997 Bonds, or
provision therefor, a portion of the costs of the acquisition, construction, improvement and
equipping of certain of the pollution control facilities described in Exhibit A hereto (the
“Facilities”), previously refinanced with the proceeds of the 1997 Bonds; and

 

 

NOW, THEREFORE, the parties hereto, intending to be legally bound hereby and in consideration
of the premises, DO HEREBY AGREE as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Definitions. The terms defined in this Article I shall for all purposes of this
Agreement have the meanings herein specified, unless the context clearly requires otherwise:

Act:

“Act” shall mean Title 35, Chapter 6, Arizona Revised Statutes, and all acts supplemental
thereto or amendatory thereof.

Administration Expenses:

“Administration Expenses” shall mean the reasonable expenses incurred by the Pollution Control
Corporation with respect to this Agreement, the Indenture and any transaction or event contemplated
by this Agreement or the Indenture, including the compensation and reimbursement of expenses and
advances payable to the Trustee, to the Paying Agent, any Co-Paying Agent and the Registrar under
the Indenture.

Agreement:

“Agreement” shall mean this Loan Agreement, dated as of October 1, 2009, between the Pollution
Control Corporation and the Company, and any and all modifications, alterations, amendments and
supplements hereto.

Authorized Company Representative:

“Authorized Company Representative” shall mean each person at the time designated to act on
behalf of the Company by written certificate furnished to the Pollution Control Corporation and the
Trustee containing the specimen signature of such person and signed on behalf of the Company by its
President, any Vice President or its Treasurer, together with its Secretary or any Assistant
Secretary.

Bond Counsel:

“Bond Counsel” shall mean any firm or firms of nationally recognized bond counsel experienced
in matters pertaining to the validity of, and exclusion from gross income for federal tax purposes
of interest on bonds issued by states and political subdivisions, selected by the Company and
acceptable to the Pollution Control Corporation.

Bond Fund:

“Bond Fund” shall mean the fund created by Section 4.01 of the Indenture.

 

2

 

Bonds:

“Bond” or “Bonds” shall mean Coconino County, Arizona Pollution Control Corporation Pollution
Control Revenue Bonds, 2009 Series A (Tucson Electric Power Company Navajo Project).

Code:

“Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute
thereto. Each reference to a section of the Code herein shall be deemed to include the United
States Treasury Regulations proposed or in effect thereunder and applicable to the Bonds or the use
of the proceeds thereof, unless the context clearly requires otherwise. Reference to any
particular Code section shall, in the event of a successor Code, be deemed to be a reference to the
successor to such Code section.

Company:

“Company” shall mean Tucson Electric Power Company, a corporation organized and existing under
the laws of the State of Arizona, its successors and their assigns, including, without limitation,
any successor obligor under Section 6.01 or Section 7.01 hereof to the extent of the obligations
assumed thereunder.

Facilities:

“Facilities” shall mean the real and personal properties, machinery and equipment currently
existing, under construction and to be constructed which are described in Exhibit A hereto, as
revised from time to time to reflect any changes therein, additions thereto, substitutions therefor
and deletions therefrom permitted by the terms hereof, subject, however, to the provisions of
Section 7.01 hereof.

Indenture:

“Indenture” shall mean the Indenture of Trust, dated as of October 1, 2009, between the
Pollution Control Corporation and the Trustee relating to the Bonds, and any and all modifications,
alterations, amendments and supplements thereto.

Loan Payments:

“Loan Payments” shall mean the payments required to be made by the Company pursuant to Section
5.01 hereof.

1954 Code:

“1954 Code” shall mean the Internal Revenue Code of 1954, as amended.

1997 Bonds:

“1997 Bonds” shall mean the $14,700,000 aggregate principal amount of Coconino County, Arizona
Pollution Control Corporation Pollution Control Revenue Bonds, 1997 Series B (Tucson Electric
Power Company Navajo Project).

 

3

 

Outstanding:

“Outstanding”, when used in reference to the Bonds, shall mean, as at any particular date, the
aggregate of all Bonds authenticated and delivered under the Indenture except:

(a) those canceled by the Trustee at or prior to such date or delivered to or acquired
by the Trustee at or prior to such date for cancellation;

(b) those paid pursuant to Section 2.07 of the Indenture;

(c) those deemed to be paid in accordance with Article VIII of the Indenture; and

(d) those in lieu of or in exchange or substitution for which other Bonds shall have
been authenticated and delivered pursuant to the Indenture, unless proof satisfactory to the
Trustee and the Company is presented that such Bonds are held by a bona fide holder in due
course.

Person:

“Person” means (i) any corporation, limited liability company, partnership, joint venture,
association, joint stock company, business trust or unincorporated organization, in each case
formed or organized under the laws of the United States of America, any state thereof or the
District of Columbia, or (ii) the United States of America or any state thereof, or any political
subdivision of either thereof, or any agency, authority or other instrumentality of any of the
foregoing.

Plant:

“Plant” shall mean the Navajo Generating Station, an electric power generating plant near
Page, Arizona, in Coconino County, Arizona, and any additions or improvements thereto or
replacements thereof.

Plant Agreements:

“Plant Agreements” shall mean all contracts relating to the ownership, construction and
operation of the Plant, including the Facilities, as from time to time amended or supplemented.

Pollution Control Corporation:

“Pollution Control Corporation” shall mean Coconino County, Arizona Pollution Control
Corporation, an Arizona nonprofit corporation and a political subdivision of the State of Arizona
incorporated for and with the approval of the County of Coconino, Arizona, pursuant to the
provisions of the Constitution of the State of Arizona and the Act, its successors and their
assigns.

 

4

 

Tax Agreement:

“Tax Agreement” shall mean that tax certificate and agreement, dated the date of the initial
authentication and delivery of the Bonds, between the Pollution Control Corporation and the
Company, relating to the requirements of the 1954 Code, Title XIII of the Tax Reform Act of 1986,
and any and all modifications, alterations, amendments and supplements thereto.

Trustee:

“Trustee” shall mean U.S. Bank Trust National Association, as trustee under the Indenture, its
successors in trust and their assigns.

SECTION 1.02. Incorporation of Certain Definitions by Reference. Each capitalized term used
herein and not otherwise defined herein shall have the meaning set forth in the Indenture.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

SECTION 2.01. Representations and Warranties of the Pollution Control Corporation. The
Pollution Control Corporation makes the following representations and warranties as the basis for
the undertakings on the part of the Company contained herein:

(a) The Pollution Control Corporation is an Arizona nonprofit corporation and a political
subdivision of the State of Arizona created and existing under the Constitution and laws of the
State of Arizona;

(b) The Pollution Control Corporation has the power to enter into this Agreement and the
Indenture and to perform and observe the agreements and covenants on its part contained herein
and therein, including without limitation the power to issue and sell the Bonds as contemplated
herein and in the Indenture, and by proper action has duly authorized the execution and delivery
hereof and thereof;

(c) The execution and delivery of this Agreement and the Indenture by the Pollution Control
Corporation do not, and consummation of the transactions contemplated hereby and fulfillment of
the terms hereof and thereof by the Pollution Control Corporation will not, result in a breach
of any of the terms or provisions of, or constitute a default under, any indenture, mortgage,
deed of trust or other agreement or instrument to which the Pollution Control Corporation is now
a party or by which it is now bound, or any order, rule or regulation applicable to the
Pollution Control Corporation of any court or of any regulatory body or administrative agency or
other governmental body having jurisdiction over the Pollution Control Corporation or over any
of its properties, or the Constitution or laws of the State of Arizona;

(d) With the exception of the approval of the Coconino County Board of Supervisors obtained
on April 15, 2008, no consent, approval, authorization or other order of any regulatory body or
administrative agency or other governmental body is legally required for
the Pollution Control Corporation’s participation in the transactions contemplated by this
Agreement, except such as may have been obtained or may be required under the securities laws of
any jurisdiction; and

 

5

 

(e) The Pollution Control Corporation has found and determined that all requirements of the
Act with respect to the issuance of the Bonds and the execution and delivery of the Indenture
and this Agreement have been complied with and that the entering into of the Indenture and this
Agreement will be in furtherance of the purposes of the Act.

SECTION 2.02. Representations and Warranties of the Company. The Company makes the following
representations and warranties as the basis for the undertakings on the part of the Pollution
Control Corporation contained herein:

(a) The Company is a corporation duly organized and existing in good standing under the
laws of the State of Arizona and duly qualified as a foreign corporation in the State of New
Mexico;

(b) The Company has power to enter into this Agreement and to perform and observe the
agreements and covenants on its part contained herein and by proper corporate action has duly
authorized the execution and delivery hereof;

(c) The execution and delivery of this Agreement by the Company do not, and consummation of
transactions contemplated hereby and fulfillment of the terms hereof by the Company will not,
result in a breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to which the Company is a
party or by which it is now bound, or the Restated Articles of Incorporation or bylaws of the
Company, or any order, rule or regulation applicable to the Company of any court or of any
regulatory body or administrative agency or other governmental body having jurisdiction over the
Company or over any of its properties, or any statute of any jurisdiction applicable to the
Company;

(d) The Arizona Corporation Commission has approved all matters relating to the Company’s
participation in the transactions contemplated by this Agreement which require said approval,
and no other consent, approval, authorization or other order of any regulatory body or
administrative agency or other governmental body is legally required for the Company’s
participation therein, except such as may have been obtained or may be required under the
securities laws of any jurisdiction;

(e) The Facilities to be refinanced constitute “pollution control facilities” as such term
is defined in the Act; and

(f) All of the proceeds of the Bonds will be expended to refinance the Facilities through
the payment or redemption of the 1997 Bonds, or provisions therefor.

 

6

 

ARTICLE III

THE FACILITIES

SECTION 3.01. Facilities; Property of the Company. An undivided interest in the Facilities
shall be the property of the Company and the Pollution Control Corporation shall have no right,
title or interest in the Facilities.

SECTION 3.02. Maintenance of Facilities; Remodeling. The Company shall at all times exercise
all of its rights, powers, elections and options under the Plant Agreements to cause the
Facilities, and every element and unit thereof, to be maintained, preserved and kept in thorough
repair, working order and condition and to cause all needful and proper repairs and renewals
thereto to be made; provided, however, that the Company may exercise all of its rights, powers,
elections and options under the Plant Agreements to cause the operation of the Facilities, or any
element or unit thereof, to be discontinued if, in the judgment of the Company, it is no longer
advisable to operate the same, or if the Company intends to sell or dispose of the same and within
a reasonable time shall endeavor to effectuate such sale or disposition.

The Company may, subject to the provisions of Section 6.05 hereof, at its own expense consent
to the remodeling of the Facilities or to the making of such substitutions, modifications and
improvements to the Facilities from time to time as it, in its discretion, may deem to be desirable
for its uses and purposes, which remodeling, substitutions, modifications and improvements shall be
included under the terms of this Agreement as part of the Facilities.

SECTION 3.03. Insurance. The Company shall exercise all of its rights, powers, elections and
options under the Plant Agreements to keep the Facilities insured against fire and other risks to
the extent usually insured against by companies owning and operating similar property, by reputable
insurance companies or, at the Company’s election, with respect to all or any element or unit of
the Facilities, by means of an adequate insurance fund set aside and maintained by it out of its
own earnings or in conjunction with other companies through an insurance fund, trust or other
agreement or, by means of unfunded self insurance as may be reasonable and customary by companies
owning and operating similar property. All proceeds of such insurance shall be for the account of
the Company.

SECTION 3.04. Condemnation. The Company shall be entitled to the entire proceeds of any
condemnation award or portion thereof made for damages to or takings of the Facilities or other
property of the Company.

ARTICLE IV

ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS OF THE BONDS

SECTION 4.01. Issuance of the Bonds. The Pollution Control Corporation shall issue the Bonds
under and in accordance with the Indenture, subject to the provisions of the bond
purchase agreement among the Pollution Control Corporation, the initial purchaser or
purchasers of the Bonds and the Company. The Company hereby approves the issuance of the Bonds and
all terms and conditions thereof.

 

7

 

SECTION 4.02. Issuance of Other Obligations. The Pollution Control Corporation and the
Company expressly reserve the right to enter into, to the extent permitted by law, but shall not be
obligated to enter into, an agreement or agreements other than this Agreement with respect to the
issuance by the Pollution Control Corporation, under an indenture or indentures other than the
Indenture, of obligations to provide additional funds to pay the cost of construction of the
Facilities or obligations to refund all or any principal amount of the Bonds, or any combination
thereof.

SECTION 4.03. The Loan; Disposition of Bond Proceeds. The Pollution Control Corporation shall
cause the proceeds of the Bonds to be deposited with the trustee for the 1997 Bonds to be applied
to the payment of the 1997 Bonds upon the redemption thereof.

The Pollution Control Corporation shall establish the Bond Fund with the Trustee in accordance
with Section 4.01 of the Indenture.

SECTION 4.04. Investment of Moneys in Funds and Accounts. The Company and the Pollution
Control Corporation agree that any moneys held in any fund or account created by the Indenture
shall be invested as provided in the Indenture.

ARTICLE V

LOAN PAYMENTS; OTHER OBLIGATIONS

SECTION 5.01. Loan Payments. In consideration of the issuance of the Bonds and the
disposition of the proceeds thereof as contemplated in Section 4.03 hereof, the Company shall pay,
or cause to be paid, to the Trustee for the account of the Pollution Control Corporation an amount
equal to the aggregate principal amount of the Bonds from time to time Outstanding and, as interest
on its obligation to pay such amount, an amount equal to premium, if any, and interest on such
Bonds, such amounts to be paid in installments due on the dates, in the amounts and in the manner
provided in the Indenture for the Pollution Control Corporation to cause amounts to be deposited in
the Bond Fund for the payment of the principal of and premium, if any, and interest on the Bonds
whether at stated maturity, upon redemption or acceleration or otherwise; provided, however, that
the obligation of the Company to make any such payment hereunder shall be reduced by the amount of
any reduction under the Indenture of the amount of the corresponding payment required to be made by
the Pollution Control Corporation thereunder.

 

8

 

SECTION 5.02. Payments Assigned; Obligation Absolute. It is understood and agreed that all
Loan Payments are, pursuant to the Indenture, to be pledged by the Pollution Control Corporation to
the Trustee, and that all rights and interest of the Pollution Control Corporation hereunder
(except for the Pollution Control Corporation’s rights under Sections 5.03, 5.04, 6.03 and 8.05
hereof and any rights of the Pollution Control Corporation to receive notices, certificates,
requests, requisitions and other communications hereunder) are to be pledged and
assigned to the Trustee. The Company assents to such pledge and assignment and agrees that
the obligation of the Company to make the Loan Payments shall be absolute, irrevocable and
unconditional and shall not be subject to cancellation, termination or abatement, or to any defense
other than payment or to any right of set off, counterclaim or recoupment arising out of any breach
by the Pollution Control Corporation or the Trustee or any other party under this Agreement, the
Indenture or otherwise, or out of any obligation or liability at any time owing to the Company by
the Pollution Control Corporation, the Trustee or any other party, and, further, that the Loan
Payments and the other payments due hereunder shall continue to be payable at the times and in the
amounts herein and therein specified, whether or not the Facilities, or any portion thereof, shall
have been completed or shall have been destroyed by fire or other casualty, or title thereto, or
the use thereof, shall have been taken by the exercise of the power of eminent domain, and that
there shall be no abatement of or diminution in any such payments by reason thereof, whether or not
the Facilities shall be used or useful, whether or not any applicable laws, regulations or
standards shall prevent or prohibit the use of the Facilities, or for any other reason, all of the
foregoing being subject, however, to the provisions of Sections 6.01 and 7.01 hereof.

SECTION 5.03. Payment of Expenses. The Company shall pay all Administration Expenses,
including, without limitation, Administration Expenses incurred at and subsequent to the time the
Bonds are deemed to have been paid in accordance with Article VIII of the Indenture. The payment
of the compensation and the reimbursement of expenses and advances of the Trustee, of the Paying
Agent, any Co-Paying Agent and the Registrar under the Indenture shall be made directly to such
entities.

SECTION 5.04. Indemnification. The Company releases the Pollution Control Corporation, the
Trustee and the Coconino County, Arizona and their directors, officers, employees and agents from,
agrees that the Pollution Control Corporation and the Trustee shall not be liable for, and agrees
to indemnify and hold the Pollution Control Corporation, the Trustee and any predecessor Trustee
and their directors, officers, employees and agents free and harmless from, any liability
(including, without limitation, attorneys’ and other agents’ fees and expenses) for any loss or
damage to property or any injury to or death of any person that may be occasioned by any cause
whatsoever pertaining to the Facilities, except in any case as a result of the negligence or bad
faith or willful misconduct of the party otherwise to be indemnified.

The Company will indemnify and hold the Pollution Control Corporation, the Trustee and any
predecessor Trustee, free and harmless from any loss, claim, damage, tax, penalty, liability,
disbursement, litigation expenses, attorneys’ and other agents’ fees and expenses or court costs
arising out of, or in any way relating to, the execution or performance of this Agreement, the
issuance or sale of the Bonds, actions taken under the Indenture or any other cause whatsoever
pertaining to the Facilities, except in any case as a result of the negligence or bad faith or
willful misconduct of the party otherwise to be indemnified.

The Company will indemnify and hold the Pollution Control Corporation and its directors,
officers, employees and agents free and harmless from any loss, claim, damage, tax, penalty,
liability, disbursement, litigation expenses, attorney’s fees and expenses or court costs arising
out of or in any way relating to any untrue statement or alleged untrue statement of any material
fact or omission or alleged omission to state a material fact necessary to make the statements
made, in light of the circumstances under which they were made, not misleading in
any official statement or other offering material utilized in connection with the sale of any
Bonds.

 

9

 

SECTION 5.05. Payment of Taxes; Discharge of Liens. The Company shall: (a) pay, or make
provision for payment of, all lawful taxes and assessments, including income, profits, property or
excise taxes, if any, or other municipal or governmental charges, levied or assessed by any
federal, state or municipal government or political body upon the Facilities or any part thereof or
upon the Pollution Control Corporation with respect to the Loan Payments, when the same shall
become due; and (b) pay or cause to be satisfied and discharged or make adequate provision to
satisfy and discharge, within sixty (60) days after the same shall accrue, any lien or charge upon
the Loan Payments, and all lawful claims or demands for labor, materials, supplies or other charges
which, if unpaid, might be or become a lien upon such amounts; provided, that, if the Company shall
first notify the Pollution Control Corporation and the Trustee of its intention so to do, the
Company may in good faith contest any such lien or charge or claims or demands in appropriate legal
proceedings, and in such event may permit the items so contested and identified as such by the
Company to remain undischarged and unsatisfied during the period of such contest and any appeal
therefrom, unless the Trustee shall notify the Company in writing that, in the opinion of counsel
to the Trustee based upon material facts disclosed to the Trustee without any duty of
investigation, by nonpayment of any such items the lien of the Indenture as to the Loan Payments
will be materially endangered, in which event the Company shall promptly pay and cause to be
satisfied and discharged all such unpaid items. The Pollution Control Corporation shall cooperate
fully with the Company in any such contest.

ARTICLE VI

SPECIAL COVENANTS

SECTION 6.01. Maintenance of Legal Existence. Except as permitted in this Section 6.01, the
Company shall maintain its legal existence, shall not sell, transfer or otherwise dispose of all of
its assets, as or substantially as an entirety, and shall not consolidate with or merge with or
into another entity. The Company may consolidate with or merge into another entity organized and
existing under the laws of the United States of America, any state thereof or the District of
Columbia, or sell, transfer or otherwise dispose of all of its assets, as or substantially as an
entirety, to any Person, if the surviving or resulting Person (if other than the Company) or the
transferee Person, as the case may be, prior to or simultaneously with such merger, consolidation,
sale, transfer or disposition, assumes, by delivery to the Trustee and the Pollution Control
Corporation of an instrument in writing satisfactory in form to the Trustee, all the obligations of
the Company under this Agreement, including, without limitation, obligations of the Company under
Section 5.01 hereof. Upon such an assumption following any such sale, transfer or other disposition
of assets, the Company shall be released and discharged from all liability in respect of all
obligations under this Agreement. Notwithstanding the foregoing, in the case of any such sale,
transfer or other disposition of assets, which do not include the Facilities, the Company shall
remain liable in respect of obligations under this Agreement other than the obligations under
Section 5.01 hereof, and the transferee shall not be required to assume any obligations hereunder
other than the obligations under Section 5.01 hereof; provided, however,
that the transferee shall be required to assume all such other obligations unless the Company
shall have delivered to the Pollution Control Corporation and the Trustee an opinion of Bond
Counsel to the effect that the non-assumption by the transferee of such other obligations will not
impair the validity under the Act of the Bonds and will not adversely affect the exclusion from
gross income for federal tax purposes of interest on the Bonds.

 

10

 

If consolidation, merger or sale, transfer or other disposition is made as permitted by this
Section 6.01, the provisions of this Section 6.01 shall continue in full force and effect and no
further consolidation, merger or sale or other transfer shall be made except in compliance with the
provisions of this Section 6.01.

Anything in this Agreement to the contrary notwithstanding, the sale, transfer or other
disposition by the Company of all of its facilities (a) for the generation of electric energy, (b)
for the transmission of electric energy or (c) for the distribution of electric energy, in each
case considered alone, or all of its facilities described in clauses (a) and (b), considered
together, or all of its facilities described in clauses (b) and (c), considered together, shall in
no event be deemed to constitute a sale, transfer or disposition of all the properties of the
Company, as or substantially as an entirety, unless, immediately following such sale, transfer or
other disposition, the Company shall own no properties in the other such categories of property not
so sold, transferred or otherwise disposed of. The character of particular facilities shall be
determined by reference to the Uniform System of Accounts prescribed for public utilities and
licensees subject to the Federal Power Act, as amended, to the extent applicable.

SECTION 6.02. Permits or Licenses. In the event that it may be necessary for the proper
performance of this Agreement on the part of the Company or the Pollution Control Corporation that
any application or applications for any permit or license to do or to perform certain things be
made to any governmental or other agency by the Company or the Pollution Control Corporation, the
Company and the Pollution Control Corporation each shall, upon the request of either, execute such
application or applications.

SECTION 6.03. Pollution Control Corporation’s Access to Facilities. The Pollution Control
Corporation shall have the right, upon appropriate prior notice to the Company, to have reasonable
access to the Facilities during normal business hours for the purpose of making examinations and
inspections of the same.

SECTION 6.04. Tax-Exempt Status of Interest on Bonds. (a) It is the intention of the parties
hereto that interest on the Bonds shall be and remain tax-exempt, and to that end the covenants and
agreements of the Pollution Control Corporation and the Company in this Section 6.04 and the Tax
Agreement are for the benefit of the Owners from time to time of the Bonds.

(b) Each of the Company and the Pollution Control Corporation covenants and agrees for the
benefit of the Owners from time to time of the Bonds that it will not directly or indirectly use
or permit the use of (to the extent within its control) the proceeds of any of the Bonds or any
other funds, or take or omit to take any action, if and to the extent such use, or the taking or
omission to take such action, would cause any of the Bonds to be “arbitrage bonds” within the
meaning of Section 148 of the Code or otherwise subject to federal income taxation by reason of
failing to qualify under Section 103 of the 1954 Code and Title XIII of
the Tax Reform Act of 1986, as applicable, and any applicable regulations promulgated
thereunder. To such ends, the Pollution Control Corporation and the Company will comply with
all requirements of such Section 148 to the extent applicable to the Bonds. In the event that
at any time the Pollution Control Corporation or the Company is of the opinion that for purposes
of this Section 6.04(b) it is necessary to restrict or limit the yield on the investment of any
moneys held by the Trustee under the Indenture, the Pollution Control Corporation or the Company
shall so notify the Trustee in writing.

 

11

 

Without limiting the generality of the foregoing, the Company and the Pollution Control
Corporation agree that there shall be paid from time to time all amounts required to be rebated to
the United States of America pursuant to Section 148(f) of the Code and any applicable Treasury
Regulations. This covenant shall survive payment in full or defeasance of the Bonds and the
satisfaction and discharge of the Indenture. The Company specifically covenants to pay or cause to
be paid, the Rebate Requirement as defined and described in the Tax Agreement.

(c) The Pollution Control Corporation certifies and represents that it has not taken, and
the Pollution Control Corporation covenants and agrees that it will not take, any action which
results in interest paid on the Bonds being included in gross income of the Owners of the Bonds
for federal tax purposes by failing to qualify under Section 103 of the 1954 Code and Title XIII
of the Tax Reform Act of 1986, as applicable, and any regulations thereunder; and the Company
certifies and represents that it has not taken or (to the extent within its control) permitted
to be taken, and the Company covenants and agrees that it will not take or (to the extent within
its control) permit to be taken any action which will cause the interest on the Bonds to become
includable in gross income for federal income tax purposes; provided, however, that neither the
Company nor the Pollution Control Corporation shall be deemed to have violated these covenants
if the interest on any of the Bonds becomes taxable to a person solely because such person is a
“substantial user” of the Facilities or a “related person” within the meaning of Section
103(b)(13) of the 1954 Code; and provided, further, that none of the covenants and agreements
herein contained shall require either the Company or the Pollution Control Corporation to enter
an appearance or intervene in any administrative, legislative or judicial proceeding in
connection with any changes in applicable laws, rules or regulations or in connection with any
decisions of any court or administrative agency or other governmental body affecting the
taxation of interest on the Bonds. The Company acknowledges having read Section 7.08 of the
Indenture and agrees to perform all duties imposed on it by such Section 7.08, by this Section
and by the Tax Agreement. Insofar as Section 7.08 of the Indenture and the Tax Agreement impose
duties and responsibilities on the Company, they are specifically incorporated herein by
reference.

(d) Notwithstanding any provision of this Section 6.04, Section 7.08 of the Indenture or
the Tax Agreement, if the Company shall provide to the Pollution Control Corporation and the
Trustee an opinion of Bond Counsel to the effect that any specified action required under this
Section 6.04, Section 7.08 of the Indenture or the Tax Agreement is no longer required or that
some further or different action is required to maintain the tax-exempt status of interest on
the Bonds, the Company, the Trustee and the Pollution Control Corporation may conclusively rely
upon such opinion in complying with the requirements of this Section 6.04, and the covenants
hereunder shall be deemed to be modified to that extent.

 

12

 

SECTION 6.05. Use of Facilities. So long as any Bonds are Outstanding and the Facilities are
operated by or for the benefit of the Company, the Company shall exercise all of its rights,
powers, elections and options under the Plant Agreements to cause the Facilities to be used for
purposes contemplated by the Act and in the Tax Agreement.

SECTION 6.06. Financing Statements. The Company shall file and record, or cause to be filed
and recorded, all financing statements and continuation statements referred to in Section 7.07 of
the Indenture.

ARTICLE VII

ASSIGNMENT, LEASING AND SELLING

SECTION 7.01. Conditions. The Company’s interest in this Agreement may be assigned as a whole
or in part, and its interest in the Facilities may be leased, sold, transferred or otherwise
disposed of by the Company as a whole or in part (whether an interest in a specific element or unit
or an undivided interest), to any Person; provided, however, that no such assignment, lease, sale,
transfer or other disposition (a) shall relieve the Company from its primary liability for its
obligations under Section 5.01 hereof or (b) shall be made unless the assignee, lessee, purchaser
or other transferee, as the case may be, prior to or simultaneously with such assignment, lease,
sale, transfer or other disposition, assumes, by delivery of an instrument in writing satisfactory
in form to the Trustee and the Pollution Control Corporation, all other obligations of the Company
hereunder to the extent of the interest assigned, leased, sold, transferred or otherwise disposed
of, and the Company shall be released of and discharged from such obligations to the extent so
assumed. Notwithstanding the foregoing, (a) if (i) the Company’s interest in this Agreement shall
be assigned as a whole or in undivided part, (ii) the Company’s interest in the Facilities shall be
leased as a whole or in undivided part and the term of such leasehold or the term of any extension
or extensions thereof at the option of the Company shall extend beyond the maturity date of the
Bonds or (iii) the Company’s interest in the Facilities shall be sold, transferred or otherwise
disposed of as a whole or in undivided part, and (b) in the event that the assignee, lessee,
purchaser or other transferee shall assume the obligations of the Company under Section 5.01 hereof
for the remaining term of this Agreement, to the extent of such assignment, lease, sale, transfer
or other disposition, the Company shall be released from and discharged of all liability in respect
of such obligations to the extent so assumed (but only to such extent); provided, however, that the
release and discharge of the Company pursuant to clause (b) shall be conditioned upon the delivery
by the Company to the Pollution Control Corporation and the Trustee of a certificate of an
Independent Expert (as hereinafter defined) describing the interests so assigned, leased, sold,
transferred or otherwise disposed of, together with all other rights, interests, assets and/or
properties assigned, leased, sold, transferred or otherwise disposed of by the Company to the same
Person in the same or a related transaction, stating that such rights, interests, assets and/or
properties so described constitute facilities for the generation, transmission and/or distribution
of electric energy and stating that, in the opinion of such Independent Expert, the Fair Value (as
hereinafter defined) of such rights, interests, assets and/or properties to the Person acquiring
the same is not less than an amount equal to 10/7 of the sum of (x) the aggregate principal amount
of the Bonds then
Outstanding and (y) the outstanding principal amount of all other obligations of the Company
representing indebtedness for borrowed money or for the deferred purchase price of property which
are being assumed by such Person; provided, further, that after any such assumption, release and
discharge as aforesaid, the Company may again assume such obligations under Section 5.01 hereof, in
whole or in part, at any time and from time to time, and, to the extent of any such assumption by
the Company (but only to such extent), the aforesaid assignee, lessee, purchaser or other
transferee shall be released from and discharged of all liability in respect of such obligations.

 

13

 

Anything herein to the contrary notwithstanding, the Company shall not make any assignment,
lease or sale as provided in the immediately preceding paragraph unless it shall have furnished to
the Pollution Control Corporation and the Trustee an opinion of Bond Counsel to the effect that the
proposed assignment, lease or sale will not impair the validity under the Act of the Bonds and will
not adversely affect the exclusion of interest on the Bonds from gross income for federal tax
purposes.

After any lease, sale, transfer or other disposition of any element or unit of the Facilities,
or any interest therein, the Company may, at its option, cause such element or unit, or interest
therein, to no longer be deemed to be part of the Facilities for the purposes of this Agreement by
delivering to the Pollution Control Corporation and the Trustee the agreements or other documents
required pursuant to Section 7.02 hereof together with an instrument signed by an Authorized
Company Representative stating that such element or unit, or interest therein, shall no longer be
deemed to be part of the Facilities for the purposes of this Agreement.

For purposes of this Section 7.01:

(a) “Independent Expert” means a Person which (i) is an engineer, appraiser or other expert
and which, with respect to any certificate to be delivered pursuant to this Section, is
qualified to pass upon the matter set forth in such certificate and (ii)(A) is in fact
independent, (B) does not have any direct material financial interest in the transferee or in
any obligor upon the Bonds or under this Agreement or in any affiliate of the transferee or any
such obligor, (C) is not connected with the transferee or any such obligor as an officer,
employee, promoter, underwriter, trustee, partner, director or any person performing similar
functions and (D) is approved by the Trustee in the exercise of reasonable care; for purposes of
this definition “engineer” means a Person engaged in the engineering profession or otherwise
qualified to pass upon engineering matters (including, but not limited to, a Person licensed as
a professional engineer, whether or not then engaged in the engineering profession); and for
purposes of this definition “appraiser” means a Person engaged in the business of appraising
property or otherwise qualified to pass upon the Fair Value or fair market value of property.

 

14

 

(b) “Fair Value” means the fair value of the interests, rights, assets and/or properties
assigned, leased, sold, transferred or otherwise disposed of (but, in the case of a lease, only
to the extent of such lease) as may be determined by reference to (i) except in the case of a
lease, the amount which would be likely to be obtained in an arm’s-length transaction with
respect to such interests, rights, assets and/or properties between an informed and willing
buyer and an informed and willing seller, under no compulsion, respectively, to buy or sell,
(ii) in the case of a lease, the amount (discounted to present value at a rate not lower
than the taxable equivalent of the yield to maturity of the Bonds based on prevailing market
prices immediately prior to the first public announcement of the proposed transaction) which
would be likely to be obtained in an arm’s-length transaction with respect to such interests,
rights, assets and/or properties between an informed and willing lessee and an informed and
willing lessor, neither under any compulsion to lease; (iii) the amount of investment with
respect to such interests, rights, assets and/or properties which, together with a reasonable
return thereon, would be likely to be recovered through ordinary business operations or
otherwise, (iv) the cost, accumulated depreciation and replacement cost with respect to such
interests, rights, assets and/or properties and/or (v) any other relevant factors; provided,
however, that (x) Fair Value shall be determined without deduction for any mortgage, deed of
trust, pledge, security interest, encumbrance, lease, reservation, restriction, servitude,
charge or similar right or any other lien of any kind and (y) the Fair Value to the transferee
of any property shall not reflect any reduction relating to the fact that such property may be
of less value to a Person which is not the owner, lessee or operator of the property or any
portion thereof than to a Person which is such owner, lessee or operator. Fair Value may be
determined, without physical inspection, by the use of accounting and engineering records and
other data maintained by the Company or the transferee or otherwise available to the Independent
Expert certifying the same.

SECTION 7.02. Instrument Furnished to the Pollution Control Corporation and Trustee. The
Company shall, within fifteen (15) days after the delivery thereof, furnish to the Pollution
Control Corporation and the Trustee a true and complete copy of the agreements or other documents
effectuating any such assignment, lease, sale, transfer or other disposition.

SECTION 7.03. Limitation. This Agreement shall not be assigned nor shall the Facilities be
leased, sold, transferred or otherwise disposed of, in whole or in part, except as provided in this
Article VII or in Section 6.01 or 5.02 hereof. This Article VII shall not apply to any sale,
transfer or other disposition by the Company of all of its assets, as or substantially as an
entirety, as contemplated in Section 6.01.

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

SECTION 8.01. Events of Default. Each of the following events shall constitute and is
referred to in this Agreement as an “Event of Default”:

(a) a failure by the Company to make any Loan Payment, which failure shall have resulted in
an “Event of Default” under clause (a) or (b) of Section 9.01 of the Indenture;

(b) a failure by the Company to pay when due any amount required to be paid under this
Agreement or to observe and perform any covenant, condition or agreement on its part to be
observed or performed (other than a failure described in clause (a) above), which failure shall
continue for a period of sixty (60) days after written notice, specifying such failure and
requesting that it be remedied, shall have been given to the Company by the Pollution
Control Corporation or the Trustee, unless the Pollution Control Corporation and the
Trustee shall agree in writing to an extension of such period prior to its expiration; provided,
however, that the Pollution Control Corporation and the Trustee shall be deemed to have agreed
to an extension of such period if corrective action is initiated by the Company within such
period and is being diligently pursued; or

 

15

 

(c) the dissolution or liquidation of the Company, or failure by the Company promptly to
lift any execution, garnishment or attachment of such consequence as will impair its ability to
make any payments under this Agreement, or the entry of an order for relief by a court of
competent jurisdiction in any proceeding for its liquidation or reorganization under the
provisions of any bankruptcy act or under any similar act which may be hereafter enacted, or an
assignment by the Company for the benefit of its creditors, or the entry by the Company into an
agreement of composition with its creditors (the term “dissolution or liquidation of the
Company,” as used in this clause, shall not be construed to include the cessation of the
corporate existence of the Company resulting either from a merger or consolidation of the
Company into or with another entity or a dissolution or liquidation of the Company following a
transfer of all or substantially all its assets as an entirety, under the conditions permitting
such actions contained in Section 6.01 hereof).

SECTION 8.02. Force Majeure. The provisions of Section 8.01 hereof are subject to the
following limitations: if by reason of acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders of any kind of the government of the United States or
of the State of Arizona, or any department, agency, political subdivision, court or official of any
of them, or any civil or military authority; insurrections; riots; epidemics; landslides;
lightning; earthquakes; volcanoes; fires; hurricanes; tornadoes; storms; floods; washouts;
droughts; arrests; restraint of government and people; civil disturbances; explosions; breakage or
accident to machinery; partial or entire failure of utilities; or any cause or event not reasonably
within the control of the Company, the Company is unable in whole or in part to carry out any one
or more of its agreements or obligations contained herein, other than its obligations under
Sections 5.01, 5.03, 5.05 and 6.01 hereof, the Company shall not be deemed in default by reason of
not carrying out said agreement or agreements or performing said obligation or obligations during
the continuance of such inability. The Company shall make reasonable effort to remedy with all
reasonable dispatch the cause or causes preventing it from carrying out its agreements; provided,
that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within
the discretion of the Company, and the Company shall not be required to make settlement of strikes,
lockouts and other industrial disturbances by acceding to the demands of the opposing party or
parties when such course is in the judgment of the Company unfavorable to the Company.

SECTION 8.03. Remedies. (a) Upon the occurrence and continuance of any Event of Default
described in clause (a) of Section 8.01 hereof, and further upon the condition that, in accordance
with the terms of the Indenture, the Bonds shall have been declared to be immediately due and
payable pursuant to any provision of the Indenture, the Loan Payments shall, without further
action, become and be immediately due and payable.

 

16

 

Any waiver of any “Event of Default” under the Indenture and a rescission and annulment of its
consequences shall constitute a waiver of the corresponding Event or Events of Default under this
Agreement and a rescission and annulment of the consequences thereof.

(b) Upon the occurrence and continuance of any Event of Default, the Pollution Control
Corporation, or the Trustee with respect to the rights of the Pollution Control Corporation
assigned to the Trustee by the Indenture, may take any action at law or in equity to collect any
payments then due and thereafter to become due, or to enforce performance and observance of any
obligation, agreement or covenant of the Company hereunder.

(c) Any amounts collected by the Trustee from the Company pursuant to this Section 8.03
shall be applied in accordance with the Indenture.

SECTION 8.04. No Remedy Exclusive. No remedy conferred upon or reserved to the Pollution
Control Corporation hereby is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right or power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle the Pollution
Control Corporation to exercise any remedy reserved to it in this Article VIII, it shall not be
necessary to give any notice, other than such notice as may be herein expressly required.

SECTION 8.05. Reimbursement of Attorneys’ and Agents’ Fees. If the Company shall default
under any of the provisions hereof and the Pollution Control Corporation or the Trustee shall
employ attorneys or agents or incur other reasonable expenses for the collection of payments due
hereunder or for the enforcement of performance or observance of any obligation or agreement on the
part of the Company contained herein, the Company will on demand therefor reimburse the Pollution
Control Corporation or the Trustee and any predecessor Trustee, as the case may be, for the
reasonable fees of such attorneys and such other reasonable expenses so incurred.

SECTION 8.06. Waiver of Breach. In the event any obligation created hereby shall be breached
by either of the parties and such breach shall thereafter be waived by the other party, such waiver
shall be limited to the particular breach so waived and shall not be deemed to waive any other
breach hereunder. In view of the assignment of certain of the Pollution Control Corporation’s
rights and interest hereunder to the Trustee, the Pollution Control Corporation shall have no power
to waive any breach hereunder by the Company in respect of such rights and interest without the
consent of the Trustee, and the Trustee may exercise any of the rights of the Pollution Control
Corporation hereunder.

 

17

 

ARTICLE IX

REDEMPTION OF BONDS

SECTION 9.01. Redemption of Bonds. The Pollution Control Corporation shall take, or cause to
be taken, the actions required by the Indenture to discharge the lien created thereby through the
redemption, or provision for payment or redemption, of all Bonds then Outstanding, or to effect the
redemption, or provision for payment or redemption, of less than all the Bonds then Outstanding,
upon receipt by the Pollution Control Corporation and the Trustee from the Company of a notice
designating the principal amount of the Bonds to be redeemed, or for the payment or redemption of
which provision is to be made, and, in the case of redemption of Bonds, or provision therefor,
specifying the date of redemption and the applicable redemption provision of the Indenture. Such
redemption date shall not be less than forty-five (45) days from the date such notice is given
(unless a shorter notice is satisfactory to the Trustee). Unless otherwise stated therein, such
notice shall be revocable by the Company at any time prior to the time at which the Bonds to be
redeemed, or for the payment or redemption of which provision is to be made, are first deemed to be
paid in accordance with Article VIII of the Indenture. The Company shall furnish any moneys or
Government Obligations (as defined in the Indenture) required by the Indenture to be deposited with
the Trustee or otherwise paid by the Pollution Control Corporation in connection with any of the
foregoing purposes.

SECTION 9.02. Compliance with the Indenture. Anything in this Agreement to the contrary
notwithstanding, the Pollution Control Corporation and the Company shall take all actions required
by this Agreement and the Indenture in order to comply with any provisions of the Indenture
requiring the mandatory redemption of Bonds.

ARTICLE X

MISCELLANEOUS

SECTION 10.01. Term of Agreement. This Agreement shall remain in full force and effect from
the date hereof until the right, title and interest of the Trustee in and to the Trust Estate (as
defined in the Indenture) shall have ceased, terminated and become void in accordance with Article
VIII of the Indenture and until all payments required under this Agreement shall have been made.
Notwithstanding the foregoing, the covenants contained in Sections 5.03, 5.04, 6.04 and 8.05 hereof
shall survive the termination of this Agreement.

SECTION 10.02. Notices. Except as otherwise provided in this Agreement, all notices,
certificates, requests, requisitions and other communications hereunder shall be in writing and
shall be sufficiently given and shall be deemed given when mailed by registered mail, postage
prepaid, addressed as follows: if to the Pollution Control Corporation, c/o Mangum, Wall, Stoops &
Warden P.L.L.C., 100 North Elden Street, P.O. Box 10, Flagstaff, Arizona 86002-0010, Attention:
President; if to the Company, at One South Church Avenue, Suite 100, Tucson, Arizona 85701,
Attention: Treasurer; and if to the Trustee, at such address as shall be designated by it in the
Indenture. A copy of each notice, certificate, request or other communication given
hereunder to the Pollution Control Corporation, the Company, or the Trustee shall also be
given to the others. The Pollution Control Corporation, the Company, and the Trustee may, by
notice given hereunder, designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.

 

18

 

SECTION 10.03. Parties in Interest. This Agreement shall inure to the benefit of and shall be
binding upon the Pollution Control Corporation, the Company and their respective successors and
assigns, and no other person, firm or corporation shall have any right, remedy or claim under or by
reason of this Agreement; provided, however, that the rights and remedies granted to the Pollution
Control Corporation in Article VIII hereof, shall inure to the benefit of the Trustee, on behalf of
the Owners from time to time of the Bonds, and shall be enforceable by the Trustee as a third party
beneficiary or as assignee of the Pollution Control Corporation; and provided, further, that
neither the County of Coconino, Arizona nor the State of Arizona shall in any event be liable for
the payment of the principal of or premium, if any, or interest on the Bonds or for the performance
of any pledge, mortgage, obligation or agreement created by or arising out of this Agreement or the
issuance of the Bonds, and further that neither the Bonds nor any such obligation or agreement of
the Pollution Control Corporation shall be construed to constitute an indebtedness of the County of
Coconino, Arizona or the State of Arizona within the meaning of any constitutional or statutory
provisions whatsoever, but shall be limited obligations of the Pollution Control Corporation
payable solely out of the revenues derived from this Agreement, or from the sale of the Bonds, or
from the investment or reinvestment of any of the foregoing, as provided herein and in the
Indenture.

SECTION 10.04. Amendments. This Agreement may be amended only by written agreement of the
parties hereto, subject to the limitations set forth herein and in the Indenture.

SECTION 10.05. Counterparts. This Agreement may be executed in any number of counterparts,
each of which, when so executed and delivered, shall be an original; but such counterparts shall
together constitute but one and the same Agreement.

SECTION 10.06. Severability. If any clause, provision or section of this Agreement shall, for
any reason, be held illegal or invalid by any court, the illegality or invalidity of such clause,
provision or section shall not affect any of the remaining clauses, provisions or sections hereof,
and this Agreement shall be construed and enforced as if such illegal or invalid clause, provision
or section had not been contained herein. In case any agreement or obligation contained in this
Agreement be held to be in violation of law, then such agreement or obligation shall be deemed to
be the agreement or obligation of the Pollution Control Corporation or the Company, as the case may
be, to the full extent permitted by law.

SECTION 10.07. Governing Law. The laws of the State of Arizona shall govern the construction
and enforcement of this Agreement, except that the provisions of Section 13.09 of the Indenture,
construed as provided in Section 13.07 of the Indenture, shall apply to this Agreement as if
contained herein.

 

19

 

SECTION 10.08. Notice Regarding Cancellation of Contracts. As required by the provisions of
Section 38-511, Arizona Revised Statutes, as amended, notice is hereby given that political
subdivisions of the State of Arizona or any of their departments or agencies may, within
three (3) years of its execution, cancel any contract, without penalty or further obligation,
made by the political subdivisions or any of their departments or agencies on or after September
30, 1988, if any person significantly involved in initiating, negotiating, securing, drafting or
creating the contract on behalf of the political subdivisions or any of their departments or
agencies is, at any time while the contract or any extension of the contract is in effect, an
employee or agent of any other party to the contract in any capacity or a consultant to any other
party of the contract with respect to the subject matter of the contract. The cancellation shall
be effective when written notice from the chief executive officer or governing body of the
political subdivision is received by all other parties to the contract unless the notice specifies
a later time.

The Company covenants and agrees not to employ as an employee, agent or, with respect to the
subject matter of this Agreement, a consultant, any person significantly involved in initiating,
negotiating, securing, drafting or creating such Agreement on behalf of the Issuer within three (3)
years from the execution hereof, unless a waiver is provided by the Pollution Control Corporation.

 

20

 

IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed as
of the day and year first above written.

	 	 	 	 	 
	 	COCONINO COUNTY, ARIZONA
 POLLUTION CONTROL CORPORATION

 	 
	 	By:  	/s/ Bruce Crozier
 	 
	 	 	Name:  	Bruce Crozier 	 
	 	 	Title:  	Secretary 	 
	 
	 	TUCSON ELECTRIC POWER COMPANY

 	 
	 	By:  	/s/ Kentton C. Grant
 	 
	 	 	Name:  	Kentton C. Grant 	 
	 	 	Title:  	Vice President, Finance and Rates 	 

Signature Page to the Loan Agreement

 

 

EXHIBIT A

A portion of the costs of the construction, improvement or equipping of the following
Facilities will be financed or refinanced with the proceeds of the Coconino County, Arizona
Pollution Control Corporation Pollution Control Revenue Bonds, 2009 Series A (Tucson Electric
Power Company Navajo Project) issued by Coconino County, Arizona Pollution Control Corporation and
referred to in the foregoing Loan Agreement.

 

The air and water pollution control facilities, sewage disposal facilities and solid waste
disposal and related facilities more particularly described below:

The air and water pollution control facilities, sewage disposal facilities and solid waste
disposal facilities to be financed in whole or in part with the proceeds of the Bonds will consist
of the following systems:

1. SO2 Removal System. This System consists of the Basic Removal and Disposal
System, and other additional features for in-plant SO2 removal. The Basic Removal and
Disposal System includes several five-chamber alkaline scrubbing modules which may be of either a
vertical or horizontal design, and associated equipment and piping. The other additional in-plant
features include by-pass dampers’ and ductwork modifications, connections for steam extraction,
induced draft fans sized to overcome the loss of velocity of the flue gas caused by the Basic
Removal and Disposal System, chimney coating to protect the stack from corrosion due to lower exit
gas temperatures caused by the Basic Removal and Disposal System, miscellaneous electrical
equipment and building space needed to accomodate the other SO2 removal equipment, and a
supplementary SO2 monitoring system.

2. Particulate Removal System. This System, which is designed to charge and collect particles
contained in the flue gas produced by the steam generator, includes a sixteen chamber hot
electrostatic precipitator, the structural supports for the precipitator, guillotine dampers,
louver isolation dampers ductwork, totally enclosed Nova feeders, opacity monitoring equipment,
induced draft fans sized to accomodate a maximum efficiency precipitator, several electrical fields
complete with casings and hoppers and the structural steel for such fields.

3. Flue Gas Monitoring System. This System consists of chimney equipment common to both
SO2 particulate removal systems and NOx particulate removal systems, and
includes the instrumentation and connections necessary to continuously monitor and record emissions
from the chimneys and a personal hoist and related equipment to permit performance testing and
maintenance of the monitoring equipment.

 

A-1

 

4. Dust Suppression System. The equipment comprising this System includes (i) enclosures for
the coal conveyors and transfer towers, (ii) a shed-like enclosure for the tract hopper, (iii)
several dust collectors, baghouses, rotary screw conveyors, separators and a vacuum conveying
system to provide dust collection in the cascade gallery, silo, sample building and
plant surge bin areas, (iv) a dust collector with a baghouse and rotary screw conveyor for the
yard bin area, (v) a dust suppression spray system consisting of jet sprays and associated
equipment located throughout the plant, (vi) enclosures to partition the coal gallery area from
boiler turbine area to control coal dust, (vii) a fixed header vacuum cleaning system for the coal
unloading hopper basement and the coal silo gallery, and (viii) portable vacuum cleaners for use in
the coal pulverizer area and the feeder deck area.

5. Sanitary Sewer System. Two pumping lift stations with dual pumps will be installed on the
main collector line and an aerated tank located below grade will be provided. Secondary treatment
by chlorine dosing may be utilized, and treated effluent will be discharged to the evaporation pond
system. A service water line will be installed to permit the sewage treatment area to be washed
and the sump weirs to be cleaned. Equipment will be installed downstream from the sewage treatment
plant to monitor sanitary waste discharges.

6. Waste Water Disposal System. This System includes the Waste Water Collection System, the
Water Reclamation Unit, Evaporation Ponds, and the Ground Water Monitoring System.

(A) Waste Water Collection System. The various types of wastewaters from the Project
will be collected and transported by the following facilities: (i) sumps and duplex
regenerative sump pumps to receive drainage from the chemical feed area and the anion-cation
regeneration area; (ii) the primary softener tank drain, the sand filter backwash drain, the
sodium zeolite softener regeneration rinse tank drain, and a special primary water treatment
pump to accomodate those drains; (iii) sumps and acid resistant duplex pumps to accommodate
the acid trench and chemical tank area; (iv) a surface drain and associated pumps to receive
runoff from the coal storage area; (v) special drains, pumps and piping to permit boiler
water to by-pass other boiler water drains and to be pumped directly to the evaporation
ponds; (vi) special drainage ditches and culverts to direct all surface water runoff from
the coal storage area to the evaporation ponds, and (vii) sumps and associated pumps and
piping to permit oily wastes to be transported to the evaporation ponds.

(B) Water Reclamation Unit. This Unit includes several clarifiers and associated pumps
and piping to permit clarification of cooling tower blowdown.

(C) Evaporation Ponds. A series of terraced and diked evaporation ponds will be
provided to receive sanitary wastes, surface water runoff and process wastes, and a second
series of terraced diked evaporation ponds will be provided to receive only process wastes.

(D) Ground Water Monitoring System. An extensive observation well and associated
equipment will be installed to monitor seepage from the ash disposal area and the
evaporation ponds to insure that such seepage does not enter the underground waterway
leading to Lake Powell.

 

A-2

 

7. Bottom Ash and Economizer Ash Disposal System. This System, which causes bottom ash,
economizer ash and pulverizer rejects to be transported to dewatering bins, water to
be drained from the dewatering bins into settling tanks, and water from the settling tanks to
be recirculated and reused for ash transport, includes six dewatering bins, two settling tanks,
three water surge tanks, one operating centrifugal ash pump, one standby centrifugal ash pump and
associated piping, an auxiliary tank for sluicing economizer ash and the necessary control valves
and piping to transport water to the mixing chamber and economizer ash slurry to the bottom ash
hopper.

8. Fly Ash Disposal System. This System, which transports fly ash from the precipitation
hoppers to the fly ash storage silos, includes several pneumatic conveyors and associated blowers,
filters and pipelines for transporting ash to the ash storage silos, two ash storage silos and
associated steel support structures, stairs and platforms, and eight dustless unloaders.

9. Solid Waste Common Systems. The equipment included in these Systems consists of the trucks
that will be used to haul damp fly ash, bottom ash, scrubber solids and evaporator solids to the
disposal area, the initial dikes for the solids disposal canyon, the road from the ash handling
area to the canyon, and fencing for the road and the solids disposal area.

10. Electrical Equipment. This equipment consists of transformers, buses, bus ducts,
breakers, switching equipment and associated equipment necessary for the operation of the
facilities.

 

A-3

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