Document:

<PAGE>

                                                                    EXHIBIT 4.26

                                                                  EXECUTION COPY

================================================================================

                               INDENTURE OF TRUST

                                     between

             MARICOPA COUNTY, ARIZONA POLLUTION CONTROL CORPORATION

                                       and

                              JPMORGAN CHASE BANK,
                                   as Trustee

                           Dated as of August 1, 2002

                                   Relating to

                                   $37,100,000
             Maricopa County, Arizona Pollution Control Corporation
                    Pollution Control Refunding Revenue Bonds
                                  2002 Series A
                 (El Paso Electric Company, Palo Verde Project)

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
                                    ARTICLE I
                                   DEFINITIONS

Section 1.01  Definitions .............................................       3
Section 1.02  Number and Gender .......................................      11
Section 1.03  Articles, Sections, Etc .................................      11
Section 1.04  Content of Certificates and Opinions ....................      12
Section 1.05  Findings ................................................      12

                                   ARTICLE II
                                    THE BONDS

Section 2.01  Authorization and Terms of Bonds ........................      13
Section 2.02  Execution of Bonds ......................................      25
Section 2.03  Transfer and Exchange of Bonds ..........................      27
Section 2.04  Bond Register ...........................................      27
Section 2.05  Bonds Mutilated, Lost, Destroyed or Stolen ..............      27
Section 2.06  Disposition of Cancelled Bonds ..........................      28
Section 2.07  CUSIP Numbers ...........................................      28
Section 2.08  Other Obligations .......................................      28
Section 2.09  Temporary Bonds .........................................      28

                                   ARTICLE III
                                ISSUANCE OF BONDS

Section 3.01  Authentication and Delivery of Bonds ....................      29
Section 3.02  Application of Proceeds of Bonds ........................      29
Section 3.03  Payment of Principal and Interest .......................      29

                                   ARTICLE IV
                        REDEMPTION AND PURCHASE OF BONDS

Section 4.01  Redemption of Bonds .....................................      30
Section 4.02  Selection of Bonds to be Redeemed .......................      34
Section 4.03  Notice for Redemption ...................................      34
Section 4.04  Partial Redemption of Bonds .............................      35
Section 4.05  Effect of Redemption ....................................      35
Section 4.06  Payment of Redemption Price .............................      36
Section 4.07  Bank Purchase Option ....................................      36
Section 4.08  Purchase of Bonds .......................................      39
Section 4.09  Delivery of Tendered Bonds ..............................      41
Section 4.10  Bonds Deemed Purchased ..................................      41
</TABLE>

                                        i

<PAGE>

<TABLE>
<CAPTION>
                                    ARTICLE V
                                  THE BOND FUND
<S>                                                                          <C>
Section 5.01  Creation of Bond Fund .....................................    42
Section 5.02  Deposits into Bond Fund ...................................    42
Section 5.03  Use of Moneys in Bond Fund ................................    43
Section 5.04  Credit Facility ...........................................    43
Section 5.05  Custody of Bond Fund; Withdrawal of Moneys ................    45
Section 5.06  Bonds Not Presented for Payment ...........................    45
Section 5.07  Moneys Held in Trust ......................................    45
Section 5.08  Payment to the Bank and to the Borrower ...................    46

                                   ARTICLE VI
                                   [RESERVED]

                                   ARTICLE VII
                                   INVESTMENTS

Section 7.01  Investments ...............................................    46

                                  ARTICLE VIII
                                GENERAL COVENANTS

Section 8.01  Limited Obligation; Payment of Principal and Interest .....    47
Section 8.02  Performance of Agreements; Authority ......................    47
Section 8.03  Maintenance of Corporate Existence; Compliance with Laws ..    47
Section 8.04  Enforcement of Borrower's Obligations under the Agreement..    47
Section 8.05  Further Assurances ........................................    48
Section 8.06  No Disposition or Encumbrance of Issuer's Interests .......    48
Section 8.07  Trustee's Access to Books Relating to Facilities ..........    48
Section 8.08  Filing of Financing Statements ............................    48
Section 8.09  Tax Covenant ..............................................    48
Section 8.10  Notices by Trustee ........................................    49
Section 8.11  No Transfer of Credit Facility ............................    49

                                   ARTICLE IX
                                   DEFEASANCE

Section 9.01  Defeasance ................................................    49
Section 9.02  Survival of Certain Provisions ............................    50

                                    ARTICLE X
                              DEFAULTS AND REMEDIES

Section 10.01 Events of Default .........................................    51
Section 10.02 Remedies ..................................................    53
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                          <C>
Section 10.03   Restoration to Former Position ...........................   54
Section 10.04   Owner's Right to Direct Proceedings ......................   54
Section 10.05   Limitation on Owners' Right to Institute Proceedings .....   54
Section 10.06   No Impairment of Right to Enforce Payment ................   55
Section 10.07   Proceeding by Trustee Without Possession of Bonds ........   55
Section 10.08   No Remedy Exclusive ......................................   55
Section 10.09   No Waiver of Remedies ....................................   55
Section 10.10   Application of Moneys ....................................   55
Section 10.11   Severability of Remedies .................................   57
Section 10.12   Waivers of Events of Default .............................   57
Section 10.13   No Obligation of Issuer to Act ...........................   58

                                   ARTICLE XI
                        TRUSTEE; PAYING AGENT; REGISTRAR

Section 11.01   Acceptance of Trusts .....................................   58
Section 11.02   Trustee Not Responsible for Recitals, Maintenance,
                Insurance, etc ...........................................   58
Section 11.03   Limitations on Liability .................................   58
Section 11.04   Compensation, Expenses and Advances ......................   59
Section 11.05   Notice of Events of Default ..............................   59
Section 11.06   Action by Trustee ........................................   60
Section 11.07   Good Faith Reliance ......................................   60
Section 11.08   Dealings in Bonds and with the Issuer and the Borrower ...   60
Section 11.09   Several Capacities .......................................   61
Section 11.10   Construction of Indenture ................................   61
Section 11.11   Resignation of Trustee ...................................   61
Section 11.12   Removal of Trustee .......................................   61
Section 11.13   Appointment of Successor Trustee .........................   61
Section 11.14   Qualifications of Successor Trustee ......................   62
Section 11.15   Judicial Appointment of Successor Trustee ................   62
Section 11.16   Acceptance of Trusts by Successor Trustee ................   62
Section 11.17   Successor by Merger or Consolidation .....................   62
Section 11.18   Standard of Care .........................................   63
Section 11.19   Notice of Event of Default ...............................   63
Section 11.20   Intervention in Litigation ...............................   63
Section 11.21   Paying Agent .............................................   63
Section 11.22   Qualifications of Paying Agent; Resignation; Removal .....   64
Section 11.23   Registrar ................................................   64
Section 11.24   Qualifications of Registrar; Resignation; Removal ........   65
Section 11.25   Appointment of Co-Trustee ................................   65
Section 11.26   Notices to Rating Agencies ...............................   66
</TABLE>

                                      iii

<PAGE>

                                   ARTICLE XII
                           EXECUTION OF INSTRUMENTS BY
                     OWNERS AND PROOF OF OWNERSHIP OF BONDS

<TABLE>
<S>                                                                          <C>
Section 12.01    Execution of Instruments; Proof of Ownership ...........    66

                                  ARTICLE XIII
                      MODIFICATION OF INDENTURE, DOCUMENTS

Section 13.01   Limitations .............................................    67
Section 13.02   Modification without Consent of Owners ..................    67
Section 13.03   Modification with Consent of Owners .....................    68
Section 13.04   Effect of Supplemental Indenture ........................    69
Section 13.05   Consent of the Borrower and the Bank ....................    69
Section 13.06   Amendment of Agreement without Consent of Owners ........    69
Section 13.07   Amendment of Agreement with Consent of Owners ...........    70
Section 13.08   Issuance of Bonds Under Other Indentures; Recognition
                of Prior Pledges ........................................    70

                                   ARTICLE XIV

          REMARKETING AGENT; TENDER AGENT; PURCHASE AND REMARKETING OF
                                      BONDS

Section 14.01   Remarketing Agent and Tender Agent ......................    70
Section 14.02   Qualifications of Remarketing Agent and Tender Agent;
                Resignation; Removal ....................................    72
Section 14.03   Notice of Bonds Delivered for Purchase; Purchase of
                Bonds ...................................................    73
Section 14.04   Remarketing of Bonds; Notice of Interest Rates ..........    74
Section 14.05   Delivery of Bonds .......................................    75
Section 14.06   Drawings on Credit Facility .............................    76
Section 14.07   Delivery of Proceeds of Sale ............................    76

                                   ARTICLE XV
                                  MISCELLANEOUS

Section 15.01   Indenture to Bind and Inure to Benefit of Successors
                to Issuer ...............................................    77
Section 15.02   Parties in Interest .....................................    77
Section 15.03   Severability ............................................    77
Section 15.04   No Personal Liability of Issuer Under Indenture .........    77
Section 15.05   Bonds Owned by the Issuer or the Borrower ...............    77
Section 15.06   Governing Law ...........................................    78
Section 15.07   Notices .................................................    78
Section 15.08   Non-Business Days .......................................    79
Section 15.09   Opinions ................................................    79
Section 15.10   Headlines; Table of Contents ............................    79
Section 15.11   Execution in Several Counterparts .......................    79
</TABLE>

                                       iv

<PAGE>

<TABLE>
<S>                                                                         <C>
Section 15.12  Statutory Notice ......................................      79

EXHIBIT A Form of Bond
</TABLE>

                                       v

<PAGE>

       THIS INDENTURE OF TRUST is made and entered into as of August 1, 2002, by
and between MARICOPA COUNTY, ARIZONA POLLUTION CONTROL CORPORATION, an Arizona
nonprofit corporation designated as a political subdivision under the laws of
the State of Arizona incorporated for and with the approval of the County of
Maricopa, Arizona, pursuant to the provisions of the Constitution of the State
of Arizona and Title 9, Chapter 12, Arizona Revised Statutes, enacted by Chapter
69, Section 2, Laws of Arizona of 1972, renumbered as Title 35, Chapter 6,
Arizona Revised Statutes, by Chapter 281, Section 2, Laws of Arizona of 1986,
and all acts supplemental thereto or, amendatory thereof (hereinafter, together
with any successor to its functions, called the "Issuer"), and JPMorgan Chase
Bank, a New York banking corporation authorized to exercise corporate trust
powers, with its principal corporate trust offices in Texas in Houston, Texas
(hereinafter, together with any successor in such capacity, called the
"Trustee").

                              W I T N E S S E T H:

       WHEREAS, Title 35, Chapter 6, Arizona Revised Statutes (formerly Title 9,
Chapter 12, Arizona Revised Statutes, enacted by Chapter 69, Section 2, Laws of
Arizona of 1972), as amended (hereinafter called the "Act"), empowers any
pollution control corporation organized pursuant to Article 1 of the Act to
issue revenue bonds in accordance with Article 2 of 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, 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 corporation and any
agreements made in connection therewith, whenever the board of directors finds
such loans to be in furtherance of the purposes of the corporation; and

       WHEREAS, Chapter 69, Section 1, Laws of Arizona of 1972, declares it to
be the purpose of the Act to authorize the incorporation in the several
municipalities and counties of the State of Arizona of corporations which shall
constitute political subdivisions of the State, to finance the acquisition and
installation of, or the construction and leasing of, properties, machinery and
equipment intended to prevent or limit air, water and other forms of pollution
for the purpose of protecting the health and welfare of the citizens of the
State of Arizona, and to facilitate compliance with existing or future air,
water and other quality standards designed to improve the environment, and
declares that such corporations shall serve a public purpose and perform an
essential governmental function; and

       WHEREAS, in response to an application by four qualified electors of the
County of Maricopa, Arizona (the "County"), a political subdivision of the State
of Arizona, the Board of Supervisors of said County on December 5, 1983, adopted
a resolution by which it determined that it was wise, expedient, advisable and
in the public interest that said application be approved, approved said
application, and authorized said four electors to proceed with the incorporation
of the Issuer as a pollution control corporation for said County, all in
accordance with Section 35-802 of the Act to issue bonds and to carry out the
other functions and fulfill the purposes of the Issuer; and

<PAGE>

         WHEREAS, the Issuer was thereupon organized and incorporated in
accordance with the provisions of the Act, and, on December 5, 1983, the
Articles of Incorporation of the Issuer were filed with the Arizona Corporation
Commission, in accordance with Section 35-809 of the Act; and

         WHEREAS, the Issuer has heretofore issued and sold its $37,100,000
aggregate principal amount of Pollution Control Refunding Revenue Bonds, 1984
Series E (El Paso Electric Company, Palo Verde Project) (the "Prior Bonds"), the
proceeds of which were used to finance and refinance such costs of acquisition,
construction, improvement or equipping of the Project; and

         WHEREAS, the Board of Directors of the Issuer on June 25, 2002
determined to sell additional revenue bonds of the Issuer to provide a portion
of the moneys necessary to redeem and refund the outstanding principal amount of
the Prior Bonds; and

         WHEREAS, appropriate certifications have been received stating that the
portion of the Generating Station which constitutes the pollution control
facilities, as described in Exhibit A to the Agreement (defined below), as
designed, are in furtherance of the purpose of abating or controlling
atmospheric or water pollutants or contaminants resulting from the generation of
electricity at the Generating Station; and

         WHEREAS, the Issuer and the Borrower have executed and delivered that
certain Loan Agreement, dated as of August 1, 2002 (hereinafter called the
"Agreement"), setting forth the undertaking by the Issuer to issue and sell its
revenue bonds under the Act (hereinafter called the "Bonds"), and to lend the
proceeds of the Bonds to the Borrower to provide a portion of the moneys
necessary to redeem and refund the outstanding principal amount of Prior Bonds;
and

         WHEREAS, in the Agreement the Borrower releases the Issuer and agrees
that the Issuer shall not be liable for, and will indemnify and hold the Issuer
and the Trustee harmless from, certain matters; and

         WHEREAS, certain findings and determinations relating to the Agreement
and the Generating Station and the Project have heretofore been made and are set
forth in this Indenture; and

         WHEREAS, the execution and delivery of the Agreement and this Indenture
and the issuance of the Bonds have been in all respects duly and validly
authorized, and duly adopted and approved by resolutions of the Board of
Directors of the Issuer, and the Project, the plan of financing for the Project
and the issuance of the Bonds have been duly approved by the Board of
Supervisors of the County, as required by the Act and otherwise; and

         WHEREAS, all other things necessary to make the Bonds, when issued,
executed and delivered by the Issuer and authenticated by the Trustee pursuant
to this Indenture, the valid, legal and binding limited obligations of the
Issuer, and to constitute this Indenture a valid pledge and assignment of all
right, title and interest of the Issuer in the Agreement (except as to certain
payments to the Issuer under provisions for indemnification of, and
reimbursement of expenses of, the Issuer), and of certain income and revenues
derived from the Agreement, for the payment of the principal of and interest on
the Bonds authenticated and delivered under this Indenture,

                                        2

<PAGE>

and the creation, execution and issuance of the Bonds, subject to the terms
hereof, have in all respects been duly authorized;

       NOW, THEREFORE, the Issuer, in consideration of the covenants herein
contained and of the purchase and acceptance of the Bonds by the holders
thereof, in order to secure the payment of all Bonds at any time outstanding
under this Indenture, according to their tenor and effect, and the performance
and observance of all the covenants and conditions in the Bonds and herein
contained, and to declare the terms and conditions upon and subject to which the
Bonds are issued and secured, does grant a security interest in and pledge to
the Trustee (as hereinafter defined), and to its successors and assigns forever,
the Trust Estate (as hereinafter defined) for the equal and proportionate
benefit, security and protection of all holders and owners of the Bonds issued
under and secured by this Indenture without privilege, priority or distinction
as to the lien or otherwise of any of the Bonds over any other of the Bonds, all
upon the terms stated in this Indenture.

                                    ARTICLE I

                                   DEFINITIONS

            Section 1.01 Definitions. The terms defined in this Article I shall,
for all purposes of this Indenture and of any indenture supplemental hereto have
the meanings herein specified, unless the context clearly requires otherwise.
Capitalized terms used herein, defined in the Agreement and not otherwise
defined herein, shall have the meaning specified in the Agreement.

       "Act" shall mean Title 35, Chapter 6, Arizona Revised Statutes (formerly
Title 9, Chapter 12, Arizona Revised Statutes, enacted by Chapter 69, Section 2,
Laws of Arizona of 1972), and all acts supplemental thereto or amendatory
thereof.

       "Agreement" shall mean the Loan Agreement, of even date herewith, between
the Issuer and the Borrower and relating to the loan of the proceeds of the
Bonds, as originally executed or as it may from time to time be supplemented or
amended.

       "Alternate Credit Support" shall mean any letter of credit, credit
facility, insurance policy, guarantee or other credit support agreement or
security mechanism provided by the Borrower in accordance with Section 6.08 of
the Agreement and any extension thereof.

       "Authorized Borrower Representative" shall mean each person at the time
designated to act on behalf of the Borrower by written certificate furnished to
the Issuer and the Trustee containing the specimen signature of such person and
signed on behalf of the Issuer.

       "Authorized Denominations" shall mean (a) with respect to any Long-Term
Interest Rate Period, $5,000 and any integral multiple thereof; (b) with respect
to any Daily Interest Rate Period, Weekly Interest Rate Period or Short-Term
Interest Rate Period, $100,000 and any integral multiple of $5,000 in excess of
$100,000.

       "Available Moneys" shall mean (i) with respect to any date occurring
during the term of a Credit Facility, (a) proceeds of a drawing under a Credit
Facility which have been directly

                                        3

<PAGE>

deposited in the Bond Fund or the Purchase Fund, as applicable, (b) moneys
deposited in the Bond Fund or the Purchase Fund by or on behalf of the Borrower
and which have been on deposit with the Trustee or the Tender Agent, as
applicable, for at least one hundred and twenty-four (124) days prior to and
during which no petition by or against the Issuer or the Borrower or any
affiliate of the Borrower, under any Bankruptcy Act shall have been filed or any
bankruptcy or similar proceeding shall have been commenced, unless such petition
or proceeding shall have been dismissed and such dismissal shall be final and
not subject to appeal, (c) any other money (including the proceeds of the sale
of refunding obligations of the Issuer) the application of which would not, in
the written opinion of Bond Counsel or other nationally recognized counsel
experienced in bankruptcy matters and acceptable to the Issuer, the Rating
Agencies, if any, and the Trustee and delivered to the Trustee and the Tender
Agent, constitute a voidable preference in the case of a filing for protection
under the Bankruptcy Act of the Issuer or the Borrower or any affiliate of the
Borrower and (d) the proceeds from the investment of moneys described above, and
(ii) with respect to any date not occurring during the term of a Credit
Facility, any moneys furnished to the Trustee or the Tender Agent, as
applicable, and the proceeds from the investment thereof.

       "Bank" shall mean the issuer of a Letter of Credit, if any, with respect
to the Bonds, and, any subsequently issued Credit Facility, the issuer of such
other Credit Facility so long as such other Credit Facility shall be in effect,
in its capacity as such issuer, its successors in such capacity and their
assigns.

       "Bankruptcy Act" shall mean the United States Bankruptcy Code, any
successor act thereto or amendment thereof or any other applicable federal or
state bankruptcy, insolvency, reorganization, liquidation, dissolution or
similar law, now or hereafter in effect.

       "Bond" or "Bonds" shall mean the bonds issued in accordance with this
Indenture as referenced in Section 2.01(a).

       "Bond Counsel" shall mean any firm of nationally recognized bond counsel
which is experienced in the financing of pollution control facilities and
acceptable to the Issuer, the Remarketing Agent, the Trustee and the Borrower.

       "Bond Fund" shall mean the fund created by Section 5.01.

       "Bond Interest Term" or "BIT" shall mean, with respect to each Bond
bearing interest at a BIT Rate, the period established in accordance with the
terms of Section 2.01(c)(v) hereof.

       "Bond Interest Term Rate" or "BIT Rate" shall mean the interest rate on
any Bond established in accordance with Section 2.01(c)(v) hereof.

       "Book-Entry Bonds" shall mean any Bonds which are then held in book-entry
form as provided in Section 2.01(e) hereof.

       "Borrower" shall mean (i) El Paso Electric Company, a corporation
organized under the laws of the State of Texas and its successors and assigns,
and (ii) any surviving, resulting or transferee corporation as provided in
Section 6.02 of the Agreement.

                                        4

<PAGE>

       "Business Day" shall mean a day on which banks located in the cities in
which the Principal Offices of the Trustee, the Registrar, the Paying Agent, the
Tender Agent, if any, and the Remarketing Agent, if any, are located, and in the
city or cities in which drawings under a Credit Facility are required to be
made, are not required or authorized by law or executive order to remain closed
and on which the New York Stock Exchange, Inc. is not closed.

       "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time. Each reference herein to a section of the Code shall be deemed to
include the United States Treasury Regulations adopted under the Code, as the
same may be in effect from time to time, unless the context clearly requires
otherwise.

       "Credit Facility" shall mean, collectively, the Letter of Credit, if any,
and any extensions thereof, and, upon the issuance and delivery of any Alternate
Credit Support in accordance with Section 6.08 of the Agreement, "Credit
Facility" shall mean such Alternate Credit Support.

       "County" shall mean the County of Maricopa, Arizona.

       "Daily Interest Rate" shall mean the variable interest rate on any Bond
established in accordance with Section 2.01(c)(ii) hereof.

       "Daily Interest Rate Period" shall mean each period during which a Daily
Interest Rate is in effect.

       "Determination of Taxability" means a determination that, due to the
untruth or inaccuracy of any representation or warranty made by the Borrower in
the Agreement or the breach of any covenant or warranty of the Borrower
contained in the Agreement, interest on the Bonds, or any of them, is determined
not to be Tax-Exempt by a final administrative determination of the Internal
Revenue Service or a final judicial decision of a court of competent
jurisdiction in a proceeding of which the Borrower received notice and in which
the Borrower was afforded an opportunity to participate to the full extent
permitted by law. A determination or decision will not be considered final for
purposes of the preceding sentence unless (A) the Issuer or the holder or Owners
of the Bonds involved in the proceeding in which the issue is raised (i) shall
have given the Borrower and the Trustee prompt written notice of the
commencement thereof, and (ii) shall have offered the Borrower the opportunity
to control the proceeding; provided the Borrower agrees to pay all expenses in
connection therewith and to indemnify such holder or holders against all
liability for such expenses (except that any such holder may engage separate
counsel, and the Borrower shall not be liable for the fees or expenses of such
counsel); and (B) such proceeding shall not be subject to a further right of
appeal or shall not have been timely appealed.

       "Electronic" notice shall mean notice by any form of electronic
transmission capable of producing a written record and shall constitute written
notice as required herein.

       "Facilities" or "Project" shall mean the pollution control, solid waste
disposal and sewage disposal facilities at the Plant, which are described in
Exhibit A to the Agreement, as from time to time revised, changed, amended or
modified, and related improvements and any substitutions therefor.

                                        5

<PAGE>

       "Favorable Opinion of Bond Counsel" shall mean an opinion of Bond Counsel
addressed to the Issuer, the Bank and the Trustee to the effect that the action
proposed to be taken (i) is authorized or permitted by the laws of the State of
Arizona and this Indenture, and all conditions precedent, if any, have been
satisfied and (ii) will not adversely affect any exclusion from gross income for
federal income tax purposes of interest on the Bonds.

       "Government Obligations" shall mean direct obligations of, or obligations
the principal of and interest on which are unconditionally guaranteed as to full
and timely payment by, the United States of America and which are not subject to
prepayment or redemption prior to maturity.

       "Indenture" shall mean this Indenture of Trust, as originally executed or
as it may from time to time be supplemented, modified or amended by any
supplemental indenture entered into pursuant to the provisions hereof.

       "Initial Interest Rate Period" shall mean the Interest Rate Period for
the Bonds on the date of issuance and delivery of the Bonds as specified in
Section 2.01(b) hereof.

       "Initial Long-Term Interest Rate Period" shall mean the period commencing
August 1, 2002 and ending July 31, 2005.

       "Interest Accrual Date" shall mean (i) with respect to any Daily Interest
Rate Period, the first day thereof and, thereafter, the first day of each
calendar month during that Daily Interest Rate Period, (ii) with respect to any
Weekly Interest Rate Period, the first day thereof and, thereafter, the first
day of each calendar month during that Weekly Interest Rate Period, (iii) with
respect to any Long-Term Interest Rate Period, the first day thereof and,
thereafter, each Interest Payment Date in respect thereof, other than the last
such Interest Payment Date, and (iv) with respect to each Bond Interest Term
within a Short Term Interest Rate Period, the first day thereof.

       "Interest Payment Date" shall mean (i) with respect to any Daily Interest
Rate Period or Weekly Interest Rate Period, the first Business Day of each
calendar month, (ii) with respect to any Long-Term Interest Rate Period, each
May 1 and November 1 occurring during such Long-Term Interest Rate Period and
the Business Day next succeeding the last day thereof, (iii) with respect to any
Short-Term Interest Rate Period, the Business Day next succeeding the last day
of thereof, and (iv) in all events, the redemption date or the final maturity
date of the Bonds.

       "Interest Rate Period" shall mean any Daily Interest Rate Period, Weekly
Interest Rate Period, Short-Term Interest Rate Period or Long- Term Interest
Rate Period.

       "Investment Securities" shall mean any of the following obligations or
securities (only to the extent investment therein would not violate the laws of
the State of Arizona) on which the Borrower (or any affiliate) is not the
obligor, maturing at such time or times as to enable disbursements to be made
from the Bond Fund in accordance with the terms hereof, or which shall be
marketable prior to the maturities thereof:

                     (i) direct obligations of, or obligations the principal and
              interest of which are guaranteed as to the full and timely payment
              by, the United States of

                                        6

<PAGE>

              America, which obligations, in either case, are not subject to
              redemption or prepayment at less than par by anyone other than
              the holder;

                     (ii)   obligations issued or guaranteed by an
              instrumentality of the United States of America pursuant to
              authority granted by the Congress of the United States of America,
              including obligations of the Federal National Mortgage
              Association, Federal Intermediate Credit Banks, Banks for
              Cooperatives, Federal Land Banks or Federal Home Loan Banks;

                     (iii)  commercial paper rated at the time of investment in
              the highest short-term grade by the Rating Agencies;

                     (iv)   bankers' acceptances drawn on and accepted by
              commercial banks (including the Trustee, the Paying Agent, and the
              Bank) having at least $10,000,000 in capital stock, surplus and
              undivided profits the unsecured, uninsured obligations of which
              are rated not less than "Prime - 1" or "Aa2" by Moody's and "A-1"
              or "A+" by S&P;

                     (v)    certificates of deposit, deposit accounts and
              savings accounts fully insured by the Federal Deposit Insurance
              Corporation;

                     (vi)   repurchase agreements with solvent banking or other
              financial institutions (including the Trustee, the Paying Agent,
              and the Bank) rated at the time of investment not less than the
              then current rating of the Bonds by each of the Rating Agencies;

                     (vii)  obligations of a state, a Territory, Puerto Rico, or
              a possession of the United States of America, or any political
              subdivision of the foregoing, or of the District of Columbia and
              which are rated at the time of investment not less than the then
              current rating of the Bonds by each of the Rating Agencies;

                     (viii) money market funds registered under the federal
              Investment Company Act of 1940, whose shares are registered under
              the federal Securities Act of 1933, and having a rating by S&P of
              "AAAm-G", "AAAm" or "Aam", and by Moody's of "Ass" or "As";

                     (ix)   custodial agreements providing for the investment of
              moneys through a custodian, reverse purchase agreements, option
              agreements and agreements to lend securities; and

                     (x)    any other obligations and securities not prohibited
              by law and which are rated at least "Aaa" or "A8" by Moody's and
              "AAA" or `AA' by S&P.

       "Issue Date" shall mean August 1, 2002, the date of issuance and delivery
of the Bonds.

       "Issuer" shall mean Maricopa County, Arizona Pollution Control
Corporation, an Arizona nonprofit corporation designated as a political
subdivision existing under the laws of the

                                        7

<PAGE>

State of Arizona, incorporated for and with the approval of the County, pursuant
to the provisions of the Constitution of the State of Arizona and the Act, and
its successors and assigns.

       "Letter of Credit" shall mean the irrevocable direct pay letter of
credit, if any, issued by the Bank and delivered to the Trustee in accordance
with Section 6.08 of the Agreement and any extension thereof.

       "Long-Term Interest Rate" shall mean with respect to each Bond, a fixed,
non-variable interest rate on such Bond established in accordance with Section
2.01(c)(iv) hereof.

       "Long-Term Interest Rate Period" shall mean each period during which a
Long-Term Interest Rate is in effect.

       "Maturity Date" shall mean May 1, 2037

       "Maximum Interest Rate" shall mean fifteen percent (15%) per annum.

       "Moody's" shall mean Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its successors
and their assigns, and, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency, "Moody's"
shall be deemed to refer to any other nationally recognized securities rating
agency designated by the Borrower, with the approval of the Remarketing Agent
and the Bank, by notice to the Trustee, the Tender Agent and the Issuer.

       "Nominee" shall have the meaning specified in Section 2.01(e) hereof.

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

                i.   those cancelled at or prior to such date or delivered to or
                     held by the Trustee at or prior to such date for
                     cancellation;

                ii.  those deemed to be paid in accordance with Article IX
                     hereof;

                iii. those in lieu of or in exchange, replacement or
                     substitution for which other Bonds shall have been
                     authenticated and delivered in accordance with this
                     Indenture, unless proof satisfactory to the Trustee and the
                     Borrower is presented that such Bond is held by a bona fide
                     holder in due course; and

                iv.  Bonds deemed purchased pursuant to Section 4.10 hereof.

       "Owner" shall mean the person or entity in whose name any Bond is
registered upon the registration books maintained pursuant to Section 2.04
hereof.

       "Paying Agent" shall mean the initial and any successor paying agent or
agents appointed in or in accordance with Section 11.21 hereof. "Principal
Office" of the Paying Agent shall mean the Principal Office of the Trustee (if
the Trustee is the Paying Agent) or such other office

                                        8

<PAGE>

of the Paying Agent designated in writing to the Issuer, the Trustee, the Bank,
the Tender Agent and the Remarketing Agent.

       "Plant" shall mean Units 1, 2 and 3 of the Palo Verde Nuclear Generating
Station, a nuclear power generating plant located in Maricopa County, Arizona,
at which the Project is located.

       "Prior Bonds" shall have the meaning set forth in the 5th Whereas clause
of this Indenture.

       "Purchase Fund" shall mean the fund created by Section 14.01 hereof.

       "Rating Agencies" shall mean S&P or Moody.

       "Receipts and Revenues" shall mean (a) the Repayment Installments
including all moneys drawn by the Trustee under a Credit Facility in
satisfaction of the Borrower's obligations to make Repayment Installments (b)
all other moneys received by the Trustee (for the account of the Issuer)
pursuant to the Agreement, (c) all moneys and investments in the Bond Fund and
(d) all income and profit from the investment of the foregoing moneys. The term
"Receipts and Revenues" does not include any moneys or investments in the
Purchase Fund or amounts required to be paid to the Issuer pursuant to Sections
5.04, 5.08, 8.03 and 8.05 of the Agreement.

       "Record Date" shall mean (a) with respect to any Interest Payment Date in
respect of any Daily Interest Rate Period, the last Business Day of each
calendar month or, in the case of the last Interest Payment Date in respect of a
Daily Interest Rate Period, the Business Day immediately preceding such Interest
Payment Date, (b) with respect to any Interest Payment Date in respect of any
Weekly Interest Rate Period or any Bond Interest Term within a Short-Term
Interest Rate Period, the Business Day immediately preceding such Interest
Payment Date, and (c) with respect to any Interest Payment Date in respect of
any Long-Term Interest Rate Period, the fifteenth day of the month immediately
preceding such Interest Payment Date or, in the event that an Interest Payment
Date shall occur within 16 days after the first day of a Long-Term Interest Rate
Period, such first day

       "Registrar" shall mean the registrar or registrars appointed in or in
accordance with Section 11.23 hereof. "Principal Office" of the Registrar shall
mean the Principal Office of the Trustee (if the Trustee is the Registrar) or
such other office of the Registrar designated in writing to the Issuer, the
Trustee, the Tender Agent and the Remarketing Agent.

       "Reimbursement Agreement" shall mean the Reimbursement Agreement, between
the Borrower and the Bank issued in connection with the Letter of Credit and
delivered to the Trustee in connection with Section 6.08 of the Agreement and
any extension thereof.

       "Remarketing Agent" shall mean Salomon Smith Barney Inc. and any
successor remarketing agent appointed in accordance with Section 14.01 hereof.
"Principal Office" of the Remarketing Agent shall mean Salomon Smith Barney
Inc., 390 Greenwich Street, 4th Floor, New York, New York 10013, Attention: Debt
Capital Markets, or such other office thereof designated in writing to the
Issuer, the Trustee, the Bank and the Tender Agent.

                                        9

<PAGE>

       "Remarketing Agreement" shall mean the Remarketing Agreement, executed
and delivered at or prior to the initial issuance of the Bonds, between the
Borrower and the Remarketing Agent, relating to the Bonds, as supplemented or
amended in accordance with the provisions thereof.

       "Repayment Installment" shall mean any amount that the Borrower is
required to pay to the Trustee pursuant to Section 5.02(a) of the Agreement as a
repayment of the loan made by the Issuer under the Agreement.

       "Representation Letter" shall have the meaning set forth in Section
2.01(e) hereof.

       "S&P" shall mean Standard & Poor's Ratings Group (a Division of
McGraw-Hill Inc.), a corporation organized and existing under the laws of the
State of New York, its successors and their assigns, and, if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other nationally
recognized securities rating agency designated by the Borrower, with the
approval of the Remarketing Agent and the Bank, by notice to the Trustee, the
Tender Agent and the Issuer.

       "Short-Term Interest Rate Period" shall mean, with respect to each Bond
bearing interest at a BIT Rate, the period established in accordance with
Section 2.01(c)(v) hereof.

       "Special Record Date" shall mean, with respect to any Bond, the date
established by the Trustee in connection with the payment of overdue interest on
that Bond pursuant to Section 2.01(b) hereof.

       "Supplemental Indenture" shall mean any supplemental indenture hereafter
duly authorized and entered into between the Issuer and the Trustee in
accordance with the provisions of this Indenture.

       "Tax Certificate" shall mean "The Tax Certificate as to Arbitrage and the
Provisions of Sections 141-150 of the Internal Revenue Code of 1986", executed
by the Issuer in connection with the issuance of the Bonds.

       "Tax Exempt" shall mean, with respect to interest on any obligations of a
state or local government, including the Bonds, that such interest is excluded
from the gross income of the holders thereof (other than any holder who is a
"substantial user" of facilities financed with such obligations or a "related
person" within the meaning of Section 147(a) of the Code) for federal income tax
purposes, whether or not such interest is includable as an item of tax
preference or otherwise includable directly or indirectly for purposes of
calculating other tax liabilities, including any alternative minimum tax or
environmental tax under the Code.

       "TBMA Municipal Index" means The Bond Market Association Municipal Index
as of the most recent date for which such index was published or such other
weekly, high-grade index comprised of seven-day, Tax-Exempt variable rate demand
notes produced by Municipal Market Data, Inc., or its successor, or as otherwise
designated by The Bond Market Association; provided, however, that, if such
index is no longer produced by Municipal Market Data, Inc. or its successor,
then "TBMA Municipal Index" shall mean such other reasonably comparable index
selected by the Borrower with the advice of the Remarketing Agent, if any.

                                       10

<PAGE>

       "Tender Agent" shall mean Salomon Smith Barney Inc. and any successor
tender agent appointed in accordance with Section 14.01 hereof. "Principal
Office" of the Tender Agent shall mean the Principal Office of the Remarketing
Agent (if the Remarketing Agent is the Tender Agent), or such other office
thereof designated in writing to the Issuer, the Trustee and the Remarketing
Agent.

       "Tender Agreement" shall mean the Tender Agreement, if any, executed and
delivered at or prior to the initial issuance of the Bonds, between the Borrower
and the Tender Agent, relating to the Bonds, as supplemented or amended in
accordance with the provisions thereof.

       "Trustee" shall mean JPMorgan Chase Bank, as trustee under this
Indenture, and its successor or successors hereunder. "Principal Office" of the
Trustee shall mean the principal office of the Trustee at which at any
particular time its corporate trust business shall be administered in Texas,
which office at the date of the execution of this Indenture, is 600 Travis,
Suite 1150 Houston, TX 77002, Attention: Institutional Trust Services; except
that with respect to the presentation of Bonds for payment or for registration
of transfer, exchange or tender, such term shall mean the office or agency of
the Trustee at 2001 Bryan Street, 9/th/ Floor, Dallas, Texas 75202, Attention:
Registered Bond Events.

       "Trust Estate" shall mean at any particular time all right, title and
interest of the Issuer in and to the Agreement (except its rights under Sections
5.04, 5.08 and 8.05 thereof and any rights of the Issuer to receive notices,
certificates, requests, requisitions, directions and other communications
thereunder), including without limitation the Receipts and Revenues, all moneys
and obligations 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 or
any 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, except for moneys or obligations deposited with or paid to the
Trustee or any Paying Agent for the redemption or payment of Bonds which are
deemed to have been paid in accordance with Article IX hereof and funds held
pursuant to Section 5.06 hereof.

       "Weekly Interest Rate" shall mean a variable interest rate on the Bonds
established in accordance with Section 2.01(c)(iii) hereof.

       "Weekly Interest Rate Period" means each period during which a Weekly
Interest Rate is in effect.

              Section 1.02 Number and Gender. The singular form of any word used
herein, including the terms defined in Section 1.01, shall include the plural,
and vice versa. The use herein of a word of any gender shall include all
genders.

              Section 1.03 Articles, Sections, Etc. All references herein to
"Articles," "Sections" and other subdivisions are to the corresponding Articles,
Sections or subdivisions of this Indenture as originally executed; and the words
"herein," "hereof," "hereunder" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or subdivision
hereof. The headings or titles of the several Articles and Sections hereof,

                                       11

<PAGE>

and any table of contents appended to copies hereof, shall be solely for
convenience of reference and shall not affect the meaning, construction or
effect of this Indenture.

               Section 1.04 Content of Certificates and Opinions. Every
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture or the Agreement (except for the certificate of
cancelled Bonds provided for in Sections 2.05, 2.06 and 4.05 hereof) shall
include (a) a statement that the person or persons making or giving such
certificate or opinion have read such covenant or condition and the definitions
herein relating thereto; (b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based; (c) a statement that, in the opinion of
the signers, they have made or caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such covenant or condition has been complied with; and (d) a
statement as to whether, in the opinion of the signers, such condition or
covenant has been complied with.

     Any such certificate or opinion made or given by an officer of the Issuer
or the Borrower may be based, insofar as it relates to legal matters, upon a
certificate or opinion of or representations by counsel, unless such officer
knows that the certificate or opinion or representations with respect to the
matters upon which his or her certificate or opinion may be based as aforesaid
are erroneous, or in the exercise of reasonable care should have known that the
same were erroneous. Any such certificate or opinion made or given by counsel
may be based, insofar as it relates to factual matters (with respect to which
information is in the possession of the Issuer or the Borrower), upon the
certificate or opinion of or representations by an officer of the Issuer or the
Borrower, as applicable, unless such counsel knows that the certificate or
opinion or representations with respect to the matters upon which his or her
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should have known that the same were erroneous.

               Section 1.05 Findings. It is hereby found and determined that:

               (a)  The Borrower is a corporation which is conducting operations
     in the County and is qualified under the Act to borrow the proceeds of the
     sale of the Bonds from the Issuer to redeem and repay the outstanding
     principal amount of the Prior Bonds for purposes of the Act;

               (b)  The Project promotes the purposes of the Act by preventing
     or limiting air, water and other forms of pollution for the purpose of
     protecting the health and welfare of the citizens of the State of Arizona,
     and facilitate compliance by the Borrower with existing and possible future
     air, water and other quality standards designed to improve the environment
     in the State of Arizona;

               (c)  The loan pursuant to the Agreement is in furtherance of the
     purposes of the Issuer;

               (d)  It is advisable that the Bonds be subject to redemption as
     provided in this Indenture;

                                       12

<PAGE>

               (e)  The manner in which the Bonds are sold is most advantageous
     and it is necessary and advantageous that the expenses, premiums and
     commissions, if any, in connection with the issuance of the Bonds be paid
     by the Borrower; and

               (f)  It is advisable that this Indenture contain the provisions
     set forth herein.

                                   ARTICLE II

                                   THE BONDS

               Section 2.01 Authorization and Terms of Bonds.

               (a)  Authorization. Bonds designated as "Maricopa County, Arizona
     Pollution Control Corporation Pollution Control Refunding Revenue Bonds
     2002 Series A (El Paso Electric Company, Palo Verde Project)" may be issued
     under this Indenture. The aggregate principal amount of Bonds which may be
     issued and Outstanding under this Indenture shall not exceed Thirty-Seven
     Million One Hundred Thousand Dollars ($37,100,000). No Bonds may be issued
     hereunder except in accordance with this Article.

               (b)  General Terms. The Bonds shall be issued as fully registered
     Bonds, without coupons, in Authorized Denominations and shall be dated as
     of the Issue Date. The Bonds shall mature, subject to prior redemption as
     provided in Article IV, upon the terms and conditions hereinafter set
     forth, on the Maturity Date. The Bonds shall bear interest at a Long-Term
     Interest Rate for a Long-Term Interest Rate Period commencing August 1,
     2002 and ending July 31, 2005 (the "Initial Interest Rate Period"). The
     Initial Long-Term Interest Rate shall be 6.25% per annum.

     The Bonds shall be numbered from R-1 consecutively upwards in order of
authentication. Each Bond shall bear interest from the last date to which
interest has been paid in full or, if no interest has been paid in full or duly
provided on such Bond from the Issue Date. All Bonds shall mature on the date
set forth above and shall bear interest at the rates determined from time to
time in accordance with the provisions of this Indenture. Payment of the
interest on any Bond shall be made to the person appearing on the bond
registration books of the Registrar as the registered holder thereof as of the
close of business on the Record Date, such interest to be paid by the Paying
Agent to such registered holder (i) in the event such Bond is a Book-Entry Bond,
in immediately available funds on the Interest Payment Date in accordance with
the Representation Letter, and (ii) in the event such Bond is not a Book-Entry
Bond (A) in immediately available funds (by wire transfer or by deposit to the
account of the holder of at least $1,000,000 of Bonds if such account is
maintained with the Paying Agent), according to the written instructions given
by such holder to the Registrar prior to the Record Date or (B) in all other
cases, by check mailed by first class mail to the holder at such holder's
address as it appears as of the Record Date on the registration books of the
Registrar; except, in each case, that, if and to the extent that there shall be
a default in the payment of the interest due on such Interest Payment Date, such
defaulted interest shall be paid to the holders in whose name any such Bonds are
registered as of a special record date to be fixed by the Trustee, notice of
which shall be given to such holders not less than ten (10) days prior thereto.
Both the principal of and

                                       13

<PAGE>

premium, if any, on the Bonds shall be payable upon surrender thereof in lawful
money of the United States of America at the Principal Office of the Paying
Agent. Notwithstanding the foregoing, interest on any Bond bearing a Bond
Interest Term Rate (except any such Bond which is a Book-Entry Bond) shall be
paid only upon presentation to the Tender Agent of the Bond on which such
payment is due. The Bonds shall be dated as of the Issue Date. The Bonds shall
be substantially in the form attached hereto as Exhibit A.

     If and to the extent, however, that the Issuer fails to make payment or
provision for payment of interest on any Bond on any Interest Payment Date, that
interest shall cease to be payable to the Owner of that Bond on the applicable
Record Date. When moneys become available for payment of the interest, (a) the
Trustee shall, pursuant to Section 10.10 hereof, establish a Special Record Date
for the payment of that interest which shall be not more than 15 nor fewer than
10 days prior to the date of the proposed payment, and (b) the Trustee shall
give notice by first-class mail of the proposed payment and of the Special
Record Date to each owner not fewer than 10 days prior to the Special Record
Date and, thereafter, the interest shall be payable to the owners of the Bonds
as of the Special Record Date at the close of business on the Special Record
Date.

               (c)  Interest Rates and Rate Periods. The Bonds shall bear
     interest until final payment of the principal or redemption price thereof
     shall have been made in accordance with the provisions hereof, whether at
     maturity, upon redemption or otherwise. During Daily Interest Rate Periods,
     interest on the Bonds shall be computed on the basis of a 365- or 366-day
     year for the number of days actually elapsed during Daily Interest Rate
     Periods. During Short-Term Interest Rate Periods or Weekly Interest Rate
     Periods, interest on the Bonds shall be computed on the basis of a 365- or
     366-day year for the number of days actually elapsed based on the calendar
     year in which the Short-Term Interest Rate Period or Weekly Interest Rate
     Period commences. During any Long-Term Interest Rate Period, interest on
     the Bonds shall be computed upon the basis of a 360-day year, consisting of
     twelve 30-day months.

                    (i)  Rate Periods. The Bonds shall initially bear interest
               as set forth in Section 2.01(b), and shall remain in such
               Interest Rate Period until adjusted to a different Interest Rate
               Period as provided herein. After any such adjustment, the term of
               the Bonds shall be divided into consecutive Interest Rate Periods
               during which the Bonds may bear interest at the Daily Interest
               Rate, Weekly Interest Rate, Bond Interest Term Rate or Long-Term
               Interest Rate. Any Daily Interest Rate Period, Weekly Interest
               Rate Period or Short-Term Interest Rate Period established with
               respect to the Bonds shall continue in effect unless and until
               adjusted to a different Interest Rate Period as provided herein.

                    (ii) Daily Interest Rate.

                    (A)  Determination of Daily Interest Rate. During each Daily
               Interest Rate Period, the Bonds shall bear interest at the Daily
               Interest Rate , determined by the Remarketing Agent on or before
               each Business Day for such Business Day. The Daily Interest Rate
               shall be the rate of interest per annum determined by the
               Remarketing Agent to be the lowest interest rate which would
               enable the

                                       14

<PAGE>

               Remarketing Agent to sell the Bonds for delivery on the effective
               date of such interest rate at a price (without regard to accrued
               interest) equal to 100% of the principal amount thereof. The
               Remarketing Agent shall provide the Trustee and the Borrower with
               telephonic or Electronic notice of the Daily Interest Rate
               determined by 10:30 a.m. (New York City time) on the date of
               determination. If the Remarketing Agent shall not have determined
               a Daily Interest Rate for any day by 10:30 a.m. (New York City
               time) on such day, the Daily Interest Rate shall be the same as
               the Daily Interest Rate for the immediately preceding day. In no
               event shall the Daily Interest Rate be greater than the Maximum
               Interest Rate.

                    (B)  Adjustment to a Daily Interest Rate Period. At any
               time, the Borrower, by written notice to the Issuer, the Trustee,
               the Bank, the Tender Agent and the Remarketing Agent may elect
               that the Bonds shall bear interest at a Daily Interest Rate. Such
               notice (1) shall specify the effective date of such adjustment to
               a Daily Interest Rate, which shall be (a) a Business Day not
               earlier than thirty-five (35) days after delivery of such notice
               (or such shorter period as shall be acceptable to the Trustee);
               (b) in the case of an adjustment from a Long-Term Interest Rate
               Period, a day on which the Bonds would be permitted to be
               redeemed at the option of the Borrower pursuant to Section
               4.01(a)(ii)(C) hereof; and (c) in the case of an adjustment from
               a Weekly Interest Rate Period or a Short-Term Interest Rate
               Period, an Interest Payment Date on which interest is payable for
               the Weekly Interest Rate Period or Bond Interest Term from which
               the adjustment is to be made; provided, however, that if prior to
               the Borrower's making such election, any Bonds shall have been
               called for redemption and such redemption shall not have
               theretofore been effected, the effective date of such Daily
               Interest Rate Period shall not precede such redemption date; and
               (2) if the adjustment is from a Long-Term Interest Rate Period,
               shall be accompanied by a Favorable Opinion of Bond Counsel
               addressed to the Trustee to the effect that such adjustment (a)
               is authorized or permitted by the Indenture and the Act, and (b)
               will not adversely affect the Tax-Exempt status of the interest
               on the Bonds.

                    (C)  Notice of Adjustment to a Daily Interest Rate. The
               Trustee shall give notice by first class mail of an adjustment to
               a Daily Interest Rate Period to the Owners of the Bonds not less
               than 15 days (30 days if the then current Interest Rate Period is
               a Long-Term Interest Rate Period) prior to the effective date of
               such Daily Interest Rate Period. Such notice shall state (1) that
               the interest rate on the Bonds will be adjusted to a Daily
               Interest Rate (subject to the Borrower's ability to rescind its
               election as described in Section 2.01(c)(viii) hereof), (2) the
               effective date of the Daily Interest Rate Period, (3) that the
               Bonds are subject to mandatory tender for purchase on such
               effective date (except in the case of adjustment between Daily
               Interest Rate Periods and Weekly Interest Rate Periods), (4) the
               procedures for such mandatory tender, and (5) the purchase price
               of the Bonds on such effective date (expressed as a percentage of
               the principal amount thereof).

                    (iii) Weekly Interest Rate.

                                       15

<PAGE>

                    (A)  Determination of Weekly Interest Rate. During each
               Weekly Interest Rate Period, the Bonds shall bear interest at the
               Weekly Interest Rate, which shall be determined by the
               Remarketing Agent no later than the first day of such Weekly
               Interest Rate Period and thereafter no later than 10:00 a.m. (New
               York City time) on Wednesday of each week during such Weekly
               Interest Rate Period, unless any such Wednesday shall not be a
               Business Day, in which event the Weekly Interest Rate shall be
               determined by the Remarketing Agent no later than the Business
               Day immediately preceding such Wednesday. The Weekly Interest
               Rate shall be the rate of interest per annum determined by the
               Remarketing Agent to be the lowest interest rate which would
               enable the Remarketing Agent to sell the Bonds for delivery on
               the effective date of such interest rate at a price (without
               regard to accrued interest) equal to 100% of the principal amount
               thereof. If for any reason, a Weekly Interest Rate is not so
               established for any period by the time specified above by the
               Remarketing Agent, the Weekly Interest Rate shall be the same as
               the Weekly Interest Rate in effect for the immediately preceding
               week. In no event shall any Weekly Interest Rate exceed the
               Maximum Interest Rate. The first Weekly Interest Rate determined
               for each Weekly Interest Rate Period shall apply to the period
               commencing on the first day of such Weekly Interest Rate Period
               and ending on the next succeeding Tuesday. Thereafter, each
               Weekly Interest Rate shall apply to the period commencing on each
               Wednesday and ending on the next succeeding Tuesday, unless such
               Weekly Interest Rate Period shall end on a day other than
               Tuesday, in which event the last Weekly Interest Rate for such
               Weekly Interest Rate Period shall apply to the period commencing
               on the Wednesday preceding the last day of such Weekly Interest
               Rate Period and ending on such last day. The Remarketing Agent
               shall provide the Trustee and the Borrower with written,
               telephonic or Electronic notice of each Weekly Interest Rate, as
               determined, by 12:00 noon (New York City time) on the effective
               date of such Weekly Interest Rate.

                    (B)  Adjustment to Weekly Interest Rate. At any time, the
               Borrower, by written direction to the Issuer, the Trustee, the
               Bank, the Tender Agent and the Remarketing Agent may elect that
               the Bonds shall bear interest at a Weekly Interest Rate. Such
               direction (1) shall specify the effective date of such adjustment
               to a Weekly Interest Rate, which shall be (a) a Business Day not
               earlier than thirty-five (35) days after delivery of such notice
               (or such shorter period as shall be acceptable to the Trustee);
               (b) in the case of an adjustment from a Long-Term Interest Rate
               Period, a day on which the Bonds would otherwise be permitted to
               be redeemed at the option of the Borrower pursuant to Section
               4.01(a)(ii)(C) hereof; and (c) in the case of an adjustment from
               a Daily Interest Rate Period or Short-Term Interest Rate Period,
               an Interest Payment Date on which interest is payable for the
               Daily Interest Rate Period or Bond Interest Term from which the
               adjustment is to be made; provided, however, that if prior to the
               Borrower's making such election, any Bonds shall have been called
               for redemption and such redemption shall not have theretofore
               been effected, the effective date of such Weekly Interest Rate
               Period shall not precede such redemption date; and (2) if the
               adjustment is from a Long-Term Interest Rate Period, shall be
               accompanied by a Favorable Opinion of Bond Counsel addressed

                                       16

<PAGE>

               to the Trustee to the effect that such adjustment (a) is
               authorized or permitted by the Indenture and the Act, and (b)
               will not adversely affect the Tax-Exempt status of interest on
               the Bonds.

                    (C)  Notice of Adjustment to a Weekly Interest Rate Period.
               The Trustee shall give notice by first class mail of an
               adjustment to a Weekly Interest Rate Period to the Owners of the
               Bonds not less than fifteen (15) days (thirty (30) days if the
               then current Interest Rate Period is a Long-Term Interest Rate
               Period) prior to the effective date of such Weekly Interest Rate
               Period. Such notice shall state (1) that the Interest Rate on the
               Bonds will be adjusted to a Weekly Interest Rate (subject to the
               Borrower's ability to rescind its election as provided in Section
               2.01(c)(viii) hereof), (2) the effective date of the Weekly
               Interest Rate Period, (3) that the Bonds are subject to mandatory
               tender for purchase on such effective date (except in the case of
               adjustments between Daily Interest Rate Periods and Weekly
               Interest Rate Periods), (4) the procedures for such mandatory
               tender, and (5) the purchase price of such Bonds on such
               effective date (expressed as a percentage of the principal amount
               thereof).

                    (iv) Long-Term Interest Rate.

                    (A)  Determination of Long-Term Interest Rate. During each
               Long-Term Interest Rate Period, the Bonds shall bear interest at
               the Long-Term Interest Rate, which shall be determined by the
               Remarketing Agent on a Business Day selected by the Remarketing
               Agent, but not more than forty (40) days prior to and not later
               than the effective date of such Long-Term Interest Rate Period.
               The Long-Term Interest Rate shall be the rate of interest per
               annum determined by the Remarketing Agent on such date, and
               communicated by the close of business on such date to the
               Trustee, the Paying Agent and the Borrower, by written,
               telephonic or Electronic notice, as being the lowest interest
               rate which would enable the Remarketing Agent to sell the Bonds
               for delivery on the effective date of such Long-Term Interest
               Rate Period at a price (without regard to accrued interest) equal
               to 100% of the principal amount thereof; provided, however, that
               if, for any reason, a Long-Term Interest Rate for any Long-Term
               Interest Rate Period shall not be determined or effective or if
               an adjustment from a Long-Term Interest Rate Period to another
               Interest Rate Period shall not be effective, the Interest Rate
               Period for the Bonds shall automatically convert to a Daily
               Interest Rate Period; provided, further, however, that if the
               Favorable Opinion of Bond Counsel required by Section
               2.01(c)(ii)(B) in connection with an adjustment to a Daily
               Interest Rate Period from a Long-Term Interest Rate Period cannot
               be obtained, then the Interest Rate Period for the Bonds shall
               automatically convert to a Long-Term Interest Rate Period of one
               year and one day. If a Daily Interest Rate for the first day of
               such Daily Interest Rate Period is not determined as provided in
               Section 2.01(c)(ii) hereof, the Daily Interest Rate for the first
               day of such Daily Interest Rate Period shall be equal to the TBMA
               Municipal Index. In no event shall any Long-Term Interest Rate be
               greater than the Maximum Interest Rate.

                                       17

<PAGE>

                    (B)  Adjustment to or Continuation of a Long-Term Interest
               Rate Period. At any time, the Borrower, by written notice to the
               Issuer, the Bank, the Trustee, the Tender Agent and the
               Remarketing Agent may elect that the Bonds shall bear, or
               continue to bear, interest at a Long-Term Interest Rate, and if
               it shall so elect, shall determine the duration of the Long-Term
               Interest Rate Period during which the Bonds shall bear interest
               at such Long-Term Interest Rate. Each Long-Term Interest Rate
               Period shall have a duration such that the last day of such
               Long-Term Interest Rate Period is (1) a day which both
               immediately precedes a Business Day and is at least one year
               after the effective date of such Long-Term Interest Rate Period
               or (2) if earlier, the day immediately preceding the final
               maturity date of the Bonds. At the time the Borrower so elects an
               adjustment to or continuation of a Long-Term Interest Rate
               Period, the Borrower may specify two or more consecutive
               Long-Term Interest Rate Periods and, if the Borrower so
               specifies, shall specify the duration of each such Long-Term
               Interest Rate Period as provided in this paragraph. Such notice
               shall specify the effective date of each Long-Term Interest Rate
               Period, which shall be (a) a Business Day not earlier than
               thirty-five (35) days after delivery of such notice (or such
               shorter period as shall be acceptable to the Trustee); (b) in the
               case of an adjustment from or continuation of a Long-Term
               Interest Rate Period, a day on which the Bonds would be permitted
               to be redeemed by the Borrower pursuant to Section 4.01(a)(ii)(C)
               hereof; and (c) in the case of an adjustment from a Daily, Weekly
               or Short-Term Interest Rate Period, an Interest Payment Date on
               which interest is payable for the Daily or Weekly Interest Rate
               Period or Bond Interest Term from which the adjustment is to be
               made; provided, however, that if prior to the Borrower's making
               such election, any Bonds shall have been called for redemption
               and such redemption shall not have theretofore been effected, the
               effective date of such Long-Term Interest Rate Period shall not
               precede such redemption date. In addition, such notice (i) shall
               specify the last day of such Long-Term Interest Rate Period, and
               (ii) if the adjustment is from a Daily, Weekly or Short-Term
               Interest Rate Period, shall be accompanied by a Favorable Opinion
               of Bond Counsel addressed to the Trustee to the effect that such
               adjustment (a) is authorized or permitted by the Indenture and
               the Act, and (b) will not adversely affect the Tax-Exempt status
               of interest on the Bonds.

                    If, by the thirty-fifth day prior to the last day of any
               Long-Term Interest Rate Period, the Trustee shall not have
               received notice of the Borrower's election that, during the next
               succeeding Interest Rate Period, the Bonds shall bear interest at
               a Daily Interest Rate, a Weekly Interest Rate, a Long-Term
               Interest Rate or a Bond Interest Term Rate accompanied by
               appropriate opinions of Bond Counsel, if required by Section
               2.01(c)(ii)(B), (iii)(B), (iv)(B) or (v)(B) hereof, the next
               succeeding Interest Rate Period for the Bonds shall be a Daily
               Interest Rate Period; provided, however, that if the opinion of
               Bond Counsel required by Section 2.01(c)(ii)(B) in connection
               with an adjustment to a Daily Interest Rate Period from a
               Long-Term Interest Rate Period cannot be obtained, then the
               Interest Rate Period for the Bonds shall automatically convert to
               a Long-Term Interest Rate Period of one year and one day. If a
               Daily Interest Rate for the first day of such Daily Interest Rate
               Period is not determined as provided in Section

                                       18

<PAGE>

               2.01(c)(ii) hereof, the Daily Interest Rate for the first day of
               such Daily Interest Rate Period shall be equal to the TBMA
               Municipal Index.

                    At the same time that the Borrower elects to have the Bonds
               bear interest at a Long-Term Interest Rate or continue to bear
               interest at a Long-Term Interest Rate, the Borrower may also
               specify to the Trustee optional redemption prices and periods
               different from (including that there be no such optional
               redemption) those set out in Section 4.01(a)(ii)(C) during the
               Long-Term Interest Rate Period(s) with respect to which such
               election is made; provided, however, that such notice shall be
               accompanied by a Favorable Opinion of Bond Counsel addressed to
               the Trustee to the effect that such changes (i) are authorized or
               permitted by the Act and this Indenture, and (ii) will not
               adversely affect the Tax-Exempt status of interest on the Bonds.

                    (C)  Notice of Adjustment to or Continuation of a Long-Term
               Interest Rate. The Trustee shall give notice by first class mail
               of an adjustment to or continuation of a Long-Term Interest Rate
               Period to the Owners of the Bonds not less than fifteen (15) days
               (thirty (30) days if the then current Interest Rate Period is a
               Long-Term Interest Rate Period) prior to the effective date of
               such Long-Term Interest Rate Period. Such notice shall state (1)
               that the interest rate on the Bonds will be adjusted to, or
               continue to be, a Long-Term Interest Rate (subject to the
               Borrower's ability to rescind its election as provided in Section
               2.01(c)(viii) hereof), (2) the effective date of such Long-Term
               Interest Rate Period, (3) that the Bonds shall be subject to
               mandatory tender for purchase on such effective date, (4) the
               procedures for such mandatory tender, and (5) the purchase price
               of the Bonds on such effective date (expressed as a percentage of
               the principal amount thereof).

                    (v)  Bond Interest Term Rate.

                    (A)  Determination of Bond Interest Terms and Bond Interest
               Term Rates. During each Short-Term Interest Rate Period, each
               Bond shall bear interest during each Bond Interest Term for such
               Bond at the Bond Interest Term Rate for such Bond. Each Bond
               Interest Term for any Bond shall be a period of at least one day
               but not more than the lesser of (x) 270 days or (y) the number of
               days of interest coverage on the Bonds provided for in any Credit
               Facility then in effect minus five (5) days. When a Credit
               Facility, if any, other than a Letter of Credit is in effect with
               respect to the Bonds or no Credit Facility is in effect with
               respect to the Bonds, each Bond Interest Term for any Bond shall
               be a period of at least one day but not more than 270 days. Each
               Bond Interest Term for any Bond shall be a period determined by
               the Remarketing Agent to be, in its judgment, the period which,
               taking into account prevailing market conditions and all other
               Bond Interest Terms and Bond Interest Term Rates for all Bonds
               then Outstanding, is likely to result in the lowest overall net
               interest expense on all such Bonds; provided, however, that any
               such Bond purchased on behalf of the Borrower and remaining
               unsold in the hands of the Remarketing Agent as of 1:00 p.m. (New
               York City time) on the effective date of the Bond Interest Term
               for such Bond

                                       19

<PAGE>

               shall have a Bond Interest Term of one day or, if such Bond
               Interest Term would not end on a day immediately preceding a
               Business Day, a Bond Interest Term of more than one day ending on
               the day immediately preceding the next Business Day; provided,
               further, however, that (1) each Bond Interest Term shall end on a
               day which immediately precedes a Business Day and no Bond
               Interest Term shall extend beyond the day immediately preceding
               the final maturity date of the Bonds or, if a Credit Facility, if
               any, is then in effect with respect to the Bonds, the scheduled
               expiration date of such Credit Facility, and (2) if for any
               reason the Remarketing Agent fails or is unable to determine a
               Bond Interest Term on any Bond, the Bond Interest Term for such
               Bond shall be one day, unless such Bond Interest Term would end
               on a day which does not precede a Business Day, in which case
               such Bond Interest Term shall end on the day immediately
               preceding the next succeeding Business Day.

                    The Bond Interest Term Rate for each Bond Interest Term for
               each Bond shall be the rate of interest per annum determined by
               the Remarketing Agent no later than 1:00 p.m. (New York City
               time) on the first day of such Bond Interest Term to be the
               lowest interest rate which would enable the Remarketing Agent to
               sell such Bonds on the effective date of such interest rate at a
               price (without regard to accrued interest) equal to 100% of the
               principal amount thereof. The Remarketing Agent shall provide the
               Trustee and the Borrower with telephonic or Electronic notice of
               each Bond Interest Term Rate and Bond Interest Term by 1:00 p.m.
               (New York City time) on the date of determination. If a Bond
               Interest Term Rate for a Bond Interest Term of one day is not
               determined or effective by 1:00 p.m. (New York City time) on such
               day, the Bond Interest Term Rate for such Bond Interest Term of
               one day shall be equal to the TBMA Municipal Index. In no event
               shall any Bond Interest Term Rate exceed the Maximum Interest
               Rate.

                    Notwithstanding the foregoing, in the event that notice of
               redemption with respect to any Bond in a Short-Term Interest Rate
               Period shall have been given to the holder of such Bond by the
               Trustee pursuant to Section 4.03 hereof, no subsequent Bond
               Interest Terms or Bond Interest Term Rates shall be determined
               with respect to such Bond.

                    (B)  Adjustment to or Continuation of Bond Interest Term
               Rates. At any time, the Borrower, by written direction to the
               Issuer, the Trustee, the Bank, if any, the Tender Agent and the
               Remarketing Agent may elect that the Bonds shall bear interest at
               Bond Interest Term Rates. Such direction (1) shall specify the
               effective date of the Short-Term Interest Rate Period during
               which the Bonds shall bear interest at Bond Interest Term Rates,
               which shall be (a) a Business Day not earlier than thirty-five
               (35) days after delivery of such notice (or such shorter period
               as shall be acceptable to the Trustee), (b) in the case of an
               adjustment from a Long-Term Interest Rate Period, a day on which
               the Bonds would be permitted to be redeemed at the option of the
               Borrower pursuant to Section 4.01(a)(ii)(C) hereof; and (c) in
               the case of an adjustment from a Daily or Weekly Interest Rate
               Period, an Interest Payment Date on which interest is payable for
               the Daily or Weekly Interest Rate Period from which the
               adjustment is to be made; provided,

                                       20

<PAGE>

                  however, that if prior to the Borrower's making such election
                  any Bonds shall have been called for redemption and such
                  redemption shall not have theretofore been effected, the
                  effective date of such Short-Term Interest Rate Period shall
                  not precede such redemption date; and (2) shall be accompanied
                  by a Favorable Opinion of Bond Counsel addressed to the
                  Trustee to the effect that such adjustment (a) is authorized
                  or permitted by the Indenture and the Act and (b) will not
                  adversely affect the Tax-Exempt status of interest on the
                  Bonds.

                         (C)  Notice of Adjustment to a Bond Interest Term. The
                  Trustee shall give notice by first class mail of an adjustment
                  to a Short-Term Interest Rate Period to the Owners of the
                  Bonds not less than fifteen (15) days (thirty (30) days if the
                  then current Interest Rate Period is a Long-Term Interest Rate
                  Period) prior to the effective date of such Short-Term
                  Interest Rate Period. Such notice shall state (1) that the
                  interest rate on the Bonds will be adjusted to Bond Interest
                  Term Rates (subject to the Borrower's ability to rescind its
                  election as provided in Section 2.01(c)(viii) hereof), (2) the
                  effective date of the Short-Term Interest Rate Period, (3)
                  that the Bonds are subject to mandatory tender for purchase on
                  the effective date of such Short-Term Interest Rate Period,
                  (4) the procedures for such mandatory tender, and (5) the
                  purchase price of the Bonds on such effective date (expressed
                  as a percentage of the principal amount thereof).

                         (D)  Adjustment from a Short-Term Interest Rate Period.
                  At any time during a Short-Term Interest Rate Period, the
                  Borrower may elect that the Bonds shall no longer bear
                  interest at Bond Interest Term Rates and shall instead bear
                  interest as otherwise permitted under this Indenture. The
                  Borrower shall give written notice to the Issuer, the Trustee,
                  the Paying Agent and the Remarketing Agent, if any, of such
                  election and shall specify the Interest Rate Period to follow
                  with respect to such Bonds upon cessation of the Short-Term
                  Interest Rate Period and instruct the Remarketing Agent to (1)
                  determine Bond Interest Terms of such duration that, as soon
                  as possible, all Bond Interest Terms shall end on the same
                  date, not earlier than twenty-four (24) days (or such shorter
                  period acceptable to the Trustee) following the delivery by
                  the Borrower of such written notice, and upon the
                  establishment of such Bond Interest Term the day next
                  succeeding the last day of all such Bond Interest Terms shall
                  be the effective date of the Interest Rate Period elected by
                  the Borrower; or (2) determine Bond Interest Terms that will
                  best promote an orderly transition to the next succeeding
                  Interest Rate Period to apply to the Bonds, beginning not
                  earlier than twenty-four (24) days (or such shorter period
                  acceptable to the Trustee) following the delivery by the
                  Borrower of such written notice. If the alternative in clause
                  (2) above is selected, the day next succeeding the last day of
                  the Bond Interest Term for each Bond shall be with respect to
                  such Bond the effective date of the Interest Rate Period
                  elected by the Borrower. The Remarketing Agent, promptly upon
                  the determination thereof, shall give written notice of such
                  last day and such effective dates to the Borrower, the Trustee
                  and the Tender Agent. During any transitional period from a
                  Short-Term Interest Rate Period to the next succeeding
                  Interest Rate Period in accordance with clause (2) above, the
                  provisions of this Indenture shall be deemed to apply to the
                  Bonds as follows: the Bonds continuing to bear interest at

                                       21

<PAGE>

                  Bond Interest Term Rates shall have applicable to them the
                  provisions hereunder theretofore applicable to such Bonds as
                  if all Bonds were continuing to bear interest at Bond Interest
                  Term Rates and the Bonds bearing interest in the Interest Rate
                  Period to which the transition is being made will have
                  applicable to them the provisions hereunder as if all Bonds
                  were bearing interest in such Interest Rate Period.

                         (vi)    Terms of Credit Facility, If Any. If a Credit
                  Facility in the form of a letter of credit, municipal bond
                  insurance policy or surety bond is to be held by the Trustee
                  after the effective date of any adjustment from one Interest
                  Rate Period to another Interest Rate Period, such Credit
                  Facility, if any, shall be in an amount sufficient to provide
                  payment of (x) the principal amount of the Outstanding Bonds
                  plus (y) the amount of interest (computed on the basis of a
                  365-day year in the case of an adjustment to a Daily Interest
                  Rate Period, Weekly Interest Rate Period or Short-Term
                  Interest Rate Period, and on the basis of a 360-day year
                  consisting of twelve 30-day months in the case of an
                  adjustment to a Long-Term Interest Rate Period) which will
                  accrue on the Outstanding Bonds for a period equal to the
                  maximum number of days between Interest Payment Dates during
                  the new Interest Rate Period plus five (5) days. In the case
                  of an adjustment to a Long-Term Interest Rate Period, a Credit
                  Facility, if any, to be in effect after the effective date of
                  such adjustment shall (i) extend for a period ending on a date
                  no earlier than five (5) days after the first date on which
                  the Bonds may be called for redemption pursuant to Section
                  4.01(a)(ii)(C) and (ii) cover the premium, if any, which would
                  be included in the purchase price upon mandatory purchase of
                  the Bonds pursuant to Section 4.08(b) hereof if the term of
                  such Credit Facility was not extended beyond the expiration
                  date set forth therein.

                         (vii)   Determination Conclusive. The determination of
                  any Bond Interest Term Rate, Daily Interest Rate, Weekly
                  Interest Rate and Long-Term Interest Rate and each Bond
                  Interest Term and the calculation of interest payable on the
                  Bonds by the Remarketing Agent shall be conclusive and binding
                  upon such Remarketing Agent, the Trustee, the Tender Agent,
                  the Issuer, the Borrower, the Bank and the Owners of the
                  Bonds.

                         (viii)  Rescission of Election. Notwithstanding
                  anything herein to the contrary, the Borrower may rescind any
                  election by it to adjust to or continue an Interest Rate
                  Period pursuant to Section 2.01(c)(ii)(B), (iii)(B), (iv)(B)
                  or (v)(B) hereof prior to the effective date of such
                  adjustment or continuation by giving written notice thereof to
                  the Issuer, the Trustee, the Tender Agent and the Remarketing
                  Agent, if any, prior to such effective date. If the Trustee
                  receives notice of such rescission prior to the time the
                  Trustee has given notice to the Owners of the Bonds pursuant
                  to Section 2.01(c)(ii)(C), (iii)(C), (iv)(C) or (v)(C), as
                  applicable, then the notice of adjustment or continuation
                  previously delivered by the Borrower shall be of no force and
                  effect. If the Trustee receives notice from the Borrower of
                  rescission of an adjustment to or continuation of an Interest
                  Rate Period after the Trustee has given notice to the Owners
                  of the Bonds pursuant to Section 2.01(c)(ii)(C), (iii)(C),
                  (iv)(C) or (v)(C), as applicable, then

                                       22

<PAGE>

                  the Interest Rate Period for the Bonds shall automatically
                  adjust to a Daily Interest Rate Period on the date originally
                  scheduled for such adjustment or continuation; provided,
                  however, that if the Bonds are then in a Long-Term Interest
                  Rate Period and the Favorable Opinion of Bond Counsel required
                  by Section 2.01(c)(ii)(B) in connection with an adjustment to
                  a Daily Interest Rate Period from a Long-Term Interest Rate
                  Period cannot be obtained, then the Interest Rate Period for
                  the Bonds shall automatically convert to a Long-Term Interest
                  Rate Period of one year and one day. If a Daily Interest Rate
                  for the first day of such Daily Interest Rate Period is not
                  determined as provided in Section 2.01(c)(ii) hereof, the
                  Daily Interest Rate for the first day of such Daily Interest
                  Rate Period shall be equal to the TBMA Municipal Index.

                  (d)   Form of Bonds. The Bonds may be engraved, printed,
         lithographed or typewritten, shall be in Authorized Denominations and
         may contain such references to any of the provisions of this Indenture
         as may be appropriate. The form of the Bonds, the certificate of
         authentication to be executed on all the Bonds by the Trustee and the
         forms for registration of transfer shall be in substantially the forms
         thereof set forth in Exhibit A hereto, with necessary or appropriate
         variations, omissions and insertions as permitted or required by this
         Indenture. The Bonds and the certificate of authentication to be
         executed thereon shall be in substantially the form attached hereto as
         Exhibit A, with such appropriate variations, omissions and insertions
         as are permitted or required by this Indenture. Pursuant to
         recommendations promulgated by the Committee on Uniform Security
         Identification Procedures, "CUSIP" numbers may be printed on the Bonds.
         The Bonds may bear such endorsement or legend relating thereto as may
         be required to conform to usage or law with respect thereto. If
         appropriate, the Bonds may be printed with a portion of the text
         printed on the reverse side thereof and with a legend printed on the
         front referring to such text to the following effect: "Reference is
         hereby made to the further provisions of this Bond set forth on the
         back hereof and such further provisions are hereby incorporated by
         reference as if set forth here in full." Upon adjustment to a Long-Term
         Interest Rate Period, the form of Bond may include a summary of the
         mandatory and optional redemption provisions to apply to the Bonds
         during such Long-Term Interest Rate Period, or a statement to the
         effect that the Bonds will not be optionally redeemed during such
         Long-Term Interest Rate Period, provided that the Registrar shall not
         authenticate such a revised Bond form prior to receiving a Favorable
         Opinion of Bond Counsel that such Bond form conforms to the terms of
         the Act and of this Indenture and that authentication thereof will not
         adversely affect the Tax-Exempt status of the Bonds.

                  (e)   Book-Entry System.

                  Bonds shall be issued in the form of a single certificated
         fully registered Bond, registered in the name of Cede & Co., as nominee
         of the Depository Trust Company (such entity and its successors and
         assigns are referred to herein as "DTC"), or such other name as may be
         requested by an authorized representative of DTC, or any successor
         nominee (the "Nominee"). Except as provided in paragraph (C) below, all
         of the Outstanding Bonds shall be so registered in the registration
         books kept by the Registrar, and the provisions of this Section 2.01(e)
         shall apply thereto.

                                       23

<PAGE>

                  (i)    The Issuer, the Borrower, the Remarketing Agent, the
         Tender Agent, the Trustee, the Registrar, the Paying Agent and any
         Co-Registrar and Co-Paying Agent shall have no responsibility or
         obligation to any DTC participant or to any person on behalf of which a
         DTC participant holds an interest in the Bonds, except as otherwise
         expressly provided herein. Without limiting the immediately preceding
         sentence, the Issuer, the Borrower, the Trustee, the Registrar, the
         Paying Agent, the Tender Agent, the Remarketing Agent and any
         Co-Registrar and Co-Paying Agent shall have no responsibility or
         obligation with respect to (i) the accuracy of the records of DTC, the
         Nominee, any DTC participant or indirect participant with respect to
         any ownership interest in the Bonds, (ii) the delivery to any DTC
         participant or any other person, other than an Owner as shown in the
         registration books kept by the Registrar, of any notice with respect to
         the Bonds, including any notice of redemption (except that the Trustee
         and Tender Agent, if any, shall have the obligation to deliver notices
         of optional and mandatory tender to the Remarketing Agent, if any, as
         provided herein) or (iii) the payment to any DTC participant or any
         other person, other than an Owner, as shown in the registration books
         kept by the Registrar, of any amount with respect to principal or
         purchase price of, premium, if any, or interest on the Bonds. The
         Paying Agent shall pay all principal, premium, if any, and interest on
         the Bonds only to or upon the order of the respective Owners, as shown
         in the registration books kept by the Registrar, or their respective
         attorneys duly authorized in writing, and all such payments shall be
         valid and effective to fully satisfy and discharge the Issuer's
         obligations with respect to payment of principal of, premium, if any,
         and interest on the Bonds to the extent of the sum or sums so paid. The
         Issuer, the Borrower, the Trustee, the Registrar, the Paying Agent, the
         Tender Agent, the Remarketing Agent and any Co-Registrar and Co-Paying
         Agent may treat and consider the person in whose name each Bond is
         registered in the registration books kept by the Registrar as the
         holder and absolute owner of such Bond for the purpose of payment of
         principal, purchase price, premium and interest with respect to such
         Bond, for the purpose of giving notices of redemption and other matters
         with respect to such Bond, for the purpose of registering transfers
         with respect to such Bond, and for all other purposes whatsoever;
         provided, however, notwithstanding the foregoing provisions, the Tender
         Agent, if any, shall accept any notice of optional tender pursuant to
         Section 4.08(a) from any Owner of any Book-Entry Bond, but shall make
         payment of the purchase price thereof only to the registered owner of
         such Bond in the manner provided in the Representation Letter (as
         defined below); and provided further, that no person other than an
         Owner, as shown in the registration books kept by the Registrar, shall
         receive a certificated Bond evidencing the obligation of the Issuer to
         make payments of principal, premium, if any, and interest pursuant to
         this Indenture.

                  (ii)   The Issuer, the Paying Agent, the Registrar, the Tender
         Agent and/or the Trustee shall, if not previously on file, execute and
         deliver to DTC a letter of representation in customary form with
         respect to the Bonds (the "Representation Letter"), but such
         Representation Letter shall not in any way limit the provisions of the
         foregoing paragraph (i) or in any other way impose upon the Issuer any
         obligation whatsoever with respect to persons having interests

                                       24

<PAGE>

         in the Bonds other than the Owners, as shown on the registration books
         kept by the Registrar. The Trustee, the Tender Agent and the Paying
         Agent shall take all actions necessary for representations of the
         Issuer in the Representation Letter with respect to the Trustee, the
         Tender Agent and the Paying Agent to be complied with at all times.

                  (iii)  The Issuer, with the consent of the Borrower, may, and
         upon request of the Borrower shall, terminate the services of DTC with
         respect to the Bonds. DTC may determine to discontinue providing its
         services with respect to the Bonds at any time by giving written notice
         and all relevant information on the beneficial owners of the Bonds to
         the Issuer, the Borrower, the Tender Agent, if any, and the Trustee and
         discharging its responsibilities with respect thereto under applicable
         law. Upon the discontinuance or termination of the services of DTC with
         respect to the Bonds, unless a substitute securities depository is
         appointed by the Issuer (with the consent, or at the request, of the
         Borrower) to undertake the functions of DTC hereunder, the Issuer, at
         the expense of the Borrower, is obligated to deliver Bond certificates
         to the Owners of such Bonds, as described in this Indenture, and such
         Bonds shall no longer be restricted to being registered in the
         registration books kept by the Registrar in the name of the Nominee,
         but may be registered in whatever name or names Owners transferring or
         exchanging such Bonds shall designate, in accordance with the
         provisions of this Indenture.

                  (iv)   In connection with any notice or other communication to
         be provided to Owners pursuant to this Indenture by the Issuer, the
         Borrower the Remarketing Agent, the Tender Agent, the Trustee, the
         Registrar, the Paying Agent, and any Co-Registrar and Co-Paying Agent
         with respect to any consent or other action to be taken by the Owners
         of the Bonds, the Issuer, the Borrower the Remarketing Agent, the
         Tender Agent, the Trustee, the Registrar, the Paying Agent, any
         Co-Registrar and Co-Paying Agent, as the case may be, the Trustee shall
         establish a record date for such consent or other action and give DTC
         notice of such record date not less than 15 calendar days in advance of
         such record date to the extent possible.

                  (v)    So long as any Bond is registered in the name of the
         Nominee, all payments with respect to principal, purchase price,
         premium, if any, and interest on such Bond and all notices with respect
         to such Bond shall be made and given, respectively, in the manner
         provided in the Representation Letter. Owners shall have no lien or
         security interest in any rebate or refund paid by DTC to the Tender
         Agent, if any, or the Paying Agent which arises from the payment by the
         Tender Agent, if any, or Paying Agent of principal of or purchase
         price, premium, if any, or interest on the Bonds in immediately
         available funds to DTC.

         Section 2.02    Execution of Bonds. The Bonds shall be executed on
behalf of the Issuer by its President, a Vice President, Secretary, Treasurer,
Assistant Secretary or Assistant Treasurer and such execution shall be attested
by its President, a Vice-President, Secretary, Treasurer, Assistant Secretary or
Assistant Treasurer; provided that the officer so attesting such execution shall
not be the same officer that executed such Bond. The signatures of the
President,

                                       25

<PAGE>

a Vice President, Secretary, Treasurer, Assistant Secretary or Assistant
Treasurer of the Issuer may be facsimile signatures.

         In case any officer of the Issuer 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 he had remained in office until delivery; and any Bond may be signed
on behalf of the Issuer by such persons as at the time of execution of such Bond
shall be the proper officers of the Issuer, even though at the date of such Bond
or the execution of this Indenture any such person was not such officer.

         The Bonds and the interest thereon shall not be general obligations or
an indebtedness of the Issuer but shall be limited obligations of the Issuer,
which is obliged to pay the principal and premium, if any, and interest on the
Bonds only out of the Receipts and Revenues of the Issuer from the Agreement and
other moneys pledged therefor under this Indenture. The Bonds shall never
constitute an indebtedness of the State of Arizona, or the County, or the Issuer
within the meaning of any Arizona Constitutional provision or statutory
limitation and shall never constitute or give rise to a pecuniary liability of
the State of Arizona, or the County, or the Issuer or a charge against the
general credit or taxing powers of the State of Arizona, or the County, or the
general credit of the Issuer and such fact shall be plainly stated on each Bond.
The Issuer has no taxing power.

         The Bonds shall then be delivered to the Trustee for authentication by
the Trustee. In case any officer who shall have signed any of the Bonds shall
cease to be such officer before the Bonds so signed or attested shall have been
authenticated or delivered by the Trustee or issued by the Issuer, such Bonds
may nevertheless be authenticated, delivered and issued and, upon such
authentication, delivery and issuance, shall be as binding upon the Issuer as
though those who signed and attested the same had continued to be such officers
of the Issuer. Also, any Bond may be signed on behalf of the Issuer by such
persons as on the actual date of the execution of such Bond shall be the proper
officers although on the nominal date of such Bond any such person shall not
have been such officer.

         Only such of the Bonds as shall bear thereon a certificate of
authentication in the form recited in Exhibit A hereto, manually executed by the
Trustee, shall be valid or obligatory for any purpose or entitled to the
benefits of this Indenture, and such certificate of the Trustee shall be
conclusive evidence that the Bonds so authenticated have been duly authenticated
and delivered hereunder and are entitled to the benefits of this Indenture. The
Trustee's certificate of authentication on any Bond shall be deemed to have been
executed by it if manually signed by an authorized signatory on behalf 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.

         Upon authentication of any Bond, the Trustee, Registrar or the Tender
Agent, if any, as the case may be, shall set forth on such Bond (1) the date of
such authentication and (2) in the case of a Bond bearing interest at a Bond
Interest Term Rate which is not a Book-Entry Bond, such Bond Interest Term Rate,
the day next succeeding the last day of the applicable Short-Term Interest Rate
Period, the number of days comprising such Short-Term Interest Rate Period and
the amount of interest to accrue during such Short-Term Interest Rate Period.

                                       26

<PAGE>

         So long as JPMorgan Chase Bank is serving as Trustee hereunder, it
shall also serve as Registrar hereunder.

         Section 2.03 Transfer and Exchange of Bonds. Registration of any Bond
may, in accordance with the terms of this Indenture, be transferred, upon the
books of the Registrar required to be kept pursuant to the provisions of Section
2.04, by the person in whose name it is registered, in person or by his duly
authorized attorney, upon surrender of such Bond for cancellation, accompanied
by a written instrument of transfer in a form approved by the Registrar, duly
executed. Whenever any Bond shall be surrendered for registration of transfer,
the Issuer shall execute and the Trustee shall authenticate and deliver a new
Bond or Bonds of the same tenor in Authorized Denominations. No registration of
transfer of Bonds upon the books of the Registrar required to be kept pursuant
to the provisions of Section 2.04 hereof shall be required to be made during the
period after any Record Date and prior to the related Interest Payment Date or
during the period of fifteen (15) days immediately preceding the date on which
the Trustee mails any notice of redemption, nor shall any registration of
transfer of Bonds called for redemption be required.

         Bonds may be exchanged at the Principal Office of the Trustee for a
like aggregate principal amount of Bonds of the same tenor of Authorized
Denominations. The Trustee shall require the payment by the Owner requesting
such exchange of any tax or other governmental charge required to be paid with
respect to such exchange, and there shall be no other charge to any Owners for
any such exchange. Except with respect to Bonds remarketed after being purchased
pursuant to Sections 4.07 and 4.08 hereof, no exchange of Bonds shall be
required to be made during the period after any Record Date and prior to the
related Interest Payment Date or during the period of fifteen (15) days
immediately preceding the date on which the Trustee gives notice of redemption,
nor shall any exchange of Bonds called for redemption be required. If a Bond is
presented for transfer or exchange after notice of redemption of such Bond has
been given as provided in Section 4.03 hereof, the Registrar shall deliver a
copy of such notice of redemption to the new owner of such Bond.

         Section 2.04 Bond Register. The Registrar will keep or cause to be kept
at its Principal Office sufficient books for the registration and the
registration of transfer of the Bonds, which shall at all times, during regular
business hours, be open to inspection by the Issuer, the Trustee and the
Borrower; and, upon presentation for such purpose, the Registrar shall, under
such reasonable regulations as it may prescribe, register the transfer or cause
to be registered the transfer, on said books, of Bonds as hereinbefore provided.

         Section 2.05 Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond
shall become mutilated, the Issuer, upon the request and at the expense of the
holder of said Bond, shall execute, and the Trustee shall thereupon authenticate
and deliver a new Bond of like tenor in exchange and substitution for the Bond
so mutilated, but only upon surrender to the Registrar of the Bond so mutilated.
Every mutilated Bond so surrendered to the Registrar shall be treated by the
Trustee in accordance with its document retention policies (provided that the
Trustee shall not be required to destroy such Bonds) and, upon the written
request of the Issuer, a certificate evidencing such disposition shall be
delivered to the Issuer, with a copy to the Borrower. If any Bond issued
hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction
or theft may be submitted to the Issuer, the Borrower and the Registrar, and if
such evidence be

                                       27

<PAGE>

satisfactory to them and indemnity satisfactory to them shall be given by or on
behalf of the holder of such lost, destroyed or stolen Bond, the Issuer, at the
expense of the holder, shall execute, and the Trustee shall thereupon
authenticate and deliver, a new Bond of like tenor in lieu of and in
substitution for the Bond so lost, destroyed or stolen (or if any such Bond
shall have matured or shall be about to mature, instead of issuing a substitute
Bond the Trustee shall, at the direction of the Issuer, pay the same without
surrender thereof). The Issuer may require payment of a reasonable fee for each
new Bond issued under this Section and payment of the expenses which may be
incurred by the Issuer and the Trustee. Any Bond issued under the provisions of
this Section in lieu of any Bond mutilated or alleged to be lost, destroyed or
stolen shall constitute an original additional contractual obligation on the
part of the Issuer whether or not the Bond mutilated or so alleged to be lost,
destroyed or stolen shall be at any time enforceable by anyone, and shall be
equally and proportionately entitled to the benefits of this Indenture with all
other Bonds secured by this Indenture.

                  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
cancelled Bonds, notwithstanding any law or statute now existing or hereafter
enacted.

                  Section 2.06 Disposition of Cancelled Bonds. When paid in
full, all Bonds shall be delivered to the Trustee, who shall forthwith cancel
such Bonds and deliver upon request a certificate evidencing such cancellation
to the Issuer and the Borrower. The Trustee shall treat such cancelled Bonds in
accordance with its document retention policies and shall not be required to
destroy such Bonds.

                  Section 2.07 CUSIP Numbers. As provided in Section 2.01(d) of
this Indenture, the Issuer in issuing the Bonds may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to holders of Bonds; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Bonds or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Bonds, and any such redemption shall not be affected by
any defect in or omission of such CUSIP numbers. The Issuer shall promptly
notify the Trustee of any changes in the CUSIP numbers.

                  Section 2.08 Other Obligations. The Issuer expressly reserves
the right to issue, to the extent permitted by law, obligations under another
ordinance or ordinances to provide additional funds or, at the request of the
Borrower, to refund all or any principal amount of the Bonds.

                  Section 2.09 Temporary Bonds. Pending the preparation of
definitive Bonds, the Issuer may execute and the Trustee shall authenticate and
deliver temporary Bonds. Temporary Bonds shall be issuable as fully registered
Bonds, 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 Issuer.
Temporary Bonds may contain such reference to any provisions of this Indenture
as may be appropriate. Every temporary Bond shall be executed by the Issuer and
be authenticated by the

                                       28

<PAGE>

Trustee upon the same conditions and in substantially the same manner, and with
like effect, as the definitive Bonds. As promptly as practicable, the Issuer
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 the definitive Bonds
of Authorized Denominations. Until so exchanged the temporary Bonds shall be
entitled to the same benefits under this Indenture as definitive Bonds.

                                  ARTICLE III

                               ISSUANCE OF BONDS

                  Section 3.01 Authentication and Delivery of Bonds. Forthwith
upon the execution and delivery of this Indenture, the Issuer shall execute and
deliver to the Trustee and the Trustee shall authenticate the Bonds and deliver
the Bonds to the initial purchasers thereof as directed hereinafter in this
Section 3.01. Without any further action on the part of the Issuer, the Trustee
shall authenticate the Bonds in an aggregate principal amount of Thirty-Seven
Million One Hundred Thousand Dollars ($37,100,000). Prior to the delivery on
original issuance by the Trustee of any authenticated Bonds there shall be or
have been delivered to the Trustee:

                          (i)   An original duly executed counterpart of this
                  Indenture.

                          (ii)  An original duly executed counterpart of the
                  Agreement.

                          (iii) A written order of the Issuer to the Trustee to
                  authenticate and deliver the Bonds to the purchaser or
                  purchasers therein identified upon payment to the Trustee, but
                  for the account of the Issuer, of a sum specified in such
                  request and authorization plus any accrued interest on such
                  Bonds to the date of delivery.

                          (iv)  A written statement on behalf of the Borrower,
                  executed by an Authorized Borrower Representative, (i)
                  approving the issuance and delivery of the Bonds and (ii)
                  consenting to each and every provision of this Indenture.

                          (v)   The duly executed Credit Facility, if any.

                  Section 3.02 Application of Proceeds of Bonds. The proceeds
received by the Issuer from the sale of the Bonds in the amount of $37,100,000
shall be deposited with the Trustee, and the Trustee shall transfer such
proceeds to JPMorgan Chase Bank, as trustee for the Prior Bonds, to be applied
to the redemption of the Prior Bonds.

                  Section 3.03 Payment of Principal and Interest. For the
payment of interest on the Bonds, the Issuer shall cause to be deposited in the
Bond Fund established under Section 5.01 hereof, on or prior to each Interest
Payment Date, solely out of the Receipts and Revenues, an amount sufficient to
pay the interest to become due on such Interest Payment Date. The obligation of
the Issuer 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.

                                       29

<PAGE>

         For the payment of the principal of the Bonds upon maturity or earlier
redemption, the Issuer shall cause to be deposited in the Bond Fund, on or prior
to the maturity or redemption date of the Bonds, solely out of the Receipts and
Revenues, an amount sufficient to pay the principal of the Bonds then due. The
obligation of the Issuer 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 or
redemption date for the payment of the principal of the Bonds.

                                   ARTICLE IV

                        REDEMPTION AND PURCHASE OF BONDS

          Section 4.01 Redemption of Bonds. The Bonds are subject to redemption
if and to the extent the Borrower is entitled or required to make and makes a
prepayment pursuant to Article IX of the Agreement. The Trustee shall not give
notice of any optional redemption under Section 4.01(a) hereof unless the
Borrower has so directed in accordance with Section 9.02 of the Agreement. In
the event of a failure by the Borrower to give a notice of mandatory prepayment
under Section 9.03 of the Agreement, such notice may be given by the Issuer, the
Trustee or any holder or holders of ten percent (10%) or more in aggregate
principal amount of the Outstanding Bonds. No Bond shall be subject to optional
redemption pursuant to Section 4.01(a)(ii) during the Initial Long-Term Interest
Rate Period.

     The Bonds shall be redeemed upon the following terms:

          (a)  Redemption Upon Optional Prepayment.

               (i)  Extraordinary Events. During any Long-Term Interest Rate
          Period, the Bonds shall be redeemed prior to maturity in whole or in
          part, and if in part by lot, at any time at a redemption price equal
          to the principal amount thereof plus accrued interest to the
          redemption date, upon receipt by the Trustee of a written notice of
          the Borrower and signed by an Authorized Borrower Representative
          stating that any of the following events has occurred (which
          determination shall be in the sole discretion of the Borrower) and
          that the Borrower therefore intends to exercise its option to prepay
          all payments due under the Agreement, including Repayment
          Installments, in whole or in part pursuant to Section 9.01 of the
          Agreement and thereby effect the redemption of Bonds in whole or in
          part to the extent of such prepayments:

                    (A) All or part of the Project or the Plant shall have been

               damaged or destroyed to such an extent that, in the opinion of
               the Borrower, (i) the Project or the Plant or such affected
               portion could not reasonably be restored within a period of four
               (4) months to the condition thereof immediately preceding such
               damage or destruction, and the Borrower or the operator of the
               Project or the Plant will be prevented, or is likely to be
               prevented for a period of four (4) consecutive months or more,
               from carrying on all or substantially all of its normal operation
               of the Project or the Plant, or (ii) the cost of restoration of
               the Project or the Plant

                                       30

<PAGE>

               or such affected portion will be substantially in excess of the
               net proceeds of insurance thereon.

                    (B)  Title to, or the temporary use of, all or a part of the
               Project or the Plant shall have been taken under the exercise of
               the power of eminent domain.

                    (C)  Changes in economic availability of raw materials,
               operating supplies or facilities necessary to operate all or a
               part of the Project or the Plant, or technological or other
               changes which make the continued operation of the Project or the
               Plant or such affected portion uneconomical, in the opinion of
               the Borrower, shall have occurred and shall have resulted in a
               cessation of all or substantially all of the Borrower's normal
               operations of either the Project or the Plant.

                    (D)  Unreasonable burdens or excessive liabilities shall
               have been imposed upon the Issuer or the Borrower in respect of
               all or a part of the Project or the Plant including, without
               limitation, federal, state or other ad valorem, property, income
               or other taxes not being imposed on the date of the Agreement, as
               well as any statute or regulation enacted or promulgated after
               the date of the Agreement that prevents the Borrower from
               deducting interest in respect of the Agreement for federal income
               tax purposes.

                    (E)  All or substantially all of the property of the
               Borrower shall be transferred or sold to any entity other than an
               affiliate of the Borrower or the Borrower shall be consolidated
               with or merged into an entity other than an affiliate of the
               Borrower in such manner that the Borrower is not the surviving
               entity and the surviving, resulting or transferee entity does not
               agree to perform the obligations of the Borrower.

               (ii) Borrower Option. The Bonds shall be subject to redemption
          prior to maturity by the exercise by the Borrower of any of its
          options to prepay all or part of the unpaid balance of the Repayment
          Installments and cause the Bonds to be redeemed, in whole, or in part
          by lot, prior to their maturity dates, as follows:

                    (A) During any Short-Term Interest Rate Period, each Bond
               shall be subject to such redemption on the day next succeeding
               the last day of each Bond Interest Term for such Bond at a
               redemption price equal to 100% of the principal amount thereof.

                    (B) During any Daily Interest Rate Period or Weekly Interest
               Rate Period, the Bonds shall be subject to such redemption on any
               Interest Payment Date at a redemption price equal to 100% of the
               principal amount thereof.

                    (C) On the day next succeeding the last scheduled day of any
               Long-Term Interest Rate Period, the Bonds shall be subject to
               such

                                       31

<PAGE>

               redemption at a redemption price of 100% of the principal amount
               thereof. During any Long-Term Interest Rate Period, the Bonds
               shall be subject to redemption during the periods specified
               below, in whole or in part, at the redemption prices (expressed
               as percentages of principal amount) hereinafter indicated (unless
               different redemption terms shall be specified by the Borrower
               pursuant to Section 2.01(c)(iv)(B)):

<TABLE>
<CAPTION>
                      Length of                                     Redemption Prices
          Long-Term Interest Rate Period
                 (expressed in years)
          <S>                                           <C>
                    Greater than 17                     After 10 years at 102% declining by 1%
                                                               every 12 months to 100%

            Less than or equal to 17 and                After 8 years at 102%, declining by 1%
                    greater than 10                            every 12 months to 100%

            Less than or equal to 10 and                After 6 years at 101%, declining by 1/2
                    greater than 7                           of 1% every 6 months to 100%

            Less than or equal to 7 and                 After 3 years at 101%, declining by 1/2
                    greater than 4                           of 1% every 6 months to 100%

            Less than or equal to 4 and                 After 2 years at 100 1/2%, declining by
                    greater than 3                          1/2 of 1% after 6 months to 100%

            Less than or equal to 3 and                 After 1 year at 100 1/2%, declining by
                    greater than 2                          1/2 of 1% after 6 months to 100%

            Less than or equal to 2 and                         After 1 year at 100%
                    greater than 1

                    1 year or less                                  Not redeemable.
</TABLE>

               (iii) Change of Use. During any Long-Term Interest Rate
          Period, the Bonds shall be subject to redemption prior to maturity
          upon prepayment of the Repayment Installments attributable to the
          Bonds at the option of the Borrower in whole or in part by lot on any
          Interest Payment Date, at a redemption price equal to 100% of the
          principal amount thereof, if the Borrower delivers to the Trustee a
          written or Electronic notice to the effect that either:

                     (A)  the Borrower has determined that some or all of the
               interest payable under the Agreement for any sixty (60) days
               (which need not be consecutive) within any consecutive
               twenty-four (24) month period is not or will not be deductible,
               in whole or in part, for federal income tax purposes by reason of
               Section 150(b) of the Code (or would not be

                                       32

<PAGE>

               deductible unless some or all of the Bonds are redeemed) due to a
               change in use of the Project or any portion thereof, and the
               Borrower will not claim deductions for such interest on its
               federal income tax returns; or

                    (B)  the Borrower after reasonable effort has been unable to
               obtain an opinion of Bond Counsel that it is more likely than not
               that Section 150 of the Code will not prevent interest payable
               under the Agreement for any sixty (60) days (which need not be
               consecutive) within any consecutive twenty-four (24) month period
               from being deductible, in whole or in part, for federal income
               tax purposes.

     In either such case, the Borrower shall only cause the Trustee to redeem
Bonds pursuant to this Section 4.01(a) (iii) on or after the Interest Payment
Date immediately preceding the date on which, due to a change in use in the
Project or any portion thereof, the period of potential interest expense
disallowance described above commences, and the Borrower may only cause the
Trustee to redeem such principal amount of Bonds as the Borrower determines is
necessary to assure that the Borrower retains its right to all such deductions
otherwise allowable or, if a partial redemption will not enable the Borrower to
retain the right to deduct such interest, the Borrower may cause the Trustee to
redeem all the Outstanding Bonds.

     Notwithstanding any term or provision of Section 4.01(a) of this Indenture
to the contrary, the Bonds shall not be subject to optional redemption unless
(i) the Bank, if any, shall consent thereto in writing and deliver such consent
to the Borrower and the Trustee, (ii) in connection with such redemption, the
proceeds of a refunding shall be sufficient to pay, and shall be used to pay,
the redemption price of the Bonds so redeemed or (iii) sufficient Available
Moneys (other than proceeds of any drawing under the Letter of Credit) shall
have been deposited by the Borrower with the Trustee for the payment of all
amounts due in respect of all Bonds called for redemption pursuant to Section
4.01(a) of this Indenture. This paragraph shall be inapplicable if at the time
of such optional redemption there is no Letter of Credit or other Credit
Facility with respect to the Bonds.

          (b)  Redemption Upon Mandatory Prepayment. The Bonds shall be subject
     to redemption prior to maturity from amounts which are required to be
     prepaid by the Borrower under Section 9.03 of the Agreement, as set forth
     below.

               (i)  The Bonds shall be redeemed in whole on any date at a
          redemption price equal to the principal amount thereof plus interest
          accrued to the redemption date upon the occurrence of a Determination
          of Taxability; provided, however, that if, in the opinion of Bond
          Counsel delivered to the Trustee, the redemption of a specified
          portion of such Bonds Outstanding would have the result that interest
          payable on such Bonds remaining Outstanding after such redemption
          would remain Tax-Exempt, then such Bonds shall be redeemed in part by
          lot (in Authorized Denominations), in such amount as Bond Counsel in
          such opinion shall have determined is necessary to accomplish that
          result.

               (ii) The Bonds shall be redeemed in whole at a redemption price
          equal to the principal amount thereof plus accrued interest to the
          redemption date in the

                                       33

<PAGE>

          event that as a result of any changes in the Constitution of the
          United States of America or the Constitution of the State of Arizona
          or as a result of any legislative, judicial or administrative action,
          the Agreement shall have become void or unenforceable or impossible to
          perform in accordance with the intention and purposes of the parties
          thereto, or shall have been declared unlawful.

               (iii)   The Bonds shall be redeemed in whole at a redemption
          price equal to the principal amount thereof plus accrued interest to
          the redemption date in the event that at least thirty-five (35) days
          prior to the expiration of any Credit Facility, if any, then in effect
          with respect to the Bonds the Trustee shall not have received (a) a
          renewal or extension of the existing Credit Facility, for a period of
          at least one (1) year (or, if shorter, the period to maturity of the
          Bonds) or (b) a substitute Credit Facility meeting the requirements of
          Section 6.08 of the Agreement. Such redemption shall occur on the last
          Business Day which is not less than five (5) calendar days preceding
          the expiration date of a Credit Facility, if any, then in effect.

          Section 4.02 Selection of Bonds to be Redeemed. If less than all the
Bonds shall be called for redemption, the Trustee shall select the Bonds or any
given portion thereof to be redeemed, from Outstanding Bonds or any given
portion thereof not previously called for redemption, by lot. For the purpose of
any such selection the Trustee shall assign a separate number for each minimum
Authorized Denomination of each Bond of a denomination of more than such
minimum; provided that following any such selection, both the portion of such
Bond to be redeemed and the portion remaining shall be in Authorized
Denominations. The Trustee shall promptly notify the Issuer and the Borrower in
writing of the numbers of the Bonds or portions thereof so selected for
redemption. Notwithstanding the foregoing, if less than all of the Bonds are to
be redeemed at any time while the Bonds are Book-Entry Bonds, selection of the
Bonds to be redeemed shall be made in accordance with customary practices of DTC
or the applicable successor depository, as the case may be.

          Section 4.03 Notice for Redemption. The Trustee shall give notice,
Electronically or by first class mail, in the name of the Issuer, of the
redemption of the Bonds, not less than thirty (30) nor more than sixty (60) days
prior to the redemption date for Bonds bearing interest fixed to maturity or at
Daily, Weekly or Long-Term Interest Rates, and at any time not more than sixty
(60) days prior to the redemption date for Bonds bearing interest at Bond
Interest Term Rates. Each notice of redemption shall (i) specify the Bonds to be
redeemed, the redemption date, the redemption price, the place where amounts due
upon such redemption will be payable (which shall be the Principal Office of the
Paying Agent) and the source of the funds to be used for such redemption, the
principal amount, the CUSIP numbers (if any) of the Bonds to be redeemed and, if
less than all, the distinctive certificate numbers of the Bonds to be redeemed
and, in the case of Bonds to be redeemed in part only, the respective portions
of the principal amount thereof to be redeemed. Each such notice shall also
state that the interest on the Bonds designated for redemption shall cease to
accrue from and after such redemption date and that on said date there will
become due and payable on each of said Bonds the principal amount thereof to be
redeemed, interest accrued thereon, if any, to the redemption date and the
premium, if any, thereon (such premium to be specified) and shall require that
such Bonds be then surrendered at the address or addresses of the Paying Agent
specified in the redemption notice;

                                       34

<PAGE>

provided, however, the failure to duly give such notice, or any defect therein,
shall not affect the validity of any proceedings for the redemption of Bonds
with respect to which no such failure or defect occurred. In the event that any
Bond selected for redemption shall be tendered for purchase pursuant to Section
4.08 hereof, the Tender Agent shall note on each Bond delivered to an Owner
pursuant to Section 14.05 hereof upon the purchase of such tendered Bond that
such Bond has been called for redemption and the date of such redemption. Upon
presentation and surrender of Bonds so called for redemption at the place or
places of payment, such Bonds shall be redeemed and cancelled. Notice of any
redemption hereunder shall also be given to the Tender Agent and the Bank.

     With respect to any notice of optional redemption of Bonds pursuant to
Section 4.01(a), unless upon the giving of such notice such Bonds shall be
deemed to have been paid within the meaning of Article IX hereof, such notice
shall state that such redemption shall be conditional upon the receipt by the
Trustee on or prior to the date fixed for such redemption of Available Moneys
sufficient to pay the principal of, premium, if any, and interest on, such Bonds
to be redeemed, and that if such Available Moneys shall not have been so
received said notice shall be of no force and effect and the Issuer shall not be
required to redeem such Bonds. In the event that such notice of redemption
contains such a condition and such Available Moneys are not so received, the
redemption shall not be made and the Trustee shall within a reasonable time
thereafter give notice, to the persons and in the manner in which the notice of
redemption was given, that such Available Moneys were not so received.

     Any notice for the redemption of any Bond mailed as provided herein shall
be conclusively deemed to have been duly given whether or not such notice is
received. Failure to mail the notices required by this paragraph to any holder
of a Bond, or any defect in any notice so mailed, shall not affect the validity
of the proceedings for redemption of any Bonds nor impose any liability on the
Trustee.

          Section 4.04 Partial Redemption of Bonds. Upon surrender of any Bond
redeemed in part only, the Registrar shall exchange the Bond redeemed for a new
Bond of like tenor and in an Authorized Denomination without charge to the
holder in the principal amount of the portion of the Bond not redeemed. In the
event of any partial redemption of a Bond which is registered in the name of the
Nominee, DTC may elect to make a notation on the Bond certificate which reflects
the date and amount of the reduction in principal amount of said Bond in lieu of
surrendering the Bond certificate to the Registrar for exchange. The Issuer, the
Trustee and the Registrar shall be fully released and discharged from all
liability upon, and to the extent of, payment of the redemption price for any
partial redemption and upon the taking of all other actions required hereunder
in connection with such redemption.

          Section 4.05 Effect of Redemption. Notice of redemption having been
duly given as aforesaid, and moneys for payment of the redemption price being
held by the Trustee, the Bonds so called for redemption shall, on the redemption
date designated in such notice, become due and payable at the redemption price
specified in such notice, interest on the Bonds so called for redemption shall
cease to accrue, said Bonds shall cease to be entitled to any lien, benefit or
security under this Indenture, and the holders of said Bonds shall have no
rights in respect thereof except to receive payment of the redemption price
thereof (including interest, if

                                       35

<PAGE>

any, accrued to the redemption date), without interest accrued on any funds held
after the redemption date to pay such redemption price.

     All Bonds fully redeemed pursuant to the provisions of this Article IV
shall upon surrender thereof be cancelled by the Trustee, who shall deliver a
certificate evidencing such cancellation to the Issuer and the Borrower. The
Trustee shall treat such cancelled Bonds in accordance with its document
retention policies and shall not be required to destroy such Bonds.

          Section 4.06 Payment of Redemption Price.

                 (i)   For the redemption of any of the Bonds, the Issuer shall
          cause to be deposited in the Bond Fund, on or prior to the date fixed
          for redemption, solely out of the Receipts and Revenues, an amount
          sufficient to pay the principal of and interest and any premium to
          become due on the date fixed for such redemption on the Bonds;
          provided that so long as a Credit Facility is in effect with respect
          to the Bonds and such Credit Facility does not cover some or all of
          the optional or mandatory redemption price, any amount payable as the
          optional or mandatory redemption price upon redemption of Bonds and
          not covered by such Credit Facility shall be on deposit in the Bond
          Fund and constitute Available Moneys prior to the Trustee giving any
          notice of redemption hereunder.

                 (ii)  Moneys for payment of the principal of and interest and
          any premium to the date fixed for redemption on Bonds called for
          redemption and not presented for payment on the date fixed for
          redemption shall be set aside by the Trustee in trust for the Owners
          of such Bonds and shall be held uninvested. Interest on such Bonds
          shall cease to accrue on the date fixed for redemption.

          Section 4.07 Bank Purchase Option.

                 (i)   Notwithstanding any term or provision of this Indenture
          to the contrary, if a Credit Facility is in effect, (i) if an Event of
          Default shall occur and the Bonds are accelerated or (ii) if any Bonds
          shall be subject to redemption pursuant to Section 4.01 of this
          Indenture, or (iii) if the Remarketing Agent shall be unable to
          remarket Bonds as provided in Article XIV of this Indenture, then in
          any of such cases the Bank may from time to time in its discretion (in
          the manner provided in this Section 4.07) purchase all of the Bonds or
          the portion thereof that is subject to redemption, acceleration or
          which the Remarketing Agent has been unable to remarket, on the terms
          provided herein.

                 (ii)  The Bank shall notify the Trustee in writing of its
          exercise of its purchase option pursuant hereto at or before the time
          by which payment of any drawing of a Credit Facility is required in
          respect of the relevant acceleration, redemption or failure to
          remarket Bonds which gives rise to such purchase option. Such notice
          may be given after presentation by the Trustee of any document or
          draft under such Credit Facility with respect to such acceleration,
          redemption or failure to remarket, in which case purchase of the
          relevant Bonds by the Bank shall take precedence over such drawing;
          provided, that if the Bank has not

                                       36

<PAGE>

          exercised its purchase option and paid the purchase price of the Bonds
          being purchased by the time by which payment is due under such Credit
          Facility in respect of such drawing, the Bank shall pay such drawing
          pursuant to such Credit Facility. If the Trustee shall have presented
          drafts or documents under such Credit Facility, the Bank's notice of
          exercise of its purchase option may accompany payment of the purchase
          price of Bonds being acquired. The purchase price of Bonds purchased
          by the Bank pursuant hereto shall be paid to the Trustee at such
          account as it shall specify and shall be distributed by the Trustee to
          the former owners from which such Bonds shall have been purchased;
          provided, that in the case of any Bonds purchased upon a failed
          remarketing pursuant to paragraph (vi) of this Section 4.07, the
          purchase price shall be paid to the Remarketing Agent for distribution
          to the former Owners of such Bonds which tendered them to the Tender
          Agent.

               (iii)  No purchase of any Bonds by the Bank in accordance
          herewith shall cause such Bonds to be extinguished or deemed paid, and
          upon payment of the purchase price of Bonds by the Bank, the Trustee
          shall authenticate and deliver to the Bank (or its nominee) as Owner a
          Bond or Bonds in an aggregate principal amount equal to the aggregate
          principal amount of Bonds so purchased (which shall be deemed to be in
          an "Authorized Denomination" for all purposes of this Indenture), and
          such Bonds so delivered shall be Outstanding Bonds that are entitled
          to the benefits of this Indenture equally and proportionately with all
          other Bonds; provided that the Trustee shall not make any drawing on a
          Credit Facility in respect of Bonds known by the Trustee to be held by
          the Bank (or its nominee) except as provided in paragraph (viii) of
          this Section 4.07. Bonds purchased by the Bank which are not delivered
          to the Trustee by the date upon which such Bonds were to have been
          purchased nonetheless will be deemed to have been purchased by the
          Bank, and the former Owner or Owners of such Bonds shall have no claim
          thereon, under this Indenture or otherwise, for any amount other than
          the purchase price thereof. Interest accruing after the purchase date
          of such Bonds shall no longer be payable to the former Owners thereof.

               (iv)   Bonds called for and subject to redemption pursuant to
          Section 4.01 of this Indenture may, at the option of the Bank, be
          purchased by the Bank pursuant to this Section 4.07 in lieu of such
          redemption on the date upon which such Bonds were to have been
          redeemed at a purchase price equal to the amount that would have been
          payable on such Bonds if such Bonds had been so redeemed, except as
          provided in paragraph (vii) of this Section 4.07; provided, that no
          Bond called for redemption shall be subject to purchase by the Bank
          pursuant to this Section 4.07 if (i) in connection with such
          redemption, the proceeds of a refunding shall be sufficient to pay,
          and shall be used to pay, the redemption price of the Bonds so
          redeemed or (ii) sufficient Available Moneys (other than proceeds of
          any drawing under a Credit Facility) shall have been deposited by the
          Borrower with the Trustee for the payment of all amounts due in
          respect of all Bonds called for redemption pursuant to Section 4.01 of
          this Indenture. The Bank shall pay the purchase price for Bonds
          purchased by the Bank on such redemption date.

                                       37

<PAGE>

               (v)    If an Event of Default occurs and the Bonds are
          accelerated, the Bank may purchase all Bonds, pursuant to this Section
          4.07, for a purchase price equal to the principal amount of such Bonds
          plus interest accrued thereon to the date of purchase, except as
          otherwise provided in paragraph (vii) of this Section 4.07.

               (vi)   In the event that the Remarketing Agent shall be unable to
          remarket any Bonds as provided in Article XIV hereof, the Bank may, at
          its option, purchase all such unremarketed Bonds pursuant to this
          Section 4.07, at a purchase price equal to 100% of the principal
          amount thereof plus accrued interest, if any, on the date on which
          such Bonds would otherwise be purchased by the Remarketing Agent
          pursuant to Section 14.03(b), except as otherwise provided in
          paragraph (vii) of this Section 4.07.

               (vii)  Upon a purchase of Bonds by the Bank pursuant to this
          Section 4.07, the Bank may, in its discretion, purchase all Bonds, if
          any, then held by the Trustee which have been purchased by or on
          behalf of the Borrower with moneys drawn under a Credit Facility as to
          which drawing the Borrower has not reimbursed the Bank in accordance
          with the Reimbursement Agreement without the payment of any cash
          purchase price therefor, but the Borrower's reimbursement obligations
          under the Reimbursement Agreement shall be reduced by an amount equal
          to the principal amount of such Bonds so deemed purchased. The Bank
          may exercise its option pursuant to the preceding sentence by a notice
          to the Trustee given with or included in the relevant notice to the
          Trustee under paragraph (ii) of this Section 4.07, together with a
          notice which shall confirm that a Credit Facility has been reinstated
          in an equal amount.

               (viii) Notwithstanding any term or provision of this Indenture to
          the contrary, the Trustee shall not without the prior written consent
          of the Bank make any drawing under a Credit Facility with respect to
          the principal amount of any Bonds known by the Trustee to be held by
          the Bank or its nominee; provided, that the Trustee shall make
          drawings of interest under a Credit Facility with respect to the Bonds
          held by the Bank or its nominee, as provided in this Indenture.

               (ix)   The purchase price of any Bonds to be purchased by the
          Bank in accordance with this Section 4.07 shall be paid by the Bank
          with its general funds and not directly or indirectly from funds or
          collateral on deposit with or pledged to the Bank for the account of
          the Issuer or the Borrower or any affiliate thereof, and such payment
          by the Bank shall not be deemed to be a draw under a Credit Facility.

               (x)    Notwithstanding any term or provision of this Indenture or
          the Bonds to the contrary, if at any time all of the Outstanding Bonds
          are in aggregate held by the Bank or its nominee (whether pursuant to
          the provisions hereof or otherwise), the Bank shall not be entitled to
          exercise its rights under Section 4.08 of this Indenture or under the
          Bonds to require that the Bonds be purchased unless either (i) the
          Bank shall have given the Borrower, the Trustee and the

                                       38

<PAGE>

          Remarketing Agent at least 30 days prior written notice of its
          intention to exercise such rights or (ii) the Remarketing Agent shall
          have received from the Borrower offering materials relating to the
          Bonds which are, in the opinion of the counsel to the Borrower and the
          counsel to the Issuer, correct and complete in all material respects.

          Section 4.08 Purchase of Bonds.

          (a)    Holder's Option to Tender for Purchase.

                 (i)   During any Daily Interest Rate Period, any Bond or
          portion thereof in an Authorized Denomination shall be purchased on
          any Business Day at a purchase price equal to 100% of the principal
          amount thereof plus accrued interest from the Interest Accrual Date
          immediately prior to the date of purchase to the date of purchase
          (unless the date of purchase shall be an Interest Accrual Date, in
          which case at a purchase price equal to the principal amount thereof),
          payable in immediately available funds, upon (A) delivery to the
          Tender Agent at its Principal Office, by no later than 11:00 a.m. (New
          York City time) on such Business Day, of an irrevocable written,
          telephonic or Electronic notice which states the principal amount of
          such Bond to be tendered for purchase and the date of purchase, and
          (B) delivery of such Bond tendered for purchase to the Tender Agent at
          its Principal Office on the date of purchase in accordance with
          Section 4.09 hereof. The Tender Agent shall keep a written record of
          the notice described in Clause (A).

                 (ii)  During any Weekly Interest Rate Period, any Bond or
          portion thereof in an Authorized Denomination shall be purchased on
          any Business Day at a purchase price equal to 100% of the principal
          amount thereof plus accrued interest, if any, from the Interest
          Accrual Date immediately prior to the date of purchase to the date of
          purchase (unless the date of purchase shall be an Interest Accrual
          Date, in which case at a purchase price equal to the principal amount
          thereof), payable in immediately available funds, upon (A) delivery to
          the Tender Agent at its Principal Office by no later than 5:00 p.m.
          (New York City time), on such Business Day at least seven (7) days
          prior to the date of purchase of an irrevocable written, telephonic or
          Electronic notice, which states the principal amount of such Bond to
          be tendered for purchase and the date of purchase, and (B) delivery of
          such Bond tendered for purchase to the Tender Agent at its Principal
          Office on the date of purchase in accordance with Section 4.09 hereof.
          The Tender Agent shall keep a written record of the notice described
          in Clause (A).

                 (iii) If any Bond is to be purchased in part pursuant to (i) or
          (ii) above, the amount so purchased and the amount not so purchased
          must each be an Authorized Denomination.

                 (iv)  Any instrument delivered to the Tender Agent in
          accordance with this Section 4.08 shall be irrevocable with respect to
          the purchase for which such

                                       39

<PAGE>

          instrument was delivered and shall be binding upon any subsequent
          Owner of the Bond to which it relates, including any Bond issued in
          exchange therefor or upon the registration of transfer thereof, and as
          of the date of such instrument, the Owner of the Bonds specified
          therein shall not have any right to optionally tender for purchase
          such Bonds prior to the date of purchase specified in such notice. The
          Tender Agent and the Trustee may conclusively assume that any person
          (other than a holder) providing notice of optional tender pursuant to
          (i) or (ii) above is the Owner of the Bond to which such notice
          relates, and neither the Tender Agent nor the Trustee shall assume any
          liability in accepting such notice from any person whom it reasonably
          believes to be an Owner of Bonds.

          (b)  Mandatory Tender for Purchase.

               (i)   The Bonds shall be subject to mandatory tender for purchase
          at a purchase price, except as provided in paragraph (ii) below, equal
          to 100% of the principal amount thereof, plus accrued interest to the
          date of purchase described below, upon the occurrence of any of the
          events stated below:

                     (A)  as to any Bond, on the effective date of any change in
               an Interest Rate Period for such Bond, other than the effective
               date of any change from a Daily Interest Rate Period to a Weekly
               Interest Rate Period or from a Weekly Interest Rate Period to a
               Daily Interest Rate Period; or

                     (B)  as to each Bond in a Short-Term Interest Rate Period,
               on the day next succeeding the last day of each Bond Interest
               Term with respect to such Bond; or

                     (C)  as to all Bonds, on the effective date of any Credit
               Facility which may be provided with respect to the Bonds pursuant
               to Section 6.08 of the Agreement or of any substitute Credit
               Facility provided with respect to the Bonds pursuant to Section
               6.08 of the Agreement.

               (ii)  In the event that on a date the Bonds are subject to
          optional redemption pursuant to Section 4.01(a)(ii), the Borrower
          elects to change the Interest Rate Period with respect to the Bonds
          during a Long-Term Interest Rate Period to a different Interest Rate
          Period or to provide, substitute or terminate a Credit Facility, if
          any, during a Long-Term Interest Rate Period and thereby causes a
          mandatory tender of such Bonds as provided in Section 4.08(b)(i)(A) or
          (C), as the case may be, the Bonds shall be purchased on the
          applicable mandatory tender date at a purchase price equal to the
          principal amount thereof plus an amount equal to any premium which
          would have been payable on such day had the Borrower directed
          redemption of the Bonds pursuant to Section 4.01(a)(ii) hereof.

               (iii) The Trustee shall give notice Electronically or by first
          class mail of the provision of any Credit Facility with respect to the
          Bonds or the provision of any substitute Credit Facility with respect
          to the Bonds to the holders of the

                                       40

<PAGE>

          Bonds at their addresses shown on the registration books kept by the
          Registrar, not later than the fifteenth day (thirtieth day if the then
          current Interest Rate Period is a Long-Term Interest Rate Period)
          prior to the date on which the Bonds are subject to mandatory tender
          pursuant to Section 4.08(b)(i)(C), which notice shall (i) state the
          date of such provision or substitution; and (ii) state that such Bonds
          shall be subject to mandatory tender for purchase on the effective
          date of such provision or substitution in accordance with Section
          4.08(b)(i)(C) hereof.

          (c) Mandatory Tender for Purchase on Termination or Expiration of
     Credit Facility. In the event that any Credit Facility either is to
     terminate or is to expire in accordance with its terms (other than because
     a final drawing thereunder shall have been made in accordance with its
     terms), unless the term of the Credit Facility shall be extended or unless
     the Borrower shall provide the Trustee, no later than the 35th day
     preceding the mandatory purchase date set forth herein with a substitute
     Credit Facility and with written evidence from Moody's, if the Bonds shall
     be rated and the time by Moody's, and from S&P, if the Bonds shall be rated
     at the time by S&P, to the effect that such substitute Credit Facility will
     not, by itself, result in a reduction or withdrawal of the rating on the
     Bonds by Moody's or S&P, as the case may be (and the Trustee shall have
     received written notice of such extension or such substitution and evidence
     thereof prior to giving the notice required in paragraph (b) above), the
     Bonds shall be subject to mandatory tender for purchase at a purchase
     price, payable in immediately available funds, of 100% of their principal
     amount, plus accrued interest, if any, to the mandatory purchase date, on
     the second Business Day prior to the date of such termination or
     expiration.

          Section 4.09 Delivery of Tendered Bonds. With respect to any
Book-Entry Bond, delivery of such Bond to the Tender Agent in connection with
any optional or mandatory tender pursuant to Section 4.08 hereof shall be
effected by the making of, or the irrevocable authorization to make, appropriate
entries on the books of DTC or any DTC Participant to reflect the transfer of
the beneficial ownership interest in such Bond to the account of the Tender
Agent, or to the account of a DTC Participant acting on behalf of the Tender
Agent. With respect to any Bond which is not a Book-Entry Bond, delivery of such
Bond to the Tender Agent in connection with any optional or mandatory tender
pursuant to Section 4.08 hereof shall be effected by physical delivery of such
Bond to the Tender Agent at its Principal Office, by 1:00 p.m. (New York City
time) on the purchase date, accompanied by a proper instrument of transfer
thereof, in a form satisfactory to the Tender Agent, executed in blank by the
holder thereof with the signature of such holder guaranteed in accordance with
the guidelines set forth by one of the nationally recognized medallion signature
programs.

          Section 4.10 Bonds Deemed Purchased.

          (a) If moneys sufficient to pay the purchase price of Bonds to be
purchased pursuant to Section 4.08 shall be held by the Tender Agent on the date
such Bonds are to be purchased, such Bonds shall be deemed to have been
purchased for all purposes of this Indenture, irrespective of whether or not
such Bonds shall have been delivered to the Tender Agent, and neither the former
holder of such Bonds nor any other person shall

                                       41

<PAGE>

     have any claim thereon, under this Indenture or otherwise, for any amount
     other than the purchase price thereof.

          (b) In the event of non-delivery of any Bond to be purchased pursuant
     to Section 4.08 hereof, the Tender Agent shall segregate and hold
     uninvested the moneys for the purchase price of such Bonds in trust,
     without liability for interest thereon, for the benefit of the former
     holders of such Bonds, who shall, except as provided in the following
     sentence, thereafter be restricted exclusively to such moneys for the
     satisfaction of any claim for the purchase price of such Bonds. Any moneys
     which the Tender Agent shall segregate and hold in trust for the payment of
     the purchase price of any Bond and remaining unclaimed for two (2) years
     after the date of purchase shall be paid, upon the Borrower's written
     request, to the Borrower. After the payment of such unclaimed moneys to the
     Borrower, the former holder of such Bond shall look only to the Borrower
     for the payment thereof.

                                    ARTICLE V

                                  THE BOND FUND

          Section 5.01 Creation of Bond Fund. There is hereby created by the
Issuer and ordered established with the Trustee a trust fund in the name of the
Issuer to be designated "Maricopa County, Arizona Pollution Control Corporation
Pollution Control Refunding Revenue Bonds 2002 Series A (El Paso Electric
Company, Palo Verde Project) Bond Fund," (the "Bond Fund"). The Trustee shall
establish one or more accounts within the Bond Fund for the purpose of
segregating moneys drawn under a Credit Facility, if any, and Available Moneys
therein, and may establish one or more accounts within the Bond Fund for other
purposes.

          Section 5.02 Deposits into Bond Fund.

     There shall be deposited in the Bond Fund:

               (i)   The accrued interest and purchase premium, if any, paid by
          the initial purchasers of the Bonds;

               (ii)  All Repayment Installments and moneys drawn by the Trustee
          under a Credit Facility for the payment of principal of and interest
          and any premium on the Bonds, other than moneys paid by the Bank
          pursuant to Section 4.07 hereof or drawn under a Credit Facility
          pursuant to subsection (b) of Section 14.03 hereof or Section 4.07
          hereof;

               (iii) All other moneys received by the Trustee under and pursuant
          to any provision of the Agreement, other than Sections 5.04, 5.08 and
          8.05 thereof, or from any other source when accompanied by directions
          by the Borrower that such moneys are to be paid into the Bond Fund;
          and

               (iv)  All moneys required to be deposited therein under any other
          provision of this Indenture.

                                       42

<PAGE>

          Section 5.03 Use of Moneys in Bond Fund. Except as otherwise provided
in Sections 5.05, 5.06, 5.08, 9.01, 10.10 and 11.04 hereof, moneys in the Bond
Fund shall be used solely for the payment of the principal of and interest and
any premium on the Bonds as the same shall become due and payable on an Interest
Payment Date or at maturity, upon redemption or acceleration or otherwise. Funds
for such payments of the principal of and interest and any premium on the Bonds
shall be derived from the following sources in the order of priority indicated:

               (i)   moneys paid into the Bond Fund pursuant to Section 5.02(i)
          hereof, which shall be applied to the payment of interest on the
          Bonds;

               (ii)  proceeds of the sale of refunding obligations and proceeds
          from the investment thereof, deposited into the Bond Fund which
          constitute Available Moneys;

               (iii) moneys furnished by the Borrower to the Trustee pursuant to
          the Agreement which have been deposited into the Bond Fund and
          constitute Available Moneys (other than funds under a Credit Facility)
          and proceeds from the investment thereof;

               (iv)  moneys drawn by the Trustee under a Credit Facility for the
          payment of the principal of or interest or any premium on the Bonds
          and deposited into the Bond Fund;

               (v)   moneys furnished by the Borrower to the Trustee pursuant to
          the Agreement and any other moneys available therefor and proceeds
          from the investment thereof;

               (vi)  In addition to amounts required to be paid into the Bond
          Fund, the Trustee shall (i) in the case of Bonds to be purchased by
          the Tender Agent on behalf of the Borrower pursuant to Article IV
          hereof, draw moneys under a Credit Facility in accordance with the
          terms thereof to the extent necessary to make timely payments of the
          purchase price of the Bonds pursuant to such Article IV, but only to
          the extent moneys are not available from the sources set forth in
          clauses (i) and (ii) of Section 14.03(b) hereof, and furnish said
          moneys to the Tender Agent and (ii) in connection with the purchase of
          Bonds by the Trustee on behalf of or for the account of the Bank
          pursuant to Section 4.07, draw moneys under such Credit Facility in
          accordance with the terms hereof and of such Credit Facility in
          amounts sufficient to pay the purchase price of the Bonds so purchased
          to the extent sufficient funds are not otherwise timely furnished by
          the Bank to the Trustee; provided, however, that the principal of,
          premium, if any, and interest on Bonds held by the Borrower, the
          Tender Agent or the Trustee on behalf of the Borrower (or any
          affiliate thereof), shall not be paid from moneys drawn under such
          Credit Facility.

          Section 5.04 Credit Facility.

                                       43

<PAGE>

          (a) No Credit Facility relating to the Bonds will be delivered as of
     the date of issuance and delivery of the Bonds.

          (b) A Credit Facility shall be the obligation of a Bank to pay to the
     Trustee, in accordance with the terms thereof, such amounts as shall be
     specified therein and available to be drawn thereunder for the timely
     payment of the principal of and interest and, if permitted by a Credit
     Facility, any premium on the Bonds (whether at their stated maturity, or
     upon acceleration or redemption or otherwise), and portions of the purchase
     price of Bonds corresponding to principal and interest thereon, and, if
     permitted by a Credit Facility, portions of the purchase price
     corresponding to premium on the Bonds, required to be made pursuant to, and
     in accordance with the provisions of this Indenture. Such Credit Facility
     shall be reduced to the extent of any drawings thereunder and reinstated in
     accordance with the terms thereof.

          (c) The Trustee shall draw moneys under a Credit Facility in
     accordance with the terms thereof and the terms of the Tender Agreement to
     the extent necessary to make timely payments of principal of and interest
     and any premium, if drawings thereunder shall be available to pay premium,
     on the Bonds required to be made from the Bond Fund or to enable the Tender
     Agent to pay the purchase price of Bonds purchased pursuant to Section
     14.03(b) hereof; provided, however, that, anything herein to the contrary
     notwithstanding, in no event shall the Trustee draw moneys under such
     Credit Facility in order to make payments of principal of or interest or
     any premium on, or to enable the Tender Agent to pay the purchase price of,
     Bonds held of record by the Borrower (or any affiliate thereof) or held by
     the Tender Agent or the Trustee for the account of the Borrower or
     delivered to and held of record by, or held for the account of, the Bank
     pursuant to Section 14.05(c) hereof if such Credit Facility prohibits by
     its terms a drawing thereunder for such purpose; provided, further,
     however, that the Trustee may draw moneys under such Credit Facility in
     order to make payment of interest on Bonds held of record by the Borrower
     (or any affiliate thereof), the Bank or by the Tender Agent or the Trustee
     for the account of the Borrower or the Bank pursuant to Section 14.05(c)
     hereof if such Bond was not so held by or for the account of the Borrower
     or the Bank on the immediately preceding Record Date. Upon any reduction in
     the aggregate principal amount of Bonds Outstanding, the Trustee shall
     request the Bank to permanently reduce the amounts that may be drawn under
     the applicable Credit Facility to those amounts which are then required
     pursuant to Section 6.08 of the Agreement. For extensions of the term of a
     Credit Facility, the Trustee shall surrender the applicable Credit Facility
     to the Bank (if so directed by the Bank) in exchange for a Credit Facility
     of the Bank conforming in all material respects to the applicable Credit
     Facility except that the expiration date shall be extended. If at any time
     there shall cease to be any Bonds Outstanding hereunder, the Trustee shall
     promptly surrender the applicable Credit Facility to the Bank, in
     accordance with the terms of the applicable Credit Facility, for
     cancellation.

          (d) If at any time there shall have been delivered to the Trustee, all
     as described in and in accordance with Section 6.08 the Agreement, (i) a
     notice of the Borrower, (ii) the required opinion of Bond Counsel and (iii)
     a Credit Facility, if any, described in such notice, then the Trustee shall
     accept such Credit Facility, if any, and

                                       44

<PAGE>

     comply with the direction of the Borrower, if any, contained in such
     notice. If the delivery of such Credit Facility does not result in a
     mandatory tender for purchase of all Bonds pursuant to Section 4.08(b)
     hereof, the Trustee shall give notice by first-class mail of the delivery
     of such Credit Facility to the Owners of the Bonds not less than 20 days
     prior to the date of the expiration or termination of a Credit Facility
     then in effect. Such notice shall state that the Borrower has caused to be
     provided the new Credit Facility, shall describe the new Credit Facility
     (including. its effective date and scheduled expiration date) and shall
     state that the Borrower has delivered written evidence from Moody's, if the
     Bonds are then rated by Moody's and from S&P, if the Bonds are then rated
     by S&P, that neither Moody's nor S&P will reduce or withdraw its rating
     then in effect with respect to the Bonds as a result of the proposed
     delivery of the new Credit Facility.

          Section 5.05 Custody of Bond Fund; Withdrawal of Moneys. The Bond Fund
shall be in the custody of the Trustee but in the name of the Issuer and the
Issuer hereby irrevocably authorizes and directs the Trustee to withdraw from
the Bond Fund and furnish to the Paying Agent funds sufficient to pay the
principal of and interest and any premium 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. If and
to the extent that moneys remain in the Bond Fund after payment of such
principal, interest and premium, if any, and are not required to be held therein
pursuant to Section 5.06, such moneys shall be paid to the Bank, to the extent
that there shall then be amounts due and payable to the Bank pursuant to the
Reimbursement Agreement and the Bank has notified the Trustee thereof.

          Section 5.06 Bonds Not Presented for Payment. In the event any Bond
shall not be presented for payment when the principal thereof (or any portion of
such principal) becomes due, either at maturity or at the date fixed for
redemption thereof or otherwise or in the event that any interest payment
remains unclaimed, if moneys sufficient to pay such Bonds or portions thereof or
such interest are held by the Paying Agent for the benefit of the Owners
thereof, the Paying Agent shall segregate and hold such moneys in trust
uninvested without liability for interest thereon, for the benefit of 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 or interest or any premium on any Bond and remaining
unclaimed for three years after such principal, interest or any premium shall
have become due and payable shall be paid to the extent legally permissible (i)
if, at the time, there shall be amounts due and payable to the Bank pursuant to
the Reimbursement Agreement, to the Bank, or (ii) if no such amounts shall be
due and payable, to the Borrower, with notice to the Trustee of such action. For
purposes of this Indenture, the Paying Agent may conclusively assume that no
such indebtedness, liability or obligation is owing to the Bank unless the Bank
shall otherwise give written notice to the Paying Agent. After the payment of
such unclaimed moneys to the Bank or the Borrower, the Owner of such Bond shall
look only to the Borrower for the payment thereof.

          Section 5.07 Moneys Held in Trust. All moneys required to be deposited
with or paid to the Trustee for deposit into the Bond Fund under any provision
hereof and all moneys

                                       45

<PAGE>

withdrawn from the Bond Fund and held by the Trustee or the Paying Agent shall
be held by the Trustee or the Paying Agent, as the case may be, in trust, and
such moneys (other than moneys held pursuant to Section 5.06 hereof) shall,
while so held, constitute part of the Trust Estate and be subject to the lien
hereof for the benefit of the Owners.

          Section 5.08 Payment to the Bank and to the Borrower. Any moneys
remaining in the Bond Fund after the right, title and interest of the Trustee in
and to the Trust Estate and all covenants, agreements and other obligations of
the Issuer under this Indenture shall have ceased, terminated and become void
and shall have been satisfied and discharged in accordance with Article IX
hereof, shall be paid (a) if, at that time, there shall be amounts due and
payable to the Bank pursuant to the Reimbursement Agreement, if any, and the
Bank has notified the Trustee thereof, to the Bank, or (b) if no such amounts
shall be so due and payable, to the Borrower.

                                   ARTICLE VI

                                   [RESERVED]

                                  ARTICLE VII

                                  INVESTMENTS

          Section 7.01 Investments. The moneys in the Bond Fund (other than the
moneys described in Sections 4.06(ii), 5.04(c) and 5.06 hereof, which may not be
invested) shall, but only at the direction of the Borrower, be invested and
reinvested in Investment Securities to the extent not prohibited by applicable
law as determined by the Borrower. The income from, and any gain or loss from,
any investment shall be credited or charged to the Fund from which such
investment was made. Investment Securities will be registered in the name of the
Trustee or its nominee and held by or under the control of the Trustee. Subject
to the further provisions of this Section 7.01, such investment shall be made,
and such agreements entered into, by the Trustee as directed and designated by
the Borrower in a certificate of, or telephonic advice promptly confirmed by a
certificate of, an Authorized Borrower Representative. As and when any amounts
thus invested (including investments of Available Moneys) may be needed for
disbursements from the Bond Fund; the Trustee shall cause a sufficient amount of
such investments to be sold or otherwise converted into cash to the credit of
such Fund. As long as no Event of Default (as defined in Section 10.01 hereof)
shall have occurred and be continuing, the Borrower 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 11.05 hereof. The Trustee shall have no responsibility under
this Indenture with respect to the compliance by the Borrower or the Issuer with
any covenant herein or in the Agreement regarding the yield on, or tax-exempt
nature of investments made in accordance with this Section 7.01, other than to
use its best efforts to comply with instructions from the Borrower or the Issuer
regarding such investments and the Trustee shall bear no responsibility for
losses incurred from such investments or the sale thereof. Moneys held by the
Tender Agent in the Purchase Fund shall not be invested.

                                       46

<PAGE>

                                  ARTICLE VIII

                                GENERAL COVENANTS

          Section 8.01 Limited Obligation; Payment of Principal and Interest.
Each and every covenant herein made, including all covenants made in the various
Sections of this Article VIII, is predicated upon the condition that any
obligation for the payment of money incurred by the Issuer shall not be the
general obligation of the Issuer within the meaning of the Constitution of
Arizona, and shall never constitute an indebtedness of the Issuer within the
meaning of any State of Arizona constitutional provision or statutory
limitation, and shall never constitute or give rise to any pecuniary liability
of the Issuer or a charge against its general credit or taxing powers, but shall
be payable by the Issuer solely from the Receipts and Revenues from the
Agreement, which are required to be set apart and transferred to the Bond Fund,
and which, along with the balance of the Trust Estate, are hereby specifically
pledged to the payment thereof in the manner and to the extent specified in this
Indenture, and nothing in the Bonds or in this Indenture shall be considered as
pledging or obligating any other funds or assets of the Issuer.

     The Issuer will in the manner provided herein and in the Bonds, according
to the true intent and meaning thereof, promptly cause to be paid, solely from
the sources stated herein, at the place and on the dates provided herein, the
principal of and premium, if any, and interest on every Bond issued under this
Indenture.

          Section 8.02 Performance of Agreements; Authority. The Issuer will
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 Issuer represents that it has the authority under the
Constitution and laws of the State of Arizona to issue the Bonds authorized
hereby, to enter into the Agreement, and to pledge to the Trustee the Receipts
and Revenues from the Agreement and to pledge and assign to the Trustee all or
any part of the Issuer's right, title and interest under the Agreement pledged
and assigned hereunder, and that the Bonds in the hands of the Owners thereof
are and will be valid and enforceable obligations of the Issuer according to the
import thereof.

          Section 8.03 Maintenance of Corporate Existence; Compliance with Laws.
The Issuer will at all times 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 will use its best efforts to maintain,
preserve and renew all the rights and powers provided to it by the Act; and it
will comply with all valid acts, rules, regulations, orders and directions of
any legislative, executive, administrative or judicial body applicable to the
Agreement.

          Section 8.04 Enforcement of Borrower's Obligations under the
Agreement. So long as any of the Bonds are outstanding, upon receipt of written
notification from the Trustee, the Issuer will, in the manner provided herein
and giving due recognition to the role of the Trustee hereunder, enforce the
obligation of the Borrower to pay, or cause to be paid, all the payments and
other costs and charges payable by the Borrower under the Agreement, provided,
however, that the Issuer shall not be required to spend any of its own funds in
any such enforcement. The Issuer will not enter into any agreement with the
Borrower amending the

                                       47

<PAGE>

Agreement without the prior written consent of the Trustee and compliance with
Sections 13.06 and 13.07 hereof.

          Section 8.05 Further Assurances. The Issuer will, 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 purpose of this Indenture; provided, however, that no
such instruments or actions shall give rise to any pecuniary liability of the
Issuer or pledge the credit or taxing power of the State of Arizona, the Issuer
or any other political subdivision of said State.

          Section 8.06 No Disposition or Encumbrance of Issuer's Interests.
Except as permitted by this Indenture, the Issuer will not sell, lease, pledge,
assign or otherwise dispose of or encumber its interest in the Receipts and
Revenues from the Agreement or its rights and interest under the Agreement
pledged and assigned hereunder and will promptly pay or cause to be discharged
or make adequate provision to satisfy and discharge any lien or charge on any
part thereof not permitted by this Indenture.

          Section 8.07 Trustee's Access to Books Relating to Facilities. All
books and documents in the possession of the Issuer relating to the Facilities
and the moneys, revenues and receipts derived from the Facilities shall at all
reasonable times be open to inspection by such accountants or other agencies as
the Trustee may from time to time designate. The Trustee shall permit the
Borrower or its designee reasonable access to records relating to the investment
of the proceeds of the Bonds or any other records relating to the Bonds
necessary to assure compliance with Section 148 of the Code.

          Section 8.08 Filing of Financing Statements. Appropriate financing
statements, naming the Trustee as secured party with respect to the Receipts and
Revenues from the Agreement and the other moneys pledged by the Issuer under
this Indenture for the payment of the principal of and premium, if any, and
interest on the Bonds, and as pledgee and assignee of certain of the Issuer's
rights and interest under the Agreement, shall 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,
the state in which lies the Principal Office of the Trustee and any other
applicable jurisdiction, as from time to time amended. The Trustee will file and
record, with such assistance as necessary from the Issuer and the Borrower, such
necessary continuation statements from time to time as may be required pursuant
to the provisions of said Uniform Commercial Code or other similar law to
protect the interest of the Trustee.

          Section 8.09 Tax Covenant. The Issuer covenants for the benefit of the
purchasers of the Bonds that it will not take any action or fail to take any
action reasonably within its control which would, under the Code, Regulations of
the Department of the Treasury of the United States of America (including
Temporary Regulations and Proposed Regulations) under the Code applicable to the
Bonds, rulings and court decisions, cause the interest payable on the Bonds to
be includable in the gross income of the holders thereof for Federal income tax
purposes (other than a "substantial user" of the Facilities or a "related
person" as those terms are used in Section 147(a) of the Code). Pursuant to such
covenant, the Issuer obligates itself to

                                       48

<PAGE>

comply throughout the term of the issue of the Bonds with the requirements of
Section 148 of the Code and any regulations promulgated thereunder.

     The Borrower by its execution of the Agreement has covenanted to restrict
the investment of money in the funds created under this Indenture in such manner
and to such extent, if any, as may be necessary, so that the Bonds will not
constitute "arbitrage bonds" under Section 148 of the Code.

          Section 8.10 Notices by Trustee. The Trustee shall give the same
notices to the Issuer that it is required to give to the Borrower, and to the
Borrower that it is required to give to the Issuer, pursuant to the terms of
this Indenture and, additionally, shall give written or Electronic notice to the
Issuer, the Borrower and the Remarketing Agent of any prior redemption pursuant
to Section 4.01 hereof.

          Section 8.11 No Transfer of Credit Facility. Except as provided in
Section 5.04 hereof, the Trustee shall not sell, assign or transfer a Credit
Facility except to a successor trustee under this Indenture and as contemplated
by Section 11.16 hereof.

                                   ARTICLE IX

                                   DEFEASANCE

          Section 9.01 Defeasance. If the Issuer shall pay or cause to be paid
with Available Moneys to the Owner of any Outstanding Bond secured hereby the
principal of and interest and any premium due and payable, and thereafter to
become due and payable, on such Bond, or any portion of such Bond in an
Authorized Denomination, such Bond or portion thereof shall cease to be entitled
to any lien, benefit or security under this Indenture (except as set forth in
Section 9.02 hereof). If the Issuer shall pay or cause to be paid with Available
Moneys to the owners of all the Bonds the principal thereof and interest and any
premium due and payable and thereafter to become due and payable thereon, and
shall pay or cause to be paid all other sums payable hereunder by the Issuer, or
payable under the Agreement by the Borrower, then 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 the
Trust Estate, including, without limitation, any surplus in the Bond Fund and
any balance remaining in any other fund created under this Indenture, (i) if, at
that time, there shall be amounts due and payable to the Bank pursuant to the
Reimbursement Agreement and the Bank has notified the Trustee thereof, to the
Bank, or (ii) if no such amounts shall be so due and payable, to the Borrower.

     All Outstanding Bonds 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 IX (except as set forth in Section 9.02 hereof) when

          (a) in the event the Bonds are to be redeemed, the Trustee shall have
     given, or the Borrower shall have given to the Trustee in form satisfactory
     to the Trustee irrevocable instruction to give, on a date in accordance
     with the provisions of Article IV hereof, notice of redemption of the
     Bonds,

                                       49

<PAGE>

          (b) all Outstanding Bonds then bear interest at a Long-Term Interest
     Rate during a Long-Term Interest Rate Period ending on or after the
     redemption date or on the day immediately preceding the Maturity Date, as
     the case may be, or at Bond Interest Term Rates for Bond Interest Terms
     which end on the redemption date or the day immediately preceding the
     Maturity Date, as the case may be, and there shall have been deposited with
     the Trustee either moneys in an amount which shall be sufficient, or fixed
     rate Government Obligations (i) which shall not contain provisions
     permitting the redemption or prepayment thereof at the option of the issuer
     thereof, (ii) which mature no later than the earlier of (A) the date fixed
     for the redemption of the Bonds and (B) the Maturity Date, and (iii) the
     principal of and the interest on which, when due, and without any regard to
     reinvestment thereof, will provide moneys which, together with the moneys,
     if any, deposited with or held by the Trustee, shall be sufficient, based
     on the written opinion of a firm of certified public accountants acceptable
     to the Trustee, delivered to the Trustee, to pay when due the principal of
     and interest and any premium due and to become due on the Bonds on and
     prior to the redemption date or Maturity Date, as the case may be;
     provided, however, that such moneys shall constitute Available Moneys and
     that such Government Obligations shall have been purchased with Available
     Moneys, and

          (c) in the event the Bonds do not mature and are not to be redeemed
     within the next succeeding 60 days, the Borrower 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 4.03 hereof, a notice to the Owners that the deposit
     required by clause (b) above has been made with the Trustee and that the
     Bonds are deemed to have been paid in accordance with this Article IX and
     stating the maturity or redemption date upon which moneys are to be
     available for the payment of the principal of and interest and any premium
     on the Bonds.

     Neither the Government Obligations nor moneys deposited with the Trustee
pursuant to this Article IX nor principal or interest payments on any such
Government Obligations shall be withdrawn or used for any purpose other than,
and shall be held in trust for, the payment of the principal of and interest and
any premium on the Bonds; 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 purpose, shall be invested, to the extent practicable,
at the direction of the Borrower, in Government Obligations of the type and
tenor described in clause (b) of the immediately preceding paragraph, and
interest earned from such reinvestment shall be paid as received by the Trustee
(i) if, at that time, there shall be amounts due and payable to the Bank
pursuant to the Reimbursement Agreement and the Bank has notified the Trustee
thereof, to the Bank, or (ii) if no such amounts shall be so due and payable, to
the Borrower.

          Section 9.02 Survival of Certain Provisions. Notwithstanding the
foregoing, any provisions of this Indenture which relate to the payment of the
principal of or any premium on Bonds at maturity or pursuant to redemption, as
the case may be, interest payments and dates thereof, exchange, transfer and
registration of Bonds, replacement of mutilated, destroyed, lost or stolen
Bonds, the safekeeping and cancellation of Bonds, non-presentment of Bonds, the
holding of moneys in trust and repayments to the Bank or the Borrower from the
Bond Fund or the Purchase Fund and the duties of the Trustee, the Registrar, the
Remarketing Agent and the

                                       50

<PAGE>

Paying Agent in connection with all of the foregoing, shall remain in effect and
be binding upon the Issuer, the Trustee, the Remarketing Agent, the Tender
Agent, the Registrar, the Paying Agent and Owners notwithstanding the release
and discharge of this Indenture. The provisions of this Section shall survive
the release, discharge and satisfaction of this Indenture provided, however,
that the provisions of Section 2.01 hereof, permitting adjustments in the
Interest Rate Period with respect to the Bonds, shall not be in effect after the
release and discharge of this Indenture.

                                   ARTICLE X

                              DEFAULTS AND REMEDIES

          Section 10.01 Events of Default.

          (a)  Each of the following events shall constitute and is referred to
     in this Indenture as an "Event of Default":

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

               (ii)  a failure to pay an installment of interest on any of the
          Bonds after such interest has become due and payable;

               (iii) a failure to pay an amount due pursuant to Section 4.08
          hereof after such payment has become due and payable;

               (iv)  an "Event of Default" as such term is defined in Section
          8.01 of the Agreement;

               (v)   prior to termination or expiration of a Credit Facility,
          receipt by the Trustee, prior to the date set forth in a Credit
          Facility for automatic reinstatement of interest following a drawing
          under a Credit Facility to pay accrued interest on the Bonds, of
          notice from the Bank in accordance with a Credit Facility that a
          Credit Facility will not be reinstated in respect of such interest;

               (vi)  prior to termination or expiration of a Credit Facility and
          payment in full of all amounts due under the Reimbursement Agreement,
          receipt by the Trustee of written notice from the Bank that an "Event
          of Default" under the Reimbursement Agreement has occurred and is
          continuing; or

               (vii) a failure by the Issuer to observe and perform any
          covenant, condition, agreement or provision (other than as specified
          in clauses (i), (ii) and (iii) of paragraph (a) of this Section 10.01)
          contained in the Bonds or in this Indenture on the part of the Issuer
          to be observed or performed, which failure shall continue for a period
          of 60 days after written notice, specifying such failure and
          requesting that it be remedied, shall have been given to the Issuer
          and the Borrower by the Trustee, which may give such notice in its
          discretion and shall

                                       51

<PAGE>

     give such notice at the written request of the Owners of a majority in
     principal amount of the Bonds then Outstanding, unless the Trustee or the
     Owners of Bonds then Outstanding in principal amount not less than the
     principal amount of Bonds the Owners of which requested such notice, 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 Issuer, or the Borrower on behalf of the Issuer, within
     such period and is being diligently pursued.

     (b)  If:

          (i)   (A) a Credit Facility is then in effect and (B) an Event of
     Default described in clauses (i), (ii) or (iii) of paragraph (a) of this
     Section 10.01 shall occur and be continuing, the Trustee may, and at the
     written request of the owners of a majority in principal amount of Bonds
     then Outstanding, the Trustee shall, or

          (ii)  (A) a Credit Facility is then in effect and (B) an Event of
     Default described in clause (iv) of paragraph (a) of this Section 10.01
     shall occur and be continuing, at the written request of the Bank, the
     Trustee shall, or

          (iii) (A) a Credit Facility is then in effect and (B) an Event of
     Default described in clauses (v) or (vi) of paragraph (a) of this Section
     10.01 shall occur and be continuing, the Trustee shall, or

          (iv)  (A) a Credit Facility is not then in effect or if the Bank shall
     have wrongfully failed to honor a drawing under such Credit Facility then
     in effect and (B) an Event of Default described in clauses (i), (ii),
     (iii), (iv), (v), or (vi) of paragraph (a) of this Section 10.01 shall
     occur and be continuing, the Trustee may, and at the written request of the
     Owners of a majority in principal amount of Bonds then Outstanding, the
     Trustee shall, subject to the Bank's right to purchase the Bonds pursuant
     to Section 4.07 in the circumstances set forth therein, by written notice
     to the Issuer, the Bank, and the Borrower, 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 to the Tender Agent, the Remarketing Agent and the Owners
     and shall immediately (and in no event later than five (5) days thereafter)
     draw under a Credit Facility to the extent provided in Section 5.04 hereof.
     If the principal of all of the Bonds shall have been declared due and
     payable while a Credit Facility shall be in effect, interest on such Bonds
     shall cease to accrue on the date of the drawing on a Credit Facility with
     respect to such declaration unless such drawing is pursuant to the Bank's
     purchase of the Bonds in accordance with Section 4.07 hereof. The Trustee
     shall not be entitled to accelerate the principal of the Bonds upon the
     occurrence of an Event of Default described in clause (vii) of paragraph
     (a) of this Section 10.01.

                                       52

<PAGE>

          (c) The provisions of paragraph (b), however, are subject, when no
     Credit Facility shall be in effect, 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 Issuer shall
     cause to be deposited with the Trustee a sum sufficient to pay all matured
     installments of interest upon all Bonds, premium, if any, 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 on the date of such declaration) and such amounts
     as shall be sufficient to cover reasonable compensation and reimbursement
     of expenses payable to the 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 or waived, 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 or Electronic notice of such waiver, rescission and annulment
     to the Issuer, the Borrower, the Remarketing Agent, and, if notice of the
     acceleration of the Bonds shall have been given to the Owners, shall give
     notice thereof to the Owners; 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.

          (d) The provisions of paragraph (b) are, further, subject to the
     condition that (i) if an Event of Default described in clauses (v) or (vi)
     of paragraph (a) shall have occurred and the Trustee shall thereafter have
     received written notice from the Bank that the notice of the Bank which
     caused the occurrence of such Event of Default shall have been withdrawn
     and (ii) if any drawing under a Credit Facility shall have been made and a
     Credit Facility shall have been reinstated as to principal to an amount
     equal to the outstanding principal amount of the Bonds and as to interest
     to an amount which at least equals, depending on the type of Interest Rate
     Period then in effect, the coverage required by Section 2.01(c)(vi) hereof
     to permit such Interest Rate Period to go into effect, and the Trustee
     shall have received written notice from the Bank of such reinstatement,
     then such Event of Default shall be waived, and the consequences of such
     Event of Default rescinded and annulled and the Trustee shall promptly give
     written notice of such waiver, rescission and annulment to the Issuer, the
     Borrower, the Bank, the Tender Agent, the Remarketing Agent, and, if notice
     of the acceleration of the Bonds shall have been given to the Owners, shall
     give notice thereof to the Owners; 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 10.02 Remedies. In addition to the rights conferred, or
obligation imposed, upon the Trustee under Section 10.01 hereof to accelerate
the principal of the Bonds 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 the Bank or the Owners of 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:

                                       53

<PAGE>

               (i)   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 Issuer, the Bank, and the Borrower to carry out any agreements
          with or for the benefit of the Owners and to perform their duties
          under the Act, the Agreement, a Credit Facility and this Indenture;

               (ii)  bring suit upon the Bonds or a Credit Facility; or

               (iii) 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.

          Section 10.03 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 and in every case the Issuer, the
Trustee and the Owners of the Bonds shall be restored 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 10.04 Owner's Right to Direct Proceedings. Subject to the
provisions of Section 4.07 hereof relating to the rights of the Bank in the
circumstances set forth as described therein, 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.

          Section 10.05 Limitation on Owners' Right to Institute Proceedings. No
owner shall have any right to institute any suit, action or proceedings in
equity or at law for the execution of any trust or power hereunder, or any other
remedy hereunder or on said Bonds, unless (i) such Owner previously shall have
given to the Trustee. written notice of an Event of Default as hereinabove
provided, (ii) the owners of 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, (iii) 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 (iv) the Trustee
shall not have complied with such request within a reasonable time after such
notice, request and offer of indemnity; 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
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.

                                       54

<PAGE>

          Section 10.06 No Impairment of Right to Enforce Payment.
Notwithstanding any other provision in this Indenture, the right of any Owner to
receive payment of the principal of and interest and any premium on such Bond,
on or after the respective due dates expressed therein or applicable redemption
dates, or to institute suit for the enforcement of any such payment on or after
such respective date, shall not be impaired or affected without the consent of
such Owner.

          Section 10.07 Proceeding 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 at the trial or other
proceedings relative thereto. 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 subject to the provisions of this Indenture.

          Section 10.08 No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Trustee, the Bank 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 Agreement, or now or hereafter existing at lay or in
equity or by statute.

          Section 10.09 No Waiver of Remedies. No delay or omission of the
Trustee, the Bank or of any Owner of a Bond to exercise any right or power
accruing upon any default shall impair any such right or power accruing upon any
default or shall be construed to be a waiver of any such default, or an
acquiescence therein. Every power and remedy given by this Article X to the
Trustee, the Bank and to the Owners of the Bonds, respectively, may be exercised
from time to time as often as may be deemed expedient.

          Section 10.10 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 X (other than moneys
received by the Trustee in consequence of the exercise by the Bank of its right
to purchase the Bonds pursuant to Section 4.07) or under the provisions of the
Agreement after payment of the costs and expenses of the proceedings resulting
in the collection of such moneys, including any amounts due to the Trustee
pursuant to Section 11.04 hereof and under the Agreement (except that proceeds
of a drawing under a Credit Facility and any moneys held pursuant to Section
5.06 hereof may not be so used), 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 been declared 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 on the date of occurrence of such Event of
     Default, 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

                                       55

<PAGE>

     installment, and (ii) second, to the payment to the persons entitled
     thereto of the unpaid principal of and any premium on 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 on the date of
     occurrence of such Event of Default 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
     and any premium due on such date, in each case to the persons entitled
     thereto, without any discrimination or privilege; provided, however, that
     moneys derived from the exercise of rights by the Trustee under a Credit
     Facility shall not be applied to the payment of the principal of or premium
     or interest on Bonds held of record by the Borrower or any affiliate
     thereof or by the Tender Agent for the account of the Borrower.

          (b) If the principal of all the Bonds shall have been declared due and
     payable and the Bank has not exercised its option to direct the Trustee to
     purchase all Bonds on behalf of the Bank pursuant to Section 4.07 hereof,
     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; provided, however, that moneys
     derived from the exercise of rights by the Trustee under a Credit Facility
     shall not be applied to the payment of the principal of or premium or
     interest on Bonds held of record by the Borrower or any affiliate thereof
     or by the Tender Agent for the account of the Borrower.

          (c) If the principal of all the Bonds shall have been declared due and
     payable, and if such declaration shall thereafter have been rescinded and
     annulled under the provisions of this Article X, subject to the provisions
     of clause (b) of this Section 10.10 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 10.10.

     Whenever moneys are to be applied pursuant to the provisions of this
Section 10.10, such moneys shall be applied at such times, and from time to
time, as the Trustee shall determine, having due regard to the amount of such
moneys available for application and the likelihood of additional moneys
becoming available for such application in the future. Whenever the Trustee
shall apply such funds, it shall fix the date (which, while a Credit Facility
shall be in effect, shall be within five days of any declaration of acceleration
and, if possible, an Interest Payment Date unless it shall deem another date
more suitable) upon which such application is to be made and, upon such
application, interest on the amounts of principal, premium and interest to be
paid on such dates shall cease to accrue, except that if the principal of all of
the Bonds shall have been declared due and payable when a Credit Facility shall
be in effect, interest on such amounts shall cease to accrue on the date of the
drawing on a Credit Facility with respect to such declaration unless such
drawing is pursuant to the Bank's purchase of the Bonds in accordance with
Section 4.07 hereof. The Trustee shall give notice of the deposit with it of any
such moneys and of

                                       56

<PAGE>

the fixing of any such date to all Owners of Outstanding Bonds, consistent with
the requirements of Section 2.01 hereof for the establishment of, and giving of
notice with respect to, a Special Record Date for the payment of overdue
interest. The Trustee shall not be required to make payment to any Owner of a
Bond until such Bond shall be presented to the Trustee for appropriate
endorsement or for cancellation if fully paid.

     Notwithstanding anything in this Section 10.10 to the contrary, moneys
received by the Trustee pursuant to draws on a Credit Facility, and moneys held
by the Trustee pursuant to Section 4.10 for the payment of Bonds not presented
for payment, shall be applied only to the payment of principal, redemption
premium (if any) and interest due on the Bonds.

          Section 10.11 Severability of Remedies. It is the purpose and
intention of this Article X to provide rights and remedies to the Trustee, the
Bank, and the Owners which may be lawfully granted under the provisions of the
Act, but should any right or remedy granted herein be held to be unlawful, the
Trustee, the Bank, and the Owners shall be entitled, as above set forth, to
every other right and remedy provided in this Indenture and by law.

          Section 10.12 Waivers of Events of Default. The Trustee in its
discretion may waive any Event of Default hereunder (other than an Event of
Default described in clauses (v) and (vi) of paragraph (a) of Section 10.01 and
not waived in accordance with paragraph (d) of Section 10.01) and its
consequences and shall in any event do so upon the written request of the Owners
of a majority in principal amount of all Bonds then outstanding; provided,
however, that there shall not be waived

               (i)      any Event of Default pertaining to the payment of the
          principal of any Bond at the Maturity Date or redemption date prior to
          maturity, or

               (ii)     any Event of Default pertaining to the payment when due
          of the interest on any Bond,

unless, prior to such waiver (A) all arrears of principal (due otherwise than by
declaration) and interest, with interest (to the extent permitted by law) at the
rate per annum borne by the Bonds in respect of which such Event of Default
shall have occurred on overdue installments of principal (due otherwise than by
declaration) and interest, shall have been paid or provided for, (B) all
expenses of the Trustee in connection with such Event of Default shall have been
paid or provided for to the satisfaction of the Trustee, and (C) if a Credit
Facility is in effect with respect to the Bonds, the coverage under a Credit
Facility shall have been reinstated as to principal to an amount equal to the
outstanding principal amount of the Bonds and as to interest to an amount which
at least equals, depending on the type of Interest Rate Period then in effect,
the coverage required by Section 2.01(c)(vi) hereof to permit such Interest Rate
Period to go into effect, and provided further that, in case of any such waiver,
or in case any proceeding taken by the Trustee on account of any such Event of
Default shall be discontinued or abandoned or determined adversely, then and in
every such case the Issuer, the Borrower, the Trustee, the Bank and the Owners
of the Bonds shall be restored to their former positions and rights hereunder,
respectively, but no such waiver shall extend to any subsequent or other Event
of Default, or impair any right consequent thereon. The Trustee shall not have
any discretion to waive any

                                       57

<PAGE>

Event of Default hereunder and its consequences except in the manner and subject
to the terms expressed above.

          Section 10.13 No Obligation of Issuer to Act. Subject to Sections 8.04
and 8.05, the Issuer shall have no obligation to take any action or pursue any
right or remedy of the Trustee or any Owner under this Indenture or otherwise,
including, but not limited to, taking any action in a bankruptcy proceeding.

                                   ARTICLE XI

                        TRUSTEE; PAYING AGENT; REGISTRAR

          Section 11.01 Acceptance of Trusts. By executing the certificate of
authentication endorsed upon the Bonds, the Trustee shall signify its acceptance
and agree to execute the trusts hereby created but only upon the additional
terms set forth in this Article XI, to all of which the Issuer agrees and the
respective owners agree by their acceptance of delivery of any of the Bonds.

          Section 11.02 Trustee Not Responsible for Recitals, Maintenance,
Insurance, etc. The recitals, findings and representations in this Indenture or
in the Bonds contained, save only the Trustee's authentication upon the Bonds,
shall be taken and construed as made by and on the part of the Issuer, and not
by the Trustee, and the Trustee does not assume, and shall not have, any
responsibility or obligation for the correctness of any thereof. In addition,
the Trustee shall not have any responsibility for monitoring the Borrower's
obligations under Sections 5.06 and 5.07 of the Agreement to maintain the
Facilities or to maintain or cause to be maintained the insurance required
thereunder.

          Section 11.03 Limitations on Liability.

          (a) 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 shall not be
     liable for any action taken or omitted to be taken in good faith on the
     basis of such advice, and the Trustee shall not be answerable for the
     default or misconduct of any such attorney, agent 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 gross negligence or willful misconduct.

          (b) The permissive rights of the Trustee to do things enumerated in
     this Indenture shall not be construed as a duty, and the Trustee shall not
     be liable for any action reasonably taken or omitted to be taken by it in
     good faith and reasonably believed by it to be within its discretion or
     power conferred upon it hereby.

          (c) Whenever in the administration of this Indenture the Trustee shall
     deem it desirable that a matter be proved or established prior to taking,
     suffering or omitting any

                                       58

<PAGE>

     action hereunder or under the Agreement, the Trustee may, in the absence of
     bad faith on its part, rely upon a Certificate of the Borrower.

          (d) Prior to taking any action under the Agreement or this Indenture,
     the Trustee shall be entitled to a certificate of an Authorized Borrower
     Representative and/or an opinion of counsel with respect to the proposed
     action, which certificate and/or opinion shall confirm that all conditions
     precedent, if any, have been satisfied.

          (e) The Trustee shall not be required to give any bond or surety with
     respect to the performance of its duties or the exercise of its powers
     under this Indenture.

          (f) The Trustee shall not be bound to ascertain or inquire as to
     performance or observance of any covenants, conditions or other agreements
     on the part of the Borrower or the Issuer under the Agreement or this
     Indenture, as the case may be, except as specifically provided for herein.
     The Trustee shall have no obligation to perform any of the duties of the
     Issuer or the Borrower under the Agreement or this Indenture.

          Section 11.04 Compensation, Expenses and Advances. The Trustee, the
Paying Agent, the Registrar and the Tender Agent under this Indenture shall be
entitled to reasonable compensation for their services rendered hereunder
including extraordinary services such as default administration (not limited by
any provision of law in regard to the compensation of the trustee of an express
trust) and to reimbursement for their actual out-of-pocket expenses (including
counsel fees and expenses) reasonably incurred in connection therewith except as
a result of their gross negligence or willful misconduct. If the Issuer 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, 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 Issuer, but the Trustee shall be under no obligation to do so;
but no such advance shall operate to relieve the Issuer from any default
hereunder. In Section 5.04 of the Agreement, the Borrower has agreed that it
will pay to the Trustee, the Paying Agent, the Registrar, the Remarketing Agent
and the Tender Agent such compensation and reimbursement of expenses and
advances, but the Borrower may, without creating a default hereunder, contest in
good faith the reasonableness of any such services, expenses and advances. In
Section 5.08 of the Agreement, the Borrower has agreed to indemnify the Trustee
and the Registrar to the extent stated therein. If the Borrower shall have
failed to make any payment to the Trustee under Sections 5.04 or 5.08 of the
Agreement and such failure shall have resulted in an Event of Default under the
Agreement, the Trustee shall have, in addition to any other rights hereunder, a
claim, prior to the claim of the Owners of the Bonds, for the payment of its
compensation and the reimbursement of its expenses and any advances made by it,
as provided in this Section 11.04, upon the moneys and obligations in the Bond
Fund, except for proceeds of drawings under a Credit Facility and except for
moneys or obligations deposited with or paid to the Trustee for the purchase of
Bonds by the Bank in accordance with Section 4.07 hereof or which are deemed to
have been paid in accordance with Article IX hereof and funds held pursuant to
Section 5.06 hereof.

          Section 11.05 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

                                       59

<PAGE>

or the Agreement other than an Event of Default under clauses (i), (ii), (iii)
(but only if the Trustee and the Tender Agent are the same entity), (v) or (vi)
of paragraph (a) of Section 10.01 hereof, unless specifically notified in
writing of such default or Event of Default by Owners of at least a majority in
principal amount of the Bonds then Outstanding or by the Bank. The Trustee may,
however, at any time, in its discretion, require of the Issuer full information
and advice as to the performance of any of the covenants, conditions and
agreements contained herein.

          Section 11.06 Action by Trustee. The Trustee shall be under no
obligation to take any action in respect of any default or Event of Default
hereunder other than pursuant to Section 10.01(b) hereof, 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 to do so by Owners of at least a majority in principal
amount of the Bonds then Outstanding or the Bank, 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 Owners or the
Bank, or without such security or indemnity. Notwithstanding the foregoing, the
Trustee shall submit draw requests under a Credit Facility as provided therein,
make payments on the Bonds in accordance with this Indenture and give notice of
acceleration in accordance with Section 10.01(b) hereof, without as a
precondition to such action, demanding security and indemnity as hereinbefore
provided.

          Section 11.07 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, request, consent, waiver, certificate, statement,
affidavit, voucher, bond, requisition or other paper or document, or upon
telephonic instructions to the extent the giving of telephonic instructions is
specifically authorized by this Indenture or the Agreement, in any case which
the Trustee shall in good faith believe to be genuine and to have been passed,
signed or given 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 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,
the Registrar nor the Tender Agent shall be bound to recognize any person as an
Owner or to take any action at his request unless his Bond shall be deposited
with such entity or satisfactory evidence of the ownership of such Bond shall be
furnished to such entity.

          Section 11.08 Dealings in Bonds and with the Issuer and the Borrower.
The Trustee, the Paying Agent, the Registrar, the Bank, the Tender Agent or the
Remarketing Agent and each of their officers and directors, may in good faith
buy, sell, own, hold and deal in any of the Bonds, and may join in any action
which any Owner may be entitled to take with like effect as if it did not act in
any capacity hereunder. The Trustee, the Paying Agent, the Registrar, the Bank,
the Tender Agent or the Remarketing Agent, in its individual capacity, either as
principal or agent, may also engage in or be interested in any financial or
other transaction with the Issuer

                                       60

<PAGE>

or the Borrower, and may act as depositary, trustee or agent for any committee
or body of Owners or other obligations of the Issuer as freely as if it did not
act in any capacity hereunder.

          Section 11.09 Several Capacities. Anything in this Indenture to the
contrary notwithstanding, the same entity may serve hereunder as the Trustee,
the Paying Agent, the Registrar, the Tender Agent and the Remarketing Agent and
in any other combination of such capacities, to the extent permitted by law.

          Section 11.10 Construction of Indenture. The Trustee may construe any
of the provisions of this Indenture or the Agreement insofar as the same may
appear to be ambiguous or inconsistent with any other provision hereof or
thereof, and any construction of any such provisions hereof by the Trustee in
good faith shall be binding upon the Owners, the Issuer and the Borrower.

          Section 11.11 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 the Trustee shall provide such notice to the Issuer, the
Borrower and the Bank, if any, and the Trustee shall give such notice of such
resignation to all Owners. Such notice shall specify the date when such
resignation shall take effect. Such resignation shall only take effect on the
day a successor Trustee shall have been appointed as hereinafter provided and
shall have accepted such appointment and agreed to assume all of the obligations
as Trustee hereunder.

          Section 11.12 Removal of Trustee. The Trustee may be removed by the
Issuer at any time, at the written request of the Borrower (other than during
the continuation of an Event of Default) or the Owners of not less than a
majority in principal amount of the Bonds then outstanding, by filing with the
Trustee so removed, the Issuer, the Borrower, the Tender Agent, the Remarketing
Agent, and the Bank an instrument or instruments in writing appointing a
successor in accordance with Section 11.13 hereof. Promptly upon delivery of
such instrument or instruments to the Trustee, the successor Trustee upon its
acceptance of the trusts created hereby shall give notice thereof to all Owners.

          Section 11.13 Appointment of Successor Trustee. If at any time the
Trustee shall be removed, be dissolved or its property or affairs shall be taken
under the control of any state or federal court or administrative body because
of insolvency, bankruptcy or any other reason, a vacancy shall ipso facto be
deemed to exist in the office of Trustee and a successor may be appointed, and
in case at any time the Trustee shall resign, then a successor may be appointed,
by giving written notice to the Issuer, the Borrower, the Tender Agent, the
Remarketing Agent, and the Bank an instrument of appointment in writing,
executed by Owners of not less than a majority in principal amount of Bonds then
Outstanding with the consent of the Bank unless the Bank has wrongfully
dishonored a draw on a Credit Facility. Copies of such instrument shall be
promptly delivered by the Issuer to the predecessor Trustee and to the Trustee
so appointed.

     Until a successor Trustee shall be appointed by the Owners of the Bonds as
herein authorized with the consent of the Bank unless the Bank has wrongfully
dishonored a draw on a Credit Facility, the Issuer, by an instrument authorized
by resolution of the Issuer, may, but shall have no obligation to, appoint a
successor Trustee acceptable to the Borrower and the Bank.

                                       61

<PAGE>

After any appointment by the Issuer, it shall cause notice of such appointment
to be given to the Remarketing Agent and to all Owners of the Bonds. Any new
Trustee so appointed by the Issuer shall immediately and without further act be
superseded by a Trustee appointed by the Owners of the Bonds in the manner above
provided. Notwithstanding anything herein to the contrary, no resignation or
removal of the Trustee shall be effective until (i) a successor Trustee shall be
appointed in accordance with the terms hereof and has accepted such appointment
and (ii) each then existing Letter of Credit or other Credit Facility shall have
been transferred to such successor in accordance with the terms thereof.

          Section 11.14 Qualifications of Successor Trustee. Every successor
Trustee (a) shall be a bank or trust company (other than the Bank) duly
organized under the laws of the United States or any state or territory thereof
and authorized by law to perform all the duties imposed upon it by this
Indenture, (b) shall have a combined capital stock, surplus and undivided
profits of at least $50,000,000 if there can be located, with reasonable effort,
such an institution willing and able to accept the trust on reasonable and
customary terms and (c) shall have its obligations rated or be a wholly-owned
subsidiary of an entity whose obligations are rated, so long as the Bonds shall
be rated by Moody's, at least Baa3/P-3 by Moody's or otherwise qualified by
Moody's.

          Section 11.15 Judicial Appointment of Successor Trustee. If 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 XI 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 XI within six months after a vacancy shall have occurred in the office
of Trustee, any Owner of a Bond or the Bank 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 11.16 Acceptance of Trusts by Successor Trustee. Any successor
Trustee appointed hereunder shall execute, acknowledge and deliver to the
Issuer, the Borrower, the Bank, if any, and to its predecessor Trustee 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 successor Trustee, such predecessor
Trustee and the Issuer 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
11.04 hereof and upon payment of its charges, such predecessor Trustee shall (i)
pay over to the successor Trustee all moneys and other assets at the time held
by it hereunder and (ii) transfer over to the successor Trustee its interest in
any Credit Facility.

          Section 11.17 Successor by Merger or Consolidation. Any corporation
into which any Trustee hereunder may be merged or converted or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which any Trustee hereunder shall be a party or any corporation to which the
corporate trust business of the Trustee shall be

                                       62

<PAGE>

sold or transferred, 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.

          Section 11.18 Standard of Care. Notwithstanding any other provisions
of this Article XI, the Trustee shall, during the existence of an Event of
Default of which the Trustee is required to take notice or is deemed to have
notice under Section 11.05 hereof, 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 person would use and exercise under the circumstances in
the conduct of his own affairs. Prior to the existence and after the curing or
waiving of any such Event of Default, the duties of the Trustee hereunder shall
be only such duties as are specifically set forth herein and no implied
covenants shall be read into this Indenture or the Agreement against the
Trustee.

          Section 11.19 Notice of Event of Default. If an Event of Default
occurs of which the Trustee is required by Section 11.05 hereof to take notice
or has notice, or any other Event of Default occurs of which the Trustee has
been specifically notified in accordance with Section 11.05 hereof, and any such
Event of Default shall continue for at least five Business Days after the
Trustee is required to take, or has received, notice thereof, the Trustee shall
give notice thereof to the Issuer, the Remarketing Agent, the Tender Agent, the
Bank and the Owners of the Bonds.

          Section 11.20 Intervention in Litigation. In any judicial proceeding
to which the Issuer 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 the 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.

          Section 11.21 Paying Agent. The Issuer may at any time or from time to
time by resolution, with the approval of the Trustee and the Borrower, appoint
the Paying Agent for the Bonds, subject to the conditions set forth in Section
11.22 hereof. The Trustee is hereby appointed as the initial Paying Agent. Each
Paying Agent (if not also the Trustee) shall designate to the Trustee and the
Bank 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 Issuer, the Borrower and the Trustee under which such Paying
Agent will agree, particularly:

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

               (ii) 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 Issuer, the Trustee and the Borrower at all
          reasonable times.

                                       63

<PAGE>

     The Issuer shall cooperate with the Trustee and the Borrower to cause the
necessary arrangements to be made and to be thereafter continued whereby funds
will be made available for the payment when due of the Bonds as presented at the
Principal Office of the Paying Agent.

          Section 11.22 Qualifications of Paying Agent; Resignation; Removal.
The Paying Agent shall (i) be a bank, a trust company, national banking
association or another corporation duly organized under the laws of the United
States of America or any state or territory thereof, (ii) have its obligations
rated or be a wholly-owned subsidiary of an entity whose obligations are rated,
so long as the Bonds are rated by Moody's, at least Baa3/P-3 by Moody's or
otherwise qualified by Moody's, and (iii) be authorized by law to perform all
the duties imposed upon it by this Indenture. The Paying Agent may at any time
resign and be discharged of the duties and obligations created by this Indenture
by giving at least 60 days' notice to the Issuer, the Borrower and the Trustee
(if no longer the Paying Agent). The Paying Agent shall be removed at any time,
other than during the continuance of an Event of Default, at the direction of
the Borrower, by an instrument, signed by the Issuer, filed with the Paying
Agent and with the Trustee.

     In the event of the resignation or removal of the Paying Agent, the Paying
Agent 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 Paying Agent shall resign, 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, insolvency or any other reason, and the Issuer shall not have
appointed its successor as Paying Agent, the Trustee shall de facto be deemed to
be the Paying Agent for all purposes of this Indenture until the appointment by
the Issuer of the Paying Agent or successor Paying Agent, as the case may be.

          Section 11.23 Registrar. The Trustee hereby is appointed as the
initial Registrar. In the event of the resignation or removal of the Registrar,
the Issuer shall, at the direction of the Borrower, appoint the Registrar for
the Bonds, subject to the conditions set forth in Section 11.24 hereof. Each
Registrar (if not also the Trustee) 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 Issuer, the Borrower and the
Trustee under 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 Issuer, the Trustee and
the Borrower at all reasonable times.

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

                                       64

<PAGE>

          Section 11.24 Qualifications of Registrar; Resignation; Removal. The
Registrar shall be a corporation duly organized under the laws of the United
States of America or any state or territory thereof, 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 60 days' notice to the Issuer, the Trustee and the
Borrower. The Registrar may be removed at any time, at the direction of the
Borrower (other than during the continuance of an Event of Default), by an
instrument, signed by the Issuer, 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 Registrar shall resign, 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,
insolvency or any other reason, and the Issuer shall not have appointed its
successor as Registrar, the Trustee shall de facto be deemed to be the Registrar
for all purposes of this Indenture until the appointment by the Issuer of the
Registrar or successor Registrar, as the case may be.

          Section 11.25 Appointment of Co-Trustee. It is the purpose of this
Indenture that there shall be no violation of any law of any jurisdiction
(including particularly the law of the State of Arizona) denying or restricting
the right of banking corporations or associations to transact business as
trustee in such jurisdiction. It is recognized that in case of litigation under
this Indenture or the Agreement, and in particular in the case of the
enforcement thereof on default, or in the case the Trustee deems that by reason
of any present or future law of any jurisdiction it may not exercise any of the
powers, rights or remedies herein granted to the Trustee or hold title to the
properties, in trust, as herein granted, or take any action which may be
desirable or necessary in connection therewith, it may be necessary that the
Trustee appoint an additional individual or institution as a separate or
co-trustee.

     In the event that the Trustee shall appoint an additional individual or
institution as a separate or co-trustee, each and every remedy, power, right,
claim, demand, cause of action, immunity, estate, title, interest and lien
expressed or intended by this Indenture to be exercised by or vested in or
conveyed to the Trustee with respect thereto shall be exercisable by and vest in
such separate or co-trustee, but only to the extent necessary to enable such
separate or co-trustee to exercise such powers, rights and remedies, and every
covenant and obligation necessary to the exercise thereof by such separate or
co-trustee shall run to and be enforceable by either of them.

     Should any reasonable instrument in writing from the Issuer be required by
the separate or co-trustee so appointed by the Trustee for more fully and
certainly vesting in and confirming to him or it such estates, property, rights,
powers, trusts, duties and obligations, any and all such instruments in writing
shall, on request, be executed, acknowledged and delivered by the Issuer. In
case any separate or co-trustee or a successor to either shall die, become
incapable of acting, resign or be removed, all the estates, properties, rights,
powers, trusts, duties and obligations of such separate or co-trustee, so far as
permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a successor to such separate or co-trustee or a new separate or

                                       65

<PAGE>

co-trustee. No trustee hereunder shall be liable by reason of any act or
omission of any other trustee hereunder

          Section 11.26 Notices to Rating Agencies. The Trustee shall provide
Moody's, if the Bonds are then rated by Moody's, or S&P, if the Bonds are then
rated by S&P, as appropriate, with prompt written notice of (i) the appointment
of any successor Trustee, Paying Agent, Remarketing Agent or Tender Agent (ii)
any amendments to this Indenture or the Agreement, (iii) the payment (or
provision for payment) in whole of the Bonds, (iv) the adjustment of any Bonds
to a Short-Term or Long-Term Interest Rate Period, (v) the extension, expiration
or termination of a Credit Facility or (vi) any amendment to the Reimbursement
Agreement or a Credit Facility of which the Trustee has actual knowledge.

                                   ARTICLE XII

                           EXECUTION OF INSTRUMENTS BY

                     OWNERS AND PROOF OF OWNERSHIP OF BONDS

          Section 12.01 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 in person or by agent appointed
by an instrument in writing. Proof of the execution of any such instrument and
of the ownership or former 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:

               (i)   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, or in any
          other manner reasonably acceptable to the Trustee.

               (ii)  The ownership or former ownership of Bonds shall be proved
          by the registration books kept under the provisions of Section 2.04
          hereof and the records kept by the Trustee pursuant to Section
          14.03(c) hereof.

               (iii) While the Bonds are in book-entry only form, the beneficial
          ownership or former ownership of Bonds shall be proved by an
          instrument in writing signed by such beneficial owner and acceptable
          to the Trustee.

     Nothing contained in this Article XII 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 to be sufficient. Any
request or consent of any Owner of a Bond shall bind every future Owner of any
Bond or Bonds issued in lieu thereof or upon registration of transfer

                                       66

<PAGE>

or in exchange thereof in respect of anything done by the Trustee or the Issuer
in pursuance of such request or consent.

                                  ARTICLE XIII

                      MODIFICATION OF INDENTURE, DOCUMENTS

               Section 13.01 Limitations. This Indenture and the Agreement shall
not be modified or amended in any respect subsequent to the initial issuance of
the Bonds, except as provided in and in accordance with and subject to the
provisions of this Article XIII.

               Section 13.02 Modification without Consent of Owners. The Issuer
and the Trustee may, from time to time and at any time without the consent of or
notice to the Owners of the Bonds but subject to Section 13.05 hereof, enter
into Supplemental Indentures as follows:

                    (i)   to cure any formal defect, omission, inconsistency or
               ambiguity in this Indenture;

                    (ii)  to grant to or confer upon the Trustee for the benefit
               of the Owners of the Bonds any additional rights, remedies,
               powers, authority or security which may lawfully be granted or
               conferred and which are not contrary to or inconsistent with this
               Indenture as theretofore in effect;

                    (iii) to add to the covenants and agreements of, and
               limitations and restrictions upon, the Issuer in this Indenture
               other covenants, agreements, limitations and restrictions to be
               observed by the Issuer which are not contrary to or inconsistent
               with this Indenture as theretofore in effect;

                    (iv)  to confirm, as further assurance, any pledge or
               assignment under, and the subjection to any claim, lien, pledge
               or assignment created or to be created by this Indenture, of the
               Receipts and Revenues or of any other moneys, securities or
               funds;

                    (v)   to authorize different Authorized Denominations of the
               Bonds and to make correlative amendments and modifications to
               this Indenture regarding exchangeability of Bonds of different
               Authorized Denominations, redemptions of portions of Bonds of
               particular Authorized Denominations and similar amendments and
               modifications of a technical nature;

                    (vi)  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;

                    (vii) to increase or decrease the number of days specified
               in Section 2.01(c) hereof and to make corresponding changes to
               Section 4.03 hereof; provided that no decreases in any such
               number of days shall become effective except during a Daily
               Interest Rate Period or a Weekly Interest Rate Period and until
               30 days after the Trustee shall have given notice to the Owners;

                                       67

<PAGE>

               (viii) to provide for the procedures required to permit or
          implement an uncertificated system of registration of the Bonds;

               (ix)   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 the provisions of Section
          13.03(i) hereof; and

               (x)    to modify, alter, supplement or amend this Indenture to
          comply with changes in the Code affecting the status of interest on
          the Bonds as excluded from gross income for federal income tax
          purposes or the obligations of the Issuer or the Borrower in respect
          of Section 148 of the Code.

     Before the Issuer shall adopt any Supplemental Indenture pursuant to this
Section 13.02, there shall have been provided to the Issuer and the Trustee a
Favorable Opinion of Bond Counsel.

          Section 13.03 Modification with Consent of Owners.

               (i)    Except for any Supplemental Indenture entered into
          pursuant to Section 13.02 hereof, subject to the terms and provisions
          contained in this Section 13.03, the Owners of not less than a
          majority in aggregate principal amount of the Bonds shall have the
          right from time to time to consent to and approve the adoption by the
          Issuer of any Supplemental Indenture deemed necessary or desirable by
          the Issuer 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, 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 interest or any premium on any Bond, a change in the terms of
          the purchase of Bonds pursuant to Section 4.08 hereof (other than as
          permitted by Section 13.02(vii) hereof), or a reduction in the
          principal amount or redemption price of any Bond or a change in the
          method of determining the rate of interest thereon, or (ii) the
          creation of a claim or lien upon, or a pledge or assignment of, the
          Receipts and Revenues ranking prior to or on a parity with the claim,
          lien, pledge or assignment created by this Indenture, 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 under Section 13.07 hereof, for any
          modification, alteration, amendment or supplement to the Agreement.

               (ii)   If at any time the Issuer shall determine to adopt any
          Supplemental Indenture for any of the purposes of this Section 13.03,
          the Trustee shall cause notice of the proposed Supplemental Indenture
          to be given to all Owners of the 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 the Bonds.

                                       68

<PAGE>

               (iii) Within two years after the date of the giving of such
          notice, the Issuer may adopt (the date of adoption shall be the date
          of passage and not the effective date) such Supplemental Indenture in
          substantially the form described in such notice, but only if there
          shall have first been filed with the Trustee (i) the required
          consents, in writing, of the Owners of the Bonds and (ii) a Favorable
          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 adoption thereof, will be valid
          and binding upon the Issuer in accordance with its terms and will not
          adversely affect the exclusion from gross income for federal income
          tax purposes of interest on the Bonds.

               (iv)  If Owners of not less than the percentage of Bonds required
          by this Section 13.03 shall have consented to and approved the
          adoption thereof as herein provided, no Owner shall have any right to
          object to the adoption 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 Issuer from
          enacting the same or from taking any action pursuant to the provisions
          thereof.

          Section 13.04 Effect of Supplemental Indenture. Upon the adoption of
any Supplemental Indenture pursuant to the provisions of this Article XIII, this
Indenture shall be, and be deemed to be, modified and amended in accordance
therewith, and the respective rights, duties and obligations under this
Indenture of the Issuer, the Trustee and all Owners of Bonds then outstanding
shall thereafter be determined, exercised and enforced under this Indenture
subject in all respects to such modifications and amendments.

          Section 13.05 Consent of the Borrower and the Bank. Anything herein to
the contrary notwithstanding, the Trustee (i) shall not execute any Supplemental
Indenture under this Article XIII which affects any rights, powers and authority
of the Borrower under the Agreement, the Tender Agreement or the applicable
Credit Facility or requires a revision of the Agreement, the Tender Agreement or
the applicable Credit Facility unless and until the Borrower and the Bank shall
have consented to such Supplemental Indenture and (ii) need not accept any
Supplemental Indenture which affects its rights, duties and responsibilities
hereunder or under the Agreement.

          Section 13.06 Amendment of Agreement without Consent of Owners.
Without the consent of or notice to the Owners of the Bonds but with the consent
of the Borrower and the Bank, the Issuer may modify, alter, amend or supplement
the Agreement, and the Trustee may consent thereto, (a) as may be required by
the provisions of the Agreement and this Indenture, (b) for the purpose of
curing any formal defect, omission, inconsistency or ambiguity therein, or (c)
in connection with any other change therein which is not materially adverse to
the Owners. No extension, termination or provision of any substitute Credit
Facility in accordance with the provisions of the Agreement shall be deemed a
modification, alteration, amendment or supplement to the Agreement, or to this
Indenture, for any purpose of this Indenture.

                                       69

<PAGE>

     Before the Issuer shall enter into, and the Trustee shall consent to, any
modification, alteration, amendment or supplement to the Agreement, pursuant to
this Section 13.06, there shall have been delivered to the Issuer and the
Trustee, a Favorable Opinion of Bond Counsel.

          Section 13.07 Amendment of Agreement with Consent of Owners. Except in
the cases of modifications, alterations, amendments or supplements referred to
in Sections 13.02 and 13.06 hereof, the Issuer shall not enter into, and the
Trustee shall not consent to, any modification, alteration, amendment or
supplement of the 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 but with the consent of the Borrower and the Bank, given and
procured as provided in Sections 13.03 and 13.05 hereof; provided, however,
that, unless approved in writing by the Owners of all Bonds then Outstanding,
nothing in this Section 13.07 shall permit, or be construed as permitting, a
change in the obligations of the Borrower under Section 5.02 or 10.01 of the
Agreement. If at any time the Issuer or the Borrower shall request the consent
of the Trustee to any such proposed modification, alteration, amendment or
supplement, the Trustee shall cause notice thereof to be given in the same
manner as provided by Section 13.03 hereof with respect to Supplemental
Indentures. Such notice shall briefly set forth the nature of such proposed
modification, alteration, amendment or supplement and shall state that copies of
the instrument embodying the same are on file at the Corporate Trust office of
the Trustee for inspection by all Owners of Bonds Outstanding. The Issuer may
enter into, and the Trustee may consent to, any such proposed modification,
alteration, amendment or supplement of the Agreement, subject to the same
conditions and with the same effect as provided in Section 13.03 hereof with
respect to Supplemental Indentures.

          Section 13.08 Issuance of Bonds Under Other Indentures; Recognition of
Prior Pledges. The Issuer hereby expressly reserves the right to issue, to the
extent permitted by law, bonds in accordance with other ordinances for one or
more purposes permitted by the Act. The Issuer hereby recognizes and protects
any prior pledge or mortgage made to secure any prior issue of bonds.

                                   ARTICLE XIV

          REMARKETING AGENT; TENDER AGENT; PURCHASE AND REMARKETING OF
                                      BONDS

          Section 14.01 Remarketing Agent and Tender Agent.

          (a)  The Borrower shall appoint a Remarketing Agent for the Bonds,
     subject to the conditions set forth in Section 14.02(a) hereof. The
     Remarketing Agent shall designate 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 Issuer, the Trustee, the
     Tender Agent and the Borrower under which the Remarketing Agent will agree,
     particularly, to keep such books and records with respect to the Bonds as
     shall be consistent with prudent industry practice and to make such books
     and records available for inspection by the Issuer, the Trustee, the Tender
     Agent and the Borrower at all reasonable times.

                                       70

<PAGE>

                (b)     The Borrower shall appoint a Tender Agent for the Bonds;
         subject to the conditions set forth in Section 14.02(b) hereof. The
         Tender Agent shall designate 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 Issuer, the Trustee,
         the Borrower, the Bank, and the Remarketing Agent. By acceptance of its
         appointment hereunder, the Tender Agent agrees:

                                (A)   to hold all Bonds delivered to it pursuant
                        to Section 4.09 hereof, as agent and bailee of, and in
                        escrow for the benefit of, the respective Owners which
                        shall have so delivered such Bonds until moneys
                        representing the purchase price of such Bonds shall have
                        been delivered to or for the account of or to the order
                        of such Owners;

                                (B)   to establish and maintain, and there is
                        hereby established with the Tender Agent, a separate
                        segregated trust fund designated as the "Maricopa
                        County, Arizona Pollution Control Corporation Pollution
                        Control Refunding Revenue Bonds 2002 Series A (El Paso
                        Electric Company, Palo Verde Project) Purchase Fund"
                        (the "Purchase Fund") until such time as it has been
                        discharged from its duties as Tender Agent hereunder;

                                (C)   to hold all moneys (without investment
                        thereof) delivered to it hereunder in the Purchase Fund
                        for the purchase of Bonds pursuant to Section 4.08
                        hereof, other than moneys delivered to it by the
                        Borrower during the term of a Credit Facility, as agent
                        and bailee of, and in escrow for the benefit of, the
                        person or entity which shall have so delivered such
                        moneys until the Bonds purchased with such moneys shall
                        have been delivered to or for the account of such person
                        or entity;

                                (D)   to hold all moneys delivered to it by the
                        Borrower for the purchase of Bonds pursuant to Section
                        4.08 hereof, as agent and bailee of, and in escrow for
                        the benefit of, the Owners or former Owners who shall
                        deliver Bonds to it for purchase until the Bonds
                        purchased with such moneys shall have been delivered to
                        or for the account of the Borrower; provided, however,
                        that if the Bonds shall at any time become due and
                        payable, the Tender Agent shall cause such moneys (other
                        than moneys held pursuant to Section 14.03(d) hereof) to
                        be deposited into the Bond Fund;

                                (E)   to hold all Bonds registered in the name
                        of the new Owners thereof which have been delivered to
                        it by the Trustee for delivery to the Remarketing Agent
                        in accordance with the Tender Agreement;

                                (F)   to hold Bonds for the account of the
                        Borrower as contemplated by Section 14.05(c) hereof,
                        such Bonds to be released to or upon the order of the
                        Borrower upon receipt by the Tender Agent from the Bank
                        of a notice to the effect that the Trustee is entitled
                        to draw under a

                                       71

<PAGE>

                        Credit Facility to pay principal of the Bonds and to pay
                        the purchase price of Bonds tendered under Section 4.08
                        hereof and not remarketed in an amount equal to the
                        amount that could be drawn under a Credit Facility if
                        the drawing made to purchase such Bonds were
                        disregarded;

                                (G)   to hold Bonds for the account of the Bank
                        (or its nominee), or to deliver Bonds to the Bank, as
                        contemplated by Section 14.05(c) hereof; and

                                (H)   to keep such books and records with
                        respect to the Bonds as shall be consistent with prudent
                        industry practice and to make such books and records
                        available for inspection by the Issuer, the Trustee, the
                        Borrower and the Remarketing Agent at all reasonable
                        times.

         The Issuer shall cooperate with the Borrower and the Trustee to cause
the necessary arrangements to be made and to be thereafter continued to enable
the Tender Agent to perform its duties and obligations described above.

                Section 14.02 Qualifications of Remarketing Agent and Tender
Agent; Resignation; Removal.

                (a)     The Remarketing Agent shall be a member of the National
         Association of Securities Dealers, Inc., 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 and the Remarketing Agreement. Any successor Remarketing
         Agent shall have its obligations rated or be a wholly-owned subsidiary
         of an entity whose obligations are rated, so long as the Bonds shall be
         rated by Moody's, at least Baa3/P-3 by Moody's or otherwise qualified
         by Moody's. The Remarketing Agent may at any time resign and be
         discharged of the duties and obligations created by this Indenture by
         giving notice to the Issuer, the Trustee, the Bank, if any, the Tender
         Agent and the Borrower. Such resignation shall take effect on the
         earlier of: (i) the day a successor Remarketing Agent shall have been
         appointed by the Borrower and shall have accepted such appointment or
         (ii) the 45th day after the receipt by the Issuer and the Borrower of
         the notice of resignation. The Remarketing Agent may be removed at any
         time, pursuant to the Remarketing Agreement.

                (b)     The Tender Agent shall be a corporation duly organized
         under the laws of the United States of America or any state or
         territory thereof, and, if not a bank or trust company, for so long as
         the Bonds shall be rated by Moody's, shall have its obligations rated
         at least Baa3/P-3 by Moody's or otherwise qualified by Moody's, and in
         any case having a combined capital stock, surplus and undivided profits
         of at least $25,000,000 and authorized by law to perform all the duties
         imposed upon it by this Indenture and the Tender Agreement. The Tender
         Agent may at any time resign and be discharged of the duties and
         obligations created by this Indenture by giving at least 30 days'
         notice to the Issuer, the Trustee, the Borrower, the Remarketing Agent
         and the Bank. Such resignation shall take effect on the day a successor
         Tender Agent shall have been appointed by the Borrower and shall have
         accepted such appointment. The Tender Agent may be removed

                                       72

<PAGE>

         at any time by an instrument signed by the Borrower, filed with the
         Tender Agent, the Issuer, the Trustee, the Remarketing Agent and the
         Bank.

         In the event of the resignation or removal of the Tender Agent, the
Tender Agent shall deliver any Bonds and moneys held by it in such capacity to
its successor, or if there is no successor, to the Trustee.

                Section 14.03   Notice of Bonds Delivered for Purchase; Purchase
of Bonds.

                (a)     The Tender Agent shall determine timely and proper
         delivery of Bonds pursuant to this Indenture and the proper endorsement
         of such Bonds. Such determination shall be binding on the Owners of
         such Bonds, the Issuer, the Borrower, the Remarketing Agent, the
         Trustee and the Bank absent manifest error. As promptly as practicable,
         the Tender Agent shall give telephonic or Electronic notice, promptly
         confirmed by a written notice, to the Bank, if any, the Trustee, the
         Remarketing Agent, the Registrar and the Borrower specifying the
         principal amount of Bonds, if any, for which it has received notice of
         tender for purchase in accordance with Section 4.08(a)(i) or
         4.08(a)(ii) hereof.

                (b)     Bonds required to be purchased in accordance with
         Section 4.08 hereof shall be purchased from the Owners thereof by the
         Tender Agent, on the date and at the purchase price at which such Bonds
         are required to be purchased if the Bank shall not have exercised its
         option to purchase such Bonds pursuant to Section 4.07 hereof. Funds
         for the payment of such purchase price by the Tender Agent from the
         Owners of Bonds shall be derived from the following sources in the
         order of priority indicated:

                        (i)    moneys furnished to the Tender Agent for deposit
                into the Purchase Fund representing moneys provided by the
                Borrower pursuant to Section 10.02 of the Agreement, which
                constitute Available Moneys;

                        (ii)   proceeds of the sale of such Bonds remarketed to
                any person, other than the Issuer, the Borrower or an affiliate
                thereof, pursuant to Section 14.04 hereof and furnished to the
                Tender Agent by the Remarketing Agent for deposit into the
                Purchase Fund;

                        (iii)  moneys furnished to the Tender Agent by the
                Trustee for deposit into the Purchase Fund representing the
                proceeds of a drawing under a Credit Facility; and

                        (iv)   moneys furnished to the Tender Agent representing
                moneys provided by the Borrower (or any affiliate thereof)
                pursuant to Section 10.01 or 10.02 of the Agreement or otherwise
                available for such purpose.

         Moneys described in clause (iii) may not be used to purchase Bonds held
of record by the Borrower (or any affiliate thereof) or by the Tender Agent for
the account of the Borrower.

         The Tender Agent shall establish separate accounts or subaccounts
within the Purchase Fund for each deposit made into the Purchase Fund so that
(1) the Tender Agent may at all times

                                       73

<PAGE>

ascertain the date of deposit of the funds in each account or subaccount, and
(2) the amounts derived from the source described in clause (iii) may be
segregated from other sources and such amounts shall not be commingled with any
funds from the sources described in clause (D).

                (c)     The Trustee shall authenticate a new Bond or Bonds in an
         aggregate principal amount equal to the principal amount of Bonds
         purchased in accordance with Section 14.03(b), whether or not the Bonds
         so purchased are presented by the Owners thereof, bearing a number or
         numbers not contemporaneously outstanding. Every Bond authenticated and
         delivered as provided in this Section 14.03(c) shall be entitled to all
         the benefits of this Indenture equally and proportionately with any and
         all other Bonds duly issued hereunder, except as provided in Section
         5.04(c) hereof. The Tender Agent shall maintain a record of the Bonds
         purchased as provided in this Section 14.03, together with the names
         and addresses of the former Owners thereof.

                (d)     In the event any Bonds purchased as provided in this
         Section 14.03 shall not be presented to the Tender Agent, the Tender
         Agent shall segregate and hold the moneys for the purchase price of
         such Bonds in trust for the benefit of the former Owners of such Bonds,
         who shall, except as provided in the following sentence, thereafter be
         restricted exclusively to such moneys for the satisfaction of any claim
         for the purchase price of such Bonds. Any moneys which the Tender Agent
         shall segregate and hold in trust for the payment of the purchase price
         of any Bond and remaining unclaimed for two years after the date of
         purchase shall, to the extent legally permissible, upon the Borrower's
         written request to the Tender Agent, be paid to the Bank, if the
         Borrower then owes funds under the Reimbursement Agreement or otherwise
         to the Borrower. After the payment of such unclaimed moneys to the
         Borrower, the former Owner of such Bond shall look only to the Borrower
         for the payment thereof.

                Section 14.04 Remarketing of Bonds; Notice of Interest Rates.

                (a)     Upon notice of the tender for purchase of Bonds in
         accordance with Section 4.08 hereof, the Remarketing Agent shall offer
         for sale and use its best efforts to sell such Bonds (other than Bonds
         purchased with moneys derived from the source described in clause (i)
         of Section 14.03(b) hereof, if so directed by the Borrower), any such
         sale to be made on the date of such purchase in accordance with Section
         4.08 at the best price available in the marketplace; provided, however,
         that, if a Credit Facility shall be in effect, the Remarketing Agent
         shall not sell any of such Bonds at a price below the principal amount
         thereof plus accrued interest thereon, if any. Any Bond which is
         tendered for purchase, pursuant to Section 4.08 hereof, and any Bond
         that has become subject to mandatory tender for purchase pursuant to
         Section 4.08 hereof, shall be sold only to a purchaser who agrees to
         refrain from selling that Bond other than under the terms of this
         Indenture and hold that Bond only to the date of mandatory purchase.

                (b)     The Remarketing Agent shall determine the rate of
         interest to be borne by the Bonds during each Interest Rate Period and
         by each Bond during each Bond Interest Term for such Bond and the Bond
         Interest Terms for each Bond during each Short-Term Interest Rate
         Period as provided in Section 2.01 hereof and shall furnish to the
         Trustee,

                                       74

<PAGE>

         the Tender Agent, the Borrower and the Bank on the Business Day of
         determination each rate of interest and Bond Interest Term so
         determined.

                (c)     The Remarketing Agent shall give telephonic or
         telegraphic notice, promptly confirmed by a written notice, to the
         Trustee and the Tender Agent on each date on which Bonds shall have
         been purchased pursuant to Section 14.03(b) hereof, specifying the
         principal amount of Bonds, if any, sold by it pursuant to Section
         14.04(a) hereof.

                Section 14.05 Delivery of Bonds.

                (a)     Bonds purchased with moneys described in clause (i) of
         Section 14.03(b) hereof shall be delivered to the Borrower and shall be
         registered in accordance with instructions from the Borrower.

                (b)     Bonds purchased with moneys described in clause (ii) of
         Section 14.03(b) hereof shall be delivered by the Trustee to the Tender
         Agent or the Remarketing Agent for delivery to the purchasers thereof
         against payment therefor in accordance with the Tender Agreement.

                (c)     Bonds purchased with moneys described in clause (iii) of
         Section 14.03(b) hereof shall be:

                        (i)    except as otherwise provided in Section 14.05(c)
                (ii) or (iii) hereof, held by the Tender Agent for the account
                of the Borrower, if a Credit Facility provides for reinstatement
                in respect of the drawings for the purchase of Bonds tendered
                pursuant to Section 4.08 hereof and not remarketed by
                reimbursement to the Bank of the amount of such drawing together
                with interest thereon;

                        (ii)   delivered to the Bank, as applicable, if a Credit
                Facility provides for immediate reinstatement in respect of
                drawings for the purchase of Bonds tendered pursuant to Section
                4.08 hereof and not remarketed by the delivery to the Bank of
                such Bonds or otherwise requires that Bonds be delivered to the
                Bank;

                        (iii)  held by the Tender Agent. for the account of the
                Bank, if a Credit Facility provides for immediate reinstatement
                in respect of drawings for the purchase of Bonds tendered
                pursuant to Section 4.08 hereof and not remarketed by the
                holding for the account of the Bank of such Bonds or otherwise
                requires that Bonds be held for the account of the Bank; or

                        (iv)   delivered to the Trustee for cancellation, if a
                Credit Facility does not provide for reinstatement in respect of
                drawings for the purchase of Bonds tendered pursuant to Section
                4.08 hereof and not remarketed.

Upon delivery to the Bank, or to the Tender Agent for the account of the Bank,
of the Bonds in accordance with clause (ii) or (iii) above, the Trustee shall
deliver any certificate evidencing such reimbursement or delivery of Bonds to or
for the account of the Bank, as applicable, required for reinstatement, in whole
or in part, of any Credit Facility. Bonds held pursuant to

                                       75

<PAGE>

clauses (i), (ii) and (iii) above shall be released for the purpose of
remarketing or released to or upon the order of the Borrower only upon receipt
by the Tender Agent from the Bank of a written notice to the effect that the
Trustee is entitled to draw under a Credit Facility to pay principal of and
interest on the Bonds and to pay the purchase price of Bonds purchased pursuant
to Section 4.08 hereof and not remarketed in an amount equal to the amount that
could be drawn under a Credit Facility if the drawing made to purchase such
Bonds were disregarded.

                (d)     Bonds purchased with moneys described in clause (iv) of
         Section 14.03(b) hereof shall, at the direction of the Borrower, be (i)
         held by the Tender Agent for the account of the Borrower, (ii)
         delivered to the Trustee for cancellation or (iii) delivered to the
         Borrower; provided, however, that any Bonds so purchased after the
         selection thereof by the Trustee for redemption shall be delivered to
         the Trustee for cancellation.

                (e)     Bonds delivered as provided in this Section 14.05 shall
         be registered in the manner directed by the recipient thereof.

                (f)     Bonds purchased by the Trustee on behalf of or for the
         account of the Bank (or its nominee) pursuant to Section 4.07 shall be
         delivered promptly to the Bank (or its nominee, as the case may be), or
         as the Bank shall otherwise direct and thereafter, if requested by the
         Bank, remarketed in accordance with the provisions of Section 14.04
         hereof and the Remarketing Agreement.

                Section 14.06 Drawings on Credit Facility. In accordance with
the provisions of the Tender Agreement, on each day on which Bonds are to be
purchased pursuant to Section 4.08 hereof, except to the extent that (i) moneys
described in Section 14.03(b)(i) hereof shall be available for the purchase of
such Bonds, or (ii) the Trustee shall have received telephonic or Electronic
notification from the Remarketing Agent or the Tender Agent that such Bonds
shall have been remarketed pursuant to Section 14.04 hereof and that the moneys
described in Section 14.03(b)(ii) hereof will be sufficient to pay the purchase
price of such Bonds or (iii) the Bank shall have purchased the Bonds pursuant to
Section 4.07 hereof, the Trustee promptly shall draw under a Credit Facility, in
accordance with its terms, an amount sufficient to make timely payment of the
purchase price of such Bonds and furnish the proceeds of such drawing to the
Tender Agent. Following payment of all amounts payable in respect of the
purchase of Bonds pursuant to Section 4.08 hereof, the Trustee shall remit to
the Bank any amount drawn under a Credit Facility in excess of the amount
sufficient to make timely payment of the purchase price of such Bonds.

                Section 14.07 Delivery of Proceeds of Sale. The proceeds of the
sale by the Remarketing Agent of any Bonds delivered to it by, or held by it for
the account of, the Borrower or the Bank, or delivered to it by the Bank or any
other Owner, shall be turned over to the Borrower, the Bank or such other Owner,
as the case may be. If the applicable Credit Facility provides for reinstatement
in respect of the drawings for the purchase of Bonds tendered pursuant to
Section 4.08 hereof by reimbursement to the Bank of the amount of such drawing,
the Remarketing Agent shall deliver the proceeds of such remarketing to the Bank
to the extent the Bank has not been reimbursed, and in connection therewith, the
Trustee shall deliver any certificate required for reinstatement, in whole or in
part, of any Credit Facility.

                                       76

<PAGE>

                                   ARTICLE XV

                                  MISCELLANEOUS

          Section 15.01 Indenture to Bind and Inure to Benefit of Successors to
Issuer. In the event of the dissolution of the Issuer, all the covenants,
stipulations, promises and agreements in this Indenture contained, by or on
behalf of, or for the benefit of, the Issuer, shall bind or inure to the benefit
of the successors of the Issuer from time to time and any entity, officer,
board, commission, agency or instrumentality to whom or to which any power or
duty of the Issuer shall be transferred.

          Section 15.02 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 Issuer, the Borrower, the Trustee, the Bank and the Owners, 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 Issuer, the
Borrower, the Trustee, the Bank and the Owners of the Bonds. Nothing in this
Indenture is intended to create in the Borrower any interest in the Bond Fund or
the moneys or Investment Securities therein.

          Section 15.03 Severability. In case any one or more of the provisions
of this Indenture or of the Bonds issued hereunder shall, for any reason, be
held to be illegal or invalid, such illegality or invalidity shall not affect
any other provisions of this Indenture, the Agreement, the Remarketing
Agreement, the Tender Agreement or said Bonds, and this Indenture, the
Agreement, the Remarketing Agreement, the Tender Agreement and the Bonds shall
be construed and enforced as if such illegal or invalid provisions had not been
contained herein or therein.

          Section 15.04 No Personal Liability of Issuer Under Indenture. No
covenant or agreement contained in the Bonds or in this Indenture shall be
deemed to be the covenant or agreement of any official, officer, agent, or
employee of the Issuer in his individual capacity, and neither the members of
the Issuer's Board of Directors 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.

          Section 15.05 Bonds Owned by the Issuer or the Borrower. 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 Issuer or the Borrower or by any affiliate of the
Borrower (unless the Issuer, the Borrower and such persons own all Bonds which
are then Outstanding, determined without regard to this Section 15.05) shall be
disregarded and deemed not to be Outstanding for 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. 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 Issuer or
the Borrower or any affiliate of the Borrower. Bonds delivered to the Bank or
held by the Tender Agent for the account of the Bank pursuant to Section
14.05(c) hereof shall be regarded as Outstanding for

                                       77

<PAGE>

purposes of this Section 15.05 and shall be owned by the Bank for purposes of
this Section 15.05.

          Section 15.06 Governing Law. This Indenture and the Bonds shall be
construed in accordance with and governed by the Constitution and laws of the
State of Arizona; provided however, that the rights, protections and immunities
of the Trustee shall be governed by the laws of the State of New York.

          Section 15.07 Notices. Except as otherwise provided in this Indenture,
all notices, certificates, requests, requisitions or other communications by the
Issuer, the Borrower, the Trustee, the Tender Agent, the Paying Agent, the
Registrar, the Remarketing Agent, Moody's, S&P and the Bank pursuant to this
Indenture shall be in writing and shall be sufficiently given and shall be
deemed given when mailed by first-class mail, postage prepaid, addressed as
follows:

       If to the Issuer:
                Maricopa County, Arizona
                Pollution Control Corporation
                c/o Ryley Carlock & Applewhite
                One North Central Avenue, Suite 1200
                Phoenix, Arizona 85004-4417
                Attention: President

       If to the Borrower:
                El Paso Electric Company
                100 North Stanton
                El Paso, Texas 79901
                Attention: Treasurer

       If to the Trustee:
                JPMorgan Chase Bank
                600 Travis, Suite 1150
                Houston, Texas 77002
                Attention: Institutional Trust Services

       If to the Remarketing Agent:
                Salomon Smith Barney Inc.
                390 Greenwich Street, 4/th/ Floor
                New York, New York 10013
                Attention: James A. Brodt

       If to the Tender Agent:
                Salomon Smith Barney Inc.
                390 Greenwich Street, 4/th/ Floor
                New York, New York 10013
                Attention: James A. Brodt

                                       78

<PAGE>

     If to Moody's, at Moody's Investors Service, Structured Transactions Croup,
99 Church St., New York, New York 10007; if to S&P, at Standard & Poor's
Corporation, 25 Broadway, New York, New York 10004; and if to the Registrar, the
Paying Agent and the Bank, at the address designated herein or designated to the
Issuer, the Borrower and the Trustee. 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.

          Section 15.08 Non-Business Days. If the last day of any period of
grace, or 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, is not a
Business Day, the last day of such period of grace shall be deemed to be, any
such payment may be made or act performed or right exercised, with the same
force and effect as if done on the nominal date provided in this Indenture, on
the next succeeding Business Day, and no interest shall accrue for the period
after such nominal date.

          Section 15.09 Opinions. Each opinion with respect to the validity of
documents or Bonds may be qualified to the extent of the application of
bankruptcy, insolvency, moratorium or reorganization laws or laws affecting the
remedies for the enforcement of the rights and security provided therein and
need not pass on the availability of the remedy of specific enforcement,
injunctive relief or any other equitable remedy.

          Section 15.10 Headlines; Table of Contents. The division of this
Indenture into sections, the provision of a table of contents and the insertion
of headings are for convenience of reference only and shall not affect the
construction or interpretation hereof.

          Section 15.11 Execution in Several Counterparts. This Indenture may be
executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original; and all such counterparts, or as many
of them as the Issuer and the Trustee shall preserve undestroyed, shall together
constitute but one and the same instrument.

          Section 15.12 Statutory Notice. In accordance with the terms thereof,
notice is hereby given of Title 38, Chapter 3, Section 38-511, Arizona Revised
Statutes, which provides, among other things, that the State of Arizona, its
political subdivisions or any department or agency of either may, within three
years after its execution, cancel any contract, without penalty or further
obligation, made by said State, its political subdivisions, or any of the
departments or agencies of either if any person significantly involved in
initiating, negotiating, securing, drafting or creating the contract on behalf
of said State, its political subdivisions or any of the departments or agencies
of either 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.

                                       79

<PAGE>

         IN WITNESS WHEREOF, the Issuer has caused this Indenture to be signed
in its name by its duly authorized officer, and the Trustee, in token of its
acceptance of the trust created hereunder, has caused this Indenture to be
signed in its name by its duly authorized signatory, all as of the day and year
first above written.

                          MARICOPA COUNTY, ARIZONA
                          POLLUTION CONTROL CORPORATION

                          By: /s/ Thomas L. Camp
                              ------------------------
                                President

                          JPMorgan Chase Bank, as Trustee

                          By: /s/ Cary W. Gilliam
                              -------------------
                                Authorized Officer

<PAGE>

                                    EXHIBIT A

                                 [FORM OF BOND]

         UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
         THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC") TO THE
         ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
         AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
         IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
         DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
         IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
         PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE, BY OR TO ANY PERSON
         IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
         INTEREST HEREIN.

         AS PROVIDED IN THE INDENTURE REFERRED TO HEREIN, UNTIL THE TERMINATION
         OF THE SYSTEM OF BOOK-ENTRY ONLY TRANSFERS THROUGH DTC, AND
         NOTWITHSTANDING ANY OTHER PROVISION OF THE INDENTURE TO THE CONTRARY, A
         PORTION OF THE PRINCIPAL AMOUNT OF THIS BOND MAY BE PAID OR REDEEMED
         WITHOUT SURRENDER HEREOF TO THE PAYING AGENT. DTC OR A NOMINEE,
         TRANSFEREE OR ASSIGNEE OF DTC AS OWNER OF THIS BOND MAY NOT RELY UPON
         THE PRINCIPAL AMOUNT INDICATED HEREON AS THE PRINCIPAL AMOUNT HEREOF
         OUTSTANDING AND UNPAID. THE PRINCIPAL AMOUNT HEREOF OUTSTANDING AND
         UNPAID SHALL FOR ALL PURPOSES BE THE AMOUNT DETERMINED IN THE MANNER
         PROVIDED IN THE INDENTURE AND INDICATED ON THE BOOKS OF THE TRUSTEE.

No.                                                                         $

             MARICOPA COUNTY, ARIZONA POLLUTION CONTROL CORPORATION

                           Pollution Control Refunding
                           Revenue Bond, 2002 Series A
                 (El Paso Electric Company, Palo Verde Project)

Maturity Date                          Original Issue Date                 CUSIP

May 1, 2037                              August 1, 2002                566854CU7

Registered Owner: Cede & Co.

Principal Sum: $37,100,000

<PAGE>

         Maricopa County, Arizona Pollution Control Corporation, a political
subdivision of the State of Arizona (the "Issuer"), for value received, hereby
promises to pay (but only from the source and in the manner provided herein) to
the registered owner named above, or registered assigns, on the Maturity Date
specified above upon the presentation and surrender hereof, the Principal Sum
specified above and to pay (but only out of the Receipts and Revenues from the
Agreement and other moneys pledged therefor) interest on said Principal Sum,
from and including the date of authentication hereof until payment of said
Principal Sum has been made or duly provided for, at the rates and on the dates
determined as described herein and in the Indenture (as hereinafter defined).
The principal of and any premium on this Bond are payable at the principal
corporate trust office of JPMorgan Chase Bank, as Trustee and Paying Agent.
Interest on this Bond is payable to the person appearing on the bond
registration books of the Registrar as the registered holder thereof as of the
close of business on the Record Date, such interest to be paid by the Paying
Agent to such registered holder (i) in the event such Bond is a Book-Entry Bond,
in immediately available funds on the Interest Payment Date in accordance with
the Representation Letter, and (ii) in the event such Bond is not a Book-Entry
Bond (A) in immediately available funds (by wire transfer or by deposit to the
account of the holder of at least $1,000,000 of Bonds if such account is
maintained with the Paying Agent), according to the written instructions given
by such holder to the Registrar prior to the Record Date or (B) in all other
cases, by check mailed by first class mail to the holder at such holder's
address as it appears as of the Record Date on the registration books of the
Registrar; except, in each case, that, if and to the extent that there shall be
a default in the payment of the interest due on such Interest Payment Date, such
defaulted interest shall be paid to the holders in whose name any such Bonds are
registered as of a special record date to be fixed by the Trustee, notice of
which shall be given to such holders not less than ten (10) days prior thereto.
Notwithstanding the foregoing, interest on any Bond bearing a Bond Interest Term
Rate (except any such Bond which is a Book-Entry Bond) shall be paid only upon
presentation to the Tender Agent of the Bond on which such payment is due.
Payment of the principal of and interest and any premium on this Bond shall be
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.

         Unless otherwise defined herein, all terms herein shall have the same
meanings, respectively, as such terms are given in the Indenture.

         THE BONDS AND INTEREST THEREON ARE LIMITED OBLIGATIONS OF THE ISSUER
ISSUED UNDER AND SECURED AND ENTITLED EQUALLY AND RATABLY TO THE PROTECTION
GIVEN BY THE INDENTURE. NEITHER THE GENERAL CREDIT OF MARICOPA COUNTY, ARIZONA
POLLUTION CONTROL CORPORATION NOR THE GENERAL CREDIT OR THE TAXING POWER OF THE
STATE OF ARIZONA OR OF ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED FOR THE
PAYMENT OF THE BONDS, THE BONDS SHALL NEVER CONSTITUTE AN INDEBTEDNESS OF THE
MARICOPA COUNTY, ARIZONA POLLUTION CONTROL CORPORATION WITHIN THE MEANING OF ANY
STATE CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND SHALL NEVER GIVE RISE
TO A PECUNIARY LIABILITY OF THE MARICOPA COUNTY, ARIZONA POLLUTION CONTROL
CORPORATION OR A CHARGE AGAINST ITS GENERAL CREDIT OR TAXING POWER; NOR SHALL
THE BONDS AND INTEREST THEREON BE DEEMED A GENERAL OBLIGATION OF

                                        3

<PAGE>

MARICOPA COUNTY, ARIZONA POLLUTION CONTROL CORPORATION OR OF THE STATE OF
ARIZONA OR OF ANY POLITICAL SUBDIVISION THEREOF.

         This Bond is one of the duly authorized issue of bonds designated as
Maricopa County, Arizona Pollution Control Refunding Revenue Bonds, 2002 Series
A (El Paso Electric Company, Palo Verde Project), of the Issuer, aggregating
thirty-seven million one hundred thousand Dollars ($37,100,000) in principal
amount (the "Bonds"), as provided in, and issued under and secured by, an
Indenture of Trust, dated as of August 1, 2002 (the "Indenture"), between the
Issuer and JPMorgan Chase Bank, or its successors and assigns, as trustee (the
"Trustee"). The Bond are authorized to be issued pursuant to a resolution duly
adopted by the Issuer on June 25, 2002 and the provisions of the Constitution of
the State of Arizona and Title 35, Chapter 6, Arizona Revised Statutes (formerly
Title 9, Chapter 12, Arizona Revised Statutes, enacted by Chapter 69, Section 2,
Laws of Arizona of 1972), and all acts supplemental thereto or amendatory
thereof (the "Act").

         The Bonds are equally and ratably secured, to the extent provided in
the Indenture by a pledge of and lien on, the "Receipts and Revenues,"
consisting primarily of loan repayments made be El Paso Electric Company (the
"Borrower") under the terms of a Loan Agreement dated as of August 1, 2002 (the
"Agreement"), between the Issuer and the Borrower. The Bonds are all issued
under and equally and ratably secured by and entitled to the benefits of the
Indenture, including the security of a pledge and assignment of certain revenues
and receipts derived by the Issuer pursuant to the Agreement and any Credit
Facility provided by the Borrower with respect to the Bonds (as described
herein) and all receipts of the Trustee credited under the provisions of the
Indenture against such payments and from any other moneys held by the Trustee
under the Indenture for such purpose, and there shall be no other recourse
against the Issuer or any property now or hereafter owned by it. This Bond and
all other Bonds of the series of which it forms a part are issued pursuant to
and in full compliance with the Constitution and laws of the State of Arizona,
particularly the Act, and pursuant to further proceedings adopted by the
governing body of the Issuer, which proceedings authorized the execution and
delivery of the Indenture and the Agreement. This Bond and the series of which
it forms a part are limited obligations of the Issuer payable solely from the
amounts derived under the Agreement and pledged under the Indenture, including
all amounts payable from time to time by the Borrower in respect of the
indebtedness under the Agreement and all receipts of the Trustee credited under
the provisions of the Indenture against said amounts payable. No owner of any
Bond issued under the Act has the right to compel any exercise of the taxing
power of the Issuer to pay the Bonds, or the interest or premium, if any,
thereon. The Project (as defined in the Agreement) is not security for the
Bonds.

         In the manner hereinafter provided, the term of this Bond will be
divided into consecutive Interest Rate Periods during each of which this Bond
shall bear interest at a Daily Interest Rate (a "Daily Interest Rate Period"), a
Weekly Interest Rate (a "Weekly Interest Rate Period"), a Long-Term Interest
Rate or Rates (a "Long-Term Interest Rate Period"), or each Bond may bear
interest at a Bond Interest Term Rate during one or more consecutive Bond
Interest Terms (a "Short-Term Interest Rate Period"). The first Interest Rate
Period shall be the Interest Rate Period as specified in the Indenture.

                                        4

<PAGE>

         This Bond shall bear interest from and including the Interest Accrual
Date (as hereinafter defined) to which interest has been paid in full or duly
provided for immediately preceding the date of authentication hereof, or, if
such date of authentication shall be an Interest Accrual Date to which interest
on this Bond has been paid in full or duly provided for, or the date of initial
authentication hereof, from its date of authentication; provided, however, that
if, as shown by the records of the Trustee, interest on this Bond shall be in
default, any Bond issued in exchange for this Bond if it is surrendered for
registration of transfer or exchange shall bear interest from the date to which
interest has been paid in full on this Bond or duly provided for or, if no
interest has been paid on this Bond or duly provided for, the date of the first
authentication of this Bond under the provisions of the Indenture. For any Daily
Interest Rate Period and any Weekly Interest Rate Period, interest on this Bond
shall be payable on each Interest Payment Date for the period commencing on the
preceding Interest Accrual Date (unless such Interest Payment Date does not fall
on an Interest Accrual Date, in which case on the second preceding Interest
Accrual Date) and ending on the day immediately preceding the Interest Accrual
Date on which such Interest Payment Date falls (unless such Interest Payment
Date does not fall on an Interest Accrual Date, in which case on the day
immediately preceding the immediately preceding Interest Accrual Date). For any
Short-Term Interest Rate Period or Long-Term Interest Rate Period, interest on
this Bond shall be payable on each Interest Payment Date for the period
commencing on the immediately preceding Interest Accrual Date and ending on the
day immediately preceding such Interest Payment Date. In any event, interest on
this Bond shall be payable for the final Interest Rate Period to the date on
which this Bond shall have been paid in full. Interest shall be computed, in the
case of a Long-Term Interest Rate Period, on the basis of a 360-day year
consisting of twelve 30-day months, and in the case of any other Interest Rate
Period, on the basis of a 365- or 366-day year, as appropriate, and the actual
number of days elapsed. The Bonds shall be issuable in the form of registered
Bonds without coupons in the denomination of (i) $5,000 and any integral
multiple thereof, during any Long-Term Interest Rate Period and (ii) $100,000
and any integral multiple of $5,000 in excess of $100,000 during any Daily
Interest Rate Period, Weekly Interest Rate Period or Short-Term Interest Rate
Period (such denominations referred to herein as "Authorized Denominations").

         The term "Interest Accrual Date" shall mean (i) with respect to any
Daily Interest Rate Period, the first day thereof and, thereafter, the first day
of each calendar month during that Daily Interest Rate Period, (ii) with respect
to any Weekly Interest Rate Period, the first day thereof and, thereafter, the
first day of each calendar month during that Weekly Interest Rate Period, (iii)
with respect to any Long-Term Interest Rate Period, the first day thereof and,
thereafter, each Interest Payment Date in respect thereof, other than the last
such Interest Payment Date, and (iv) with respect to each Bond Interest Term
within a Short Term Interest Rate Period, the first day thereof. The Term
"Interest Payment Date" shall mean (i) with respect to any Daily or Weekly
Interest Rate Period, the first Business Day of each calendar month, (ii) with
respect to any Long-Term Interest Rate Period, each June 1 and December 1
occurring during such Long-Term Interest Rate Period, and the Business Day next
succeeding the last day thereof, (iii) with respect to any Short-Term Interest
Rate Period, the Business Day next succeeding the last day thereof, and (iv) in
all events, the redemption date or final maturity date of the Bonds. The term
"Business Day" shall mean a day on which banks located in the cities in which
the Principal Offices of the Trustee and the Tender Agent are located, and in
the city or cities in which drawings under a Credit Facility are required to be
made, are not required or authorized by law

                                        5

<PAGE>

or executive order to remain closed and on which the New York Stock Exchange,
Inc. is not closed.

         (1)    Daily Interest Rate

         (i)    Determination of Daily Interest Rate. During each Daily Interest
                Rate Period, the Bonds shall bear interest at the Daily Interest
                Rate determined by the Remarketing Agent on or before each
                Business Day for such Business Day. The Daily Interest Rate
                shall be the rate of interest per annum determined by the
                Remarketing Agent to be the lowest interest rate which would
                enable the Remarketing Agent to sell the Bonds for delivery on
                the effective date of such interest rate at a price (without
                regard to accrued interest) equal to 100% of the principal
                amount thereof. The Remarketing Agent shall provide the Trustee
                and the Borrower with telephonic or Electronic notice of the
                Daily Interest Rate determined by 10:30 a.m. (New York City
                time) on the date of determination. If the Remarketing Agent
                shall not have determined a Daily Interest Rate for any day by
                10:30 a.m. (New York City time) on such day, the Daily Interest
                Rate shall be the same as the Daily Interest Rate for the
                immediately preceding day. In no event shall the Daily Interest
                Rate be greater than the Maximum Interest Rate.

         (ii)   Adjustment to Daily Interest Rate Period. At any time, the
                Borrower, by written notice to the Issuer, the Trustee, the
                Bank, the Tender Agent and the Remarketing Agent, may elect that
                the Bonds shall bear interest at a Daily Interest Rate. Such
                notice (1) shall specify the effective date of such adjustment
                to a Daily Interest Rate and (2) if the adjustment is from a
                Long-Term Interest Rate Period, shall be accompanied by a
                Favorable Opinion of Bond Counsel to the effect that such
                adjustment (a) is authorized or permitted by the Indenture and
                the Act, and (b) will not adversely affect the Tax-Exempt status
                of the interest on the Bonds.

         (2)    Weekly Interest Rate.

         (i)    Determination of Weekly Interest Rate. During each Weekly
                Interest Rate Period, the Bonds shall bear interest at the
                Weekly Interest Rate, which shall be determined by the
                Remarketing Agent no later than the first day of such Weekly
                Interest Rate Period and thereafter no later than 10:00 a.m.
                (New York City time) on Wednesday of each week during such
                Weekly Interest Rate Period, unless any such Wednesday shall not
                be a Business Day, in which event the Weekly Interest Rate shall
                be determined by the Remarketing Agent no later than the
                Business Day immediately preceding such Wednesday. The Weekly
                Interest Rate shall be the rate of interest per annum determined
                by the Remarketing Agent to be the lowest interest rate which
                would enable the Remarketing Agent to sell the Bonds for
                delivery on the effective date of such interest rate at a price
                (without regard to accrued interest) equal to 100% of the
                principal amount thereof. If for any reason, a Weekly Interest
                Rate is not so established for any period by the time specified
                above by the Remarketing Agent, the Weekly Interest Rate shall
                be the same as the Weekly Interest Rate in effect for the
                immediately preceding week. In no event shall any Weekly
                Interest Rate exceed the Maximum Interest Rate. The

                                        6

<PAGE>

                first Weekly Interest Rate determined for each Weekly Interest
                Rate Period shall apply to the period commencing on the first
                day of such Weekly Interest Rate Period and ending on the next
                succeeding Tuesday, unless such Weekly Interest Rate Period
                shall end on a day other than Tuesday, in which event the last
                Weekly Interest Rate for such Weekly Interest Rate Period shall
                apply to the period commencing on the Wednesday preceding the
                last day of such Weekly Interest Rate Period and ending on such
                last day. The Remarketing Agent shall provide the Trustee and
                the Borrower with written, telephonic or Electronic notice of
                each Weekly Rate, as determined, by 12:00 noon (New York City
                time) on the effective date of such Weekly Rate.

         (ii)   Adjustment to Weekly Interest Rate. At any time, the Borrower,
                by written direction to the Issuer, the Trustee, the Bank, the
                Tender Agent and the Remarketing Agent, may elect that the Bonds
                shall bear interest at a Weekly Interest Rate. Such direction
                (1) shall specify the effective date of such adjustment to a
                Weekly Interest Rate; and (2) if the adjustment is from a
                Long-Term Interest Rate Period, shall be accompanied by a
                Favorable Opinion of Bond Counsel addressed to the Trustee to
                the effect that such adjustment (a) is authorized or permitted
                by the Indenture and the Act, and (b) will not adversely affect
                the Tax-Exempt status of interest on the Bonds.

         (3)    Long-Term Interest Rate.

         (i)    Determination of Long-Term Interest Rate. During each Long-Term
                Interest Rate Period, the Bonds shall bear interest - at the
                Long-Term Interest Rate, which shall be determined by the
                Remarketing Agent on a Business Day selected by the Remarketing
                Agent but not more than forty (40) days prior to and not later
                than the effective date of such Long-Term Interest Rate Period.
                The Long Term Interest Rate shall be the rate of interest per
                annum determined by the Remarketing Agent on such date, and
                communicated by the close of business on such date to the
                Trustee, the Paying Agent and the Borrower, by written,
                telephonic or Electronic notice as being the lowest interest
                rate which would enable the Remarketing Agent to sell the Bonds
                for delivery on the effective date of such Long-Term Interest
                Rate Period at a price (without regard to accrued interest)
                equal to 100% of the principal amount thereof; provided,
                however, that if, for any reason, a Long-Term Interest Rate for
                any Long-Term Interest Rate Period shall not be determined or
                effective or if an adjustment from a Long-Term Interest Rate
                Period to another Interest Rate Period shall not be effective,
                the Interest Rate Period for the Bonds shall automatically
                convert to a Daily Interest Rate Period; provided, further,
                however, that if the Favorable Opinion of Bond Counsel required
                by Section 2.01(c)(ii)(B) of the Indenture in connection with an
                adjustment to a Daily Interest Rate Period from a Long-Term
                Interest Rate Period cannot be obtained, then the Interest Rate
                Period for the Bonds shall automatically convert to a Long-Term
                Interest Rate Period of one year and one day. If a Daily
                Interest Rate for the first day of such Daily Interest Rate
                Period is not determined as provided in Section 2.01(c)(ii)(A)
                of the Indenture, the Daily Interest Rate for the first day of
                such Daily Interest Rate Period shall be equal to the TBMA

                                        7

<PAGE>

                Municipal Index. In no event shall any Long-Term Interest Rate
                be greater than the Maximum Interest Rate.

         (ii)   Adjustment to or Continuation of Long-Term Interest Rate. At any
                time, the Borrower, by written notice to the Issuer, the Bank,
                the Trustee, the Tender Agent and the Remarketing Agent, may
                elect that the Bonds shall bear or continue to bear interest at
                a Long-Term Interest Rate and if it shall so elect, shall
                determine the duration of the Long-Term Interest Rate Period
                during which the Bonds shall bear interest at such Long-Term
                Interest Rate. Each Long-Term Interest Rate Period shall have a
                duration such that the last day of such Long-Term Interest Rate
                Period is (1) a day which both immediately precedes a Business
                Day and is at least one year after the effective date of such
                Long-Term Interest Rate Period or (2) if earlier, the day
                immediately preceding the final maturity date of the Bonds. At
                the time the Borrower so elects an adjustment to or continuation
                of a Long-Term Interest Rate Period, the Borrower may specify
                two or more consecutive Long-Term Interest Rate Periods and, if
                the Borrower so specifies, shall specify the duration of each
                such Long-Term Interest Rate Period as provided in this
                paragraph. Such notice shall specify the effective date of each
                such Long-Term Interest Rate Period. In addition, such notice
                (i) shall specify the last day of such Long-Term Interest Rate
                Period, and (ii) if the adjustment is from a Daily, Weekly or
                Short-Term Interest Rate Period, shall be accompanied by a
                Favorable Opinion of Bond Counsel to the effect that such
                adjustment (a) is authorized or permitted by the Indenture and
                the Act, and (b) will not adversely affect the Tax-Exempt status
                of interest on the Bonds.

                If, by the thirty-fifth day prior to the last day of any
                Long-Term Interest Rate Period, the Trustee shall not have
                received notice of the Borrower's election that, during the next
                succeeding Interest Rate Period, the Bonds shall bear interest
                at a Daily Interest Rate, a Weekly Interest Rate, a Long-Term
                Interest Rate, or a Bond Interest Term Rate accompanied by
                appropriate opinions of Bond Counsel, if required by Section
                2.01(c)(ii)(B), (iii)(B), (iv)(B) or (v)(B) of the Indenture,
                the next succeeding Interest Rate Period for the Bonds shall be
                a Daily Interest Rate Period; provided, however, that if the
                opinion of Bond Counsel required by Section 2.01(c)(ii)(B) of
                the Indenture in connection with an adjustment to a Daily
                Interest Rate Period from a Long-Term Interest Rate Period
                cannot be obtained, then the Interest Rate Period for the Bonds
                shall automatically convert to a Long-Term Interest Rate Period
                of one year and one day. If a Daily Interest Rate for the first
                day of such Daily Interest Rate Period is not determined as
                provided in Section 2.01(c)(ii) of the Indenture, the Daily
                Interest Rate for the first day of such Daily Interest Rate
                Period shall be equal to the TBMA Municipal Index.

                At the same time that the Borrower elects to have the Bonds bear
                interest at a Long-Term Interest Rate or continue to bear
                interest at a Long-Term Interest Rate, the Borrower may also
                specify to the Trustee optional redemption prices and periods
                different from (including that there be no such optional
                redemption) those set out in Section 4.01(a)(ii)(C) of the
                Indenture during the Long-Term

                                        8

<PAGE>

                Interest Rate Period(s) with respect to which such election is
                made; provided, however, that such notice shall be accompanied
                by a Favorable Opinion of Bond Counsel addressed to the Trustee
                to the effect that such changes (i) are authorized or permitted
                by the Act and the Indenture, and (ii) will not adversely affect
                the Tax-Exempt status of interest on the Bonds.

         (4)    Bond Interest Term Rate.

         (i)    Determination of Bond Interest Terms and Bond Interest Term
                Rates.

                During each Short-Term Interest Rate Period, each Bond shall
                bear interest during each Bond Interest Term for such Bond at
                the Bond Interest Term Rate for such Bond. Each Bond Interest
                Term and Bond Interest Term Rate for any Bond shall be a period
                of at least one day but not more than the lesser of (x) 270 days
                or (y) the number of days of interest coverage on the Bonds
                provided for in any Credit Facility then in effect minus five
                (5) days. When a Credit Facility, if any, other than a Letter of
                Credit is in effect with respect to the Bonds or no Credit
                Facility is in effect with respect to the Bonds, each Bond
                Interest Term for any Bond shall be a period of at least one day
                but not more than 270 days. Each Bond Interest Term for any Bond
                shall be a period determined by the Remarketing Agent to be, in
                its judgment, the period which, taking into account prevailing
                market conditions and all other Bond Interest Terms and Bond
                Interest Term Rates for all Bonds then Outstanding, is likely to
                result in the lowest overall net interest expense on all such
                Bonds; provided, however, that any such Bond purchased on behalf
                of the Borrower and remaining unsold in the hands of the
                Remarketing Agent as of 1:00 p.m. (New York City time) on the
                effective date of the Bond Interest Term for such Bond shall
                have a Bond Interest Term of one day or, if such Bond Interest
                Term would not end on a day immediately preceding a Business
                Day, a Bond Interest Term of more than one day ending on the day
                immediately preceding the next Business Day; provided, further,
                however, that (1) each Bond Interest Term shall end on a day
                which immediately precedes a Business Day and no Bond Interest
                Term shall extend beyond the day immediately preceding the final
                maturity date of the Bonds or, if a Credit Facility, if any, is
                then in effect with respect to the Bonds, the scheduled
                expiration date of such Credit Facility, and (2) if for any
                reason the Remarketing Agent fails or is unable to determine a
                Bond Interest Term on any Bond, the Bond Interest Term for such
                Bond shall be one day, unless such Bond Interest Term would end
                on a day which does not precede a Business Day, in which case
                such Bond Interest Term shall end on the day immediately
                preceding the next succeeding Business Day.

                           The Bond Interest Term Rate for each Bond Interest
                Term for each Bond shall be the rate of interest per annum
                determined by the Remarketing Agent no later than 1:00 p.m. (New
                York City time) on the first day of such Bond Interest Term to
                be the lowest interest rate which would enable the Remarketing
                Agent to sell such Bonds on the effective date of such interest
                rate at a price (without regard to accrued interest) equal to
                100% of the principal amount thereof. The

                                        9

<PAGE>

                Remarketing Agent shall provide the Trustee and the Borrower
                with telephonic or Electronic notice of each Bond Interest Term
                Rate and Bond Interest Term by 1:00 p.m. (New York City time) on
                the date of determination. If a Bond Interest Term Rate for a
                Bond Interest Term of one day is not determined or effective by
                1:00 p.m. (New York City time) on such day, the Bond Interest
                Term Rate for such Bond Interest Term of one day shall be equal
                to the TBMA Municipal Index. In no event shall any Bond Interest
                Term Rate exceed the Maximum Interest Rate.

                           Notwithstanding the foregoing, in the event that
                notice of redemption with respect to any Bond in a Short-Term
                Interest Rate Period shall have been given to the holder of such
                Bond by the Trustee pursuant to Section 4.03 of the Indenture,
                no subsequent Bond Interest Terms or Bond Interest Term Rates
                shall be determined with respect to such Bond.

         (ii)   Adjustment to or Continuation of Bond Interest Term Rates. At
                any time, the Borrower, by written direction to the Issuer, the
                Trustee, the Bank, if any, the Tender Agent and the Remarketing
                Agent, may elect that the Bonds shall bear interest at Bond
                Interest Term Rates. Such direction (1) shall specify the
                effective date of the Short-Term Interest Rate Period during
                which the Bonds shall bear interest at Bond Interest Term Rates;
                and (2) shall be accompanied by a Favorable Opinion of Bond
                Counsel addressed to the Trustee to the effect that such
                adjustment (a) is authorized or permitted by the Indenture and
                the Act and (b) will not adversely affect the Tax-Exempt status
                of interest on the Bonds.

         (iii)  Adjustment from Short-Term Interest Rate Period. At any time
                during a Short-Term Interest Rate Period, the Borrower may elect
                that the Bonds shall no longer bear interest at Bond Interest
                Term Rates and shall instead bear interest as otherwise
                permitted under the Indenture. The Borrower shall give written
                notice to the Issuer, the Trustee, the Paying Agent and the
                Remarketing Agent, if any, of such election and shall specify
                the Interest Rate Period to follow with respect to such Bonds
                upon cessation of the Short-Term Interest Rate Period and
                instruct the Remarketing Agent to (1) determine Bond Interest
                Terms of such duration that, as soon as possible, all Bond
                Interest Terms shall end on the same date, not earlier than
                twenty-four (24) days (or such shorter period acceptable to the
                Trustee) following the delivery by the Borrower of such written
                notice, and upon the establishment of such Bond Interest Term
                the day next succeeding the last day of all such Bond Interest
                Terms shall be the effective date of the Interest Rate Period
                elected by the Borrower; or (2) determine Bond Interest Terms
                that will best promote an orderly transition to the next
                succeeding Interest Rate Period to apply to the Bonds, beginning
                not earlier than twenty-four (24) days (or such shorter period
                acceptable to the Trustee) following the delivery by the
                Borrower of such written notice. If the alternative in clause
                (2) above is selected, the day next succeeding the last day of
                the Bond Interest Term for each Bond shall be with respect to
                such Bond the effective date of the Interest Rate Period elected
                by the Borrower. The Remarketing Agent, promptly upon the
                determination thereof, shall give written notice of such last
                day and such effective dates to the Issuer, the Borrower, the
                Trustee and the Tender Agent. During any transitional period
                from

                                       10

<PAGE>

                a Short-Term Interest Rate Period to the next succeeding
                Interest Rate Period in accordance with clause (2) above, the
                provisions of the Indenture shall be deemed to apply to the
                Bonds as follows: the Bonds continuing to bear interest at Bond
                Interest Term Rates shall have applicable to them the provisions
                thereunder theretofore applicable to such Bonds as if all Bonds
                were continuing to bear interest at Bond Interest Term Rates and
                the Bonds bearing interest in the Interest Rate Period to which
                the transition is being made will have applicable to them the
                provisions thereunder as if all Bonds were bearing interest in
                such Interest Rate Period.

         (5)    Terms of Credit Facility, If Any. If a Credit Facility in the
         form of a letter of credit, municipal bond insurance policy or surety
         bond is to be held by the Trustee after the effective date of any
         adjustment from one Interest Rate Period to another Interest Rate
         Period, such Credit Facility, if any, shall be in an amount sufficient
         to provide payment of (x) the principal amount of the Outstanding Bonds
         plus (y) the amount of interest (computed on the basis of a 365-day
         year in the case of an adjustment to a Daily Interest Rate Period,
         Weekly Interest Rate Period or Short-Term Interest Rate Period, and on
         the basis of a 360-day year consisting of twelve 30-day months in the
         case of an adjustment to a Long-Term Interest Rate Period) which will
         accrue on the Outstanding Bonds for a period equal to the maximum
         number of days between Interest Payment Dates during the new Interest
         Rate Period plus five (5) days. In the case of an adjustment to a
         Long-Term Interest Rate Period, a Credit Facility, if any, to be in
         effect after the effective date of such adjustment shall (i) extend for
         a period ending on a date no earlier than five (5) days after the first
         date on which the Bonds may be called for redemption pursuant to
         Section 4.01(a)(ii) of the Indenture and (ii) cover the premium, if
         any, which would be included in the purchase price upon mandatory
         purchase of the Bonds pursuant to Section 4.08(b) of the Indenture if
         the term of such Credit Facility was not extended beyond the expiration
         date set forth therein.

         (6)     Notice of Adjustment to Daily, Weekly or Long-Term Interest
         Rate or Bond Interest Terms Rates; Bonds Counsel Opinions; Remarketing
         Agent; Tender Agent.

         (i)    Except as otherwise provided in the Indenture, the Trustee shall
                give notice by first-class mail of an adjustment to a Daily,
                Weekly, Short-Term or Long-Term Interest Rate Period, as the
                case may be, to the Owners of the Bonds not less than fifteen
                (15) days (thirty (30) days if the then current Interest Rate
                Period is a Long-Term Interest Rate Period) prior to the
                effective date of such Daily, Weekly, Short-Term or Long-Term
                Interest Rate Period.

         (ii)   Adjustment to a Daily, Weekly, Short-Term or Long-Term Interest
                Rate Period, except for successive Long-Term Interest Rate
                Periods, requires a contemporaneous Favorable Opinion of Bond
                Counsel. "Favorable Opinion of Bond Counsel" means an opinion of
                Bond Counsel to the effect that the action proposed to be taken
                is authorized by the laws of the State of Arizona and the
                Indenture and will not adversely affect any exclusion from gross
                income for federal income tax purposes of interest on the Bonds.

                                       11

<PAGE>

         (iii) The initial Remarketing Agent appointed under the Indenture shall
               be Salomon Smith Barney Inc.

         (iv)  The initial Tender Agent appointed under the Indenture shall be
               Salomon Smith Barney Inc.

         (7)   (i) Purchase of Bonds During Daily Interest Rate Period. During
               any Daily Interest Rate Period, any Bond or portion thereof in an
               Authorized Denomination shall be purchased any Business Day at a
               purchase price equal to 100% of the principal amount thereof plus
               accrued interest from the Interest Accrual Date immediately prior
               to the date of purchase to the date of purchase (unless the date
               of purchase shall be an Interest Accrual Date, in which case at a
               purchase price equal to the principal amount thereof), payable in
               immediately available funds, upon (A) delivery to the Tender
               Agent at its Principal Office, by no later than 11:00 a.m. (New
               York City time), on such Business Day, of an irrevocable written,
               telephonic or Electronic notice which states the principal amount
               of such Bond to be tendered for purchase and the date of
               purchase, and (B) delivery of such Bond tendered for purchase to
               the Tender Agent at its Principal Office on the date of purchase
               in accordance with Section 4.09 of the Indenture. The Tender
               Agent shall keep a written record of the notice described in
               Clause (A).

         (ii)  Purchase of Bonds During Weekly Interest Rate Period. During any
               Weekly Interest Rate Period, any Bond or portion thereof in an
               Authorized Denomination shall be purchased on any Business Day at
               a purchase price equal to 100% of the principal amount thereof
               plus accrued interest, if any, from the Interest Accrual Date
               immediately prior to the date of purchase to the date of purchase
               (unless the date of purchase shall be an Interest Accrual Date,
               in which case at a purchase price equal to the principal amount
               thereof), payable in immediately available funds, upon (A)
               delivery to the Tender Agent at its Principal Office, by no later
               than 5:00 p.m. (New York City time), on such Business Day at
               least seven (7) days prior to the date of purchase of an
               irrevocable written, telephonic or Electronic notice which states
               the principal amount of such Bond to be tendered for purchase and
               the date of purchase, and (B) delivery of such Bond tendered for
               purchase to the Tender Agent at its Principal Office on the date
               of purchase in accordance with Section 4.09 of the Indenture. The
               Tender Agent shall keep a written record of the notice described
               in Clause (A).

         (iii) Mandatory Tender for Purchase On Day Next Succeeding the Last Day
               of Each Bond Interest Term. Each Bond in a Short-Term Interest
               Rate Period shall be subject to mandatory tender for purchase on
               the day next succeeding the last day of each Bond Interest Term
               with respect to such Bond, at a purchase price equal to 100% of
               the principal amount thereof, plus accrued interest to the date
               of purchase, except as provided in Section 4.08(b)(ii) of the
               Indenture; or

         (iv)  Mandatory Tender for Purchase on First Day of Each Interest Rate
               Period. The Bonds shall be subject to mandatory tender for
               purchase on the effective date of any change in an Interest Rate
               Period for such Bond, other than the effective date of any

                                       12

<PAGE>

                change from a Daily Interest Rate Period to a Weekly Interest
                Rate Period or from a Weekly Interest Rate Period to a Daily
                Interest Rate Period, at a purchase price equal to 100% of the
                principal amount thereof, plus accrued interest to the date of
                purchase, except as provided in Section 4.08(b)(ii) of the
                Indenture; or

         (v)    Mandatory Tender for Purchase on First Day of Long-Term Interest
                Rate Period Following Prior Long-Term Interest Rate Period. This
                Bond shall be subject to mandatory tender for purchase, at the
                purchase price, payable in immediately available funds,
                specified in the Indenture, on the first day of each Long-Term
                Interest Rate Period which was preceded by a Long-Term Interest
                Rate Period.

         (vi)   Mandatory Tender for Purchase on Effective Date of any Credit
                Facility. This Bond shall be subject to mandatory tender for
                purchase, at the purchase price, payable in immediately
                available funds, specified in the Indenture, on the effective
                date of any Credit Facility which may be provided with respect
                to the Bonds pursuant to Section 6.08 of the Agreement or of any
                substitute Credit Facility provided with respect to the Bonds
                pursuant to Section 6.08 of the Agreement.

         (vii)  Mandatory Tender for Purchase on Termination or Expiration of
                Credit Facility. In the event that any Credit Facility either is
                to terminate or is to expire in accordance with its terms (other
                than because a final drawing thereunder shall have been made in
                accordance with its terms), unless the term of the Credit
                Facility shall be extended or unless the Borrower shall provide
                the Trustee, no later than the 35/th/ day preceding the
                mandatory purchase date set forth herein with a substitute
                Credit Facility and with written evidence from Moody's, if the
                Bonds shall be rated at the time by Moody's, and from S&P, if
                the Bonds shall be rated at the time by S&P, to the effect that
                such substitute Credit Facility will not, by itself, result in a
                reduction or withdrawal of the rating on the Bonds by Moody's or
                S&P, as the case may be (and the Trustee shall have received
                written notice of such extension or such substitution and
                evidence thereof prior to giving the notice required in
                paragraph (viii) below), the Bonds shall be subject to mandatory
                tender for purchase at a purchase price, payable in immediately
                available funds, of 100% of their principal amount, plus accrued
                interest, if any, to the mandatory purchase date, on the second
                Business Day prior to the date of such termination or
                expiration.

         (viii) Notice of Mandatory Tender for Purchase. In connection with any
                mandatory tender for purchase of this Bond in accordance with
                paragraph 7(iii), (iv), (v), (vi) or (vii) above, the Trustee
                shall give notice by first-class mail to the Owner of this Bond
                at the time and in the form specified in the Indenture.

         (ix)   Bonds Deemed Purchased. If moneys sufficient to pay the purchase
                price of Bonds to be purchased pursuant to Section 4.08 of the
                Indenture shall be held by the Tender Agent on the date such
                Bonds are to be purchased, such Bonds shall be deemed to have
                been purchased for all purposes of the Indenture, irrespective
                of whether or not such Bonds shall have been delivered to the
                Tender Agent, and neither the former holder of such Bonds nor
                any other person shall have any claim

                                       13

<PAGE>

                thereon, under the Indenture or otherwise, for any amount other
                than the purchase price thereof.

                  In the event of non-delivery of any Bond to be purchased
                pursuant to Section 4.08 of the Indenture, the Tender Agent
                shall segregate and hold uninvested the moneys for the purchase
                price of such Bonds in trust, without liability for interest
                thereon, for the benefit of the former holders of such Bonds,
                who shall, except as provided in the following sentence,
                thereafter be restricted exclusively to such moneys for the
                satisfaction of any claim for the purchase price of such Bonds.
                Any moneys which the Tender Agent shall segregate and hold in
                trust for the payment of the purchase price of any Bond and
                remaining unclaimed for two (2) years after the date of purchase
                shall be paid, upon the Borrower's written request, to the
                Borrower. After the payment of such unclaimed moneys to the
                Borrower, the former holder of such Bond shall look only to the
                Borrower for the payment thereof.

         (8)  Redemption Provisions. The Bonds shall be subject to redemption
              prior to maturity by the exercise by the Borrower of any of its
              options to prepay all or a part of the unpaid balance of the
              Repayment Installments and cause the Bonds to be redeemed, in
              whole, or in part by lot, prior to their maturity dates, as
              follows:

                (i)   During any Short-Term Interest Rate Period, each Bond
                shall be subject to such redemption on the day next succeeding
                the last day of each Bond Interest Term for such Bond at a
                redemption price equal to 100% of the principal amount thereof.

                (ii)  During any Daily Interest Rate Period or Weekly Interest
                Rate Period,the Bonds shall be subject to such redemption on any
                Interest Payment Date at a redemption price equal to 100% of the
                principal amount thereof.

                (iii) On the day next succeeding the last scheduled day of any
                Long-Term Interest Rate Period, the Bonds shall be subject to
                such redemption at a redemption price of 100% of the principal
                amount thereof. During any Long-Term Interest Rate Period, the
                Bonds shall be subject to redemption during the periods
                specified below, in whole or in part, at the redemption prices
                (expressed as percentages of principal amount) hereinafter
                indicated (unless different redemption terms shall be specified
                by the Borrower pursuant to Section 2.01(c)(iv)(B) of the
                Indenture):

                                    Length of
                                Long-Term Interest
                                    Rate Period
                               (expressed in years)          Redemption Prices
                               --------------------          -----------------

                        Greater than 17                   After 10 years at 102%
                                                           declining by 1% every
                                                           12 months to 100%

                        Less than or equal to             After 8 years at 102%,

                                       14

<PAGE>

                          to 17 and greater            declining by 1% every 12
                          than 10                      months to 100%

                        Less than or equal to        After 6 years at 101%,
                          10 and greater than 7        declining by 1/2 of 1%
                                                       every 6 months to 100%

                        Less than or equal to 7      After 3 years at 101%,
                          and greater than 4           declining by 1/2 of 1%
                                                       every 6 months to 100%

                        Less than or equal to 4      After 2 years at 100 1/2%,
                          and greater than 3           declining by 1/2 of 1%
                                                       after 6 months to 100%

                        Less than or equal to 3      After 1 year at 100 1/2%,
                          and greater than 2           declining by 1/2 of 1%
                                                       after 6 months to 100%

                        Less than or equal to 2      After 1 year at 100%
                          and greater than 1

                        1 year or less               Not redeemable

                  (iv)    During any Long-Term Interest Rate Period, the Bonds
                  shall be subject to redemption prior to maturity at the option
                  of the Borrower in whole or in part by lot on any Interest
                  Payment Date, at a redemption price equal to 100% of the
                  principal amount thereof, if the Borrower delivers to the
                  Trustee a written or Electronic notice to the effect that
                  either:

                      (a) the Borrower has determined that some or all of the
                  interest payable under the Agreement for any sixty (60) days
                  (which need not be consecutive) within any consecutive
                  twenty-four (24) month period is not or will not be
                  deductible, in whole or in part, for federal income tax
                  purposes by reason of Section 150(b) of the Code (or would not
                  be deductible unless some or all of the Bonds are redeemed)
                  due to a change in use of the Project or any portion thereof,
                  and the Borrower will not claim deductions for such interest
                  on its federal income tax returns; or

                      (b) the Borrower after reasonable effort has been unable
                  to obtain an opinion of Bond Counsel that it is more likely
                  than not that Section 150 of the Code will not prevent
                  interest payable under the Agreement for any sixty (60) days
                  (which need not be consecutive) within any consecutive
                  twenty-four (24) month period from being deductible, in whole
                  or in part, for federal income tax purposes.

                                       15

<PAGE>

                    In either such case, the Borrower shall only cause the
               Trustee to redeem Bonds as provided in this paragraph 8(iv) on or
               after the Interest Payment Date immediately preceding the date on
               which, due to a change in use in the Project or any portion
               thereof, the period of potential interest expense disallowance
               described above commences, and the Borrower may only cause the
               Trustee to redeem such principal amount of Bonds as the Borrower
               determines is necessary to assure that the Borrower retains its
               right to all such deductions otherwise allowable or, if a partial
               redemption will not enable the Borrower to retain the right to
               deduct such interest, the Borrower may cause the Trustee to
               redeem all the Outstanding Bonds.

                    (v)  During any Long-Term Interest Rate Period, the Bonds
                    shall be redeemed prior to maturity in whole or in part, and
                    if in part by lot, at any time at a redemption price equal
                    to the principal amount thereof plus accrued interest to the
                    redemption date, upon receipt by the Trustee of a written
                    notice of the Borrower and signed by an Authorized Borrower
                    Representative stating that any of the following events has
                    occurred (which determination shall be in the sole
                    discretion of the Borrower) and that the Borrower therefore
                    intends to exercise its option to prepay all payments due
                    under the Agreement in whole or in part pursuant to Section
                    9.01 of the Agreement and thereby effect the redemption of
                    Bonds in whole or in part to the extent of such prepayments:

                         (a)  All or part of the Project or the Plant shall have
                         been damaged or destroyed to such an extent that, in
                         the opinion of the Borrower, (i) the Project or the
                         Plant or such affected portion could not reasonably be
                         restored within a period of four (4) months to the
                         condition thereof immediately preceding such damage or
                         destruction, and the Borrower or the operator of the
                         Project or the Plant will be prevented, or is likely to
                         be prevented for a period of four (4) consecutive
                         months or more, from carrying on all or substantially
                         all of its normal operation of the Project or the
                         Plant, or (ii) the cost of restoration of the Project
                         or the Plant or such affected portion will be
                         substantially in excess of the net proceeds of
                         insurance thereon.

                         (b)  Title to, or the temporary use of, all or a part
                         of the Project or the Plant shall have been taken under
                         the exercise of the power of eminent domain.

                         (c)  Changes in economic availability of raw materials,
                         operating supplies or facilities necessary to operate
                         all or a part of the Project or the Plant, or
                         technological or other changes which make the continued
                         operation of the Project or the Plant or such affected
                         portion uneconomical, in the opinion of the Borrower,
                         shall have occurred and shall have resulted in a
                         cessation of all or substantially all of the Borrower's
                         normal operations of either the Project or the Plant.

                         (d)  Unreasonable burdens or excessive liabilities
                         shall have been imposed upon the Issuer or the Borrower
                         in respect of all or a part of the

                                       16

<PAGE>

                         Project or the Plant including, without limitation,
                         federal, state or other ad valorem, property, income or
                         other taxes not being imposed on the date of the
                         Agreement, as well as any statute or regulation enacted
                         or promulgated after the date of the Agreement that
                         prevents the Borrower from deducting interest in
                         respect of the Agreement for federal income tax
                         purposes.

                         (e)  All or substantially all of the property of the
                         Borrower shall be transferred or sold to any entity
                         other than an affiliate of the Borrower or the Borrower
                         shall be consolidated with or merged into an entity
                         other than an affiliate of the Borrower in such manner
                         that the Borrower is not the surviving entity and the
                         surviving, resulting or transferee entity does not
                         agree to perform the obligations of the Borrower.

                    Notwithstanding any term or provision of this paragraph 8(v)
              to the contrary, the Bonds shall not be subject to optional
              redemption unless (i) the Bank, if any, shall consent thereto in
              writing and deliver such consent to the Borrower and the Trustee,
              (ii) in connection with such redemption, the proceeds of such
              refunding shall be sufficient to pay, and shall be used to pay,
              the redemption price of the Bonds so redeemed or (iii) sufficient
              Available Moneys (other than proceeds of any drawing under a
              Letter of Credit, if any) shall have been deposited by the
              Borrower with the Trustee for the payment of all amounts due in
              respect of all Bonds called for redemption pursuant to this
              paragraph 8(v). This paragraph shall be inapplicable if at the
              time of such optional redemption there is no Letter of Credit or
              other Credit Facility with respect to the Bonds.

                    (vi) The Bonds shall be subject to redemption prior to
                    maturity from amounts which are required to be prepaid by
                    the Borrower under Section 9.03 of the Agreement, as set
                    forth below:

                         (a)  The Bonds shall be redeemed in whole on any date
                         at a redemption price equal to the principal amount
                         thereof plus interest accrued to the redemption date
                         upon the occurrence of a Determination of Taxability;
                         provided, however, that if, in the opinion of Bond
                         Counsel delivered to the Trustee, the redemption of a
                         specified portion of such Bonds Outstanding would have
                         the result that interest payable on such Bonds
                         remaining Outstanding after such redemption would
                         remain Tax-Exempt, then such Bonds shall be redeemed in
                         part by lot (in Authorized Denominations), in such
                         amount as Bond Counsel in such opinion shall have
                         determined is necessary to accomplish that result.

                         (b)  The Bonds shall be redeemed in whole at a
                         redemption price equal to the principal amount thereof
                         plus accrued interest to the redemption date in the
                         event that as a result of any changes in the
                         Constitution of the United States of America or the
                         Constitution of the State or as a result of any
                         legislative, judicial or administrative action, the
                         Agreement shall have become void or unenforceable or
                         impossible to perform in accordance

                                       17

<PAGE>

                         with the intention and purposes of the parties thereto,
                         or shall have been declared unlawful.

                         (c)  The Bonds shall be redeemed in whole at a
                         redemption price equal to the principal amount thereof
                         plus accrued interest to the redemption date in the
                         event that at least thirty-five (35) days prior to the
                         expiration of any Credit Facility, if any, then in
                         effect with respect to the Bonds the Trustee shall not
                         have received (a) a renewal or extension of the
                         existing Credit Facility for a period of at least one
                         (1) year (or, if shorter, the period to maturity of the
                         Bonds) or (b) a substitute Credit Facility meeting the
                         requirements of Section 6.08 of the Agreement. Such
                         redemption shall occur on the last Business Day which
                         is not less than five (5) calendar days preceding the
                         expiration date of a Credit Facility, if any, then in
                         effect.

     (9)  Selection of Bonds to be Redeemed. If less than all the Bonds shall be
          called for redemption the Trustee shall select the Bonds or any given
          portion thereof to be redeemed, from Outstanding Bonds or any given
          portion thereof not previously called for redemption, by lot. For the
          purpose of any such selection the Trustee shall assign a separate
          number for each minimum Authorized Denomination of each Bond of a
          denomination of more than such minimum; provided that following any
          such selection, both the portion of such Bond to be redeemed and the
          portion remaining shall be in Authorized Denominations. The Trustee
          shall promptly notify the Issuer and the Borrower in writing of the
          numbers of the Bonds or portions thereof so selected for redemption.

          (10)   Miscellaneous.

          (i)    The transfer of this Bond shall be registered upon the
                 registration books kept at the corporate trust office of the
                 Trustee, as Registrar, at the written request of the Owner
                 hereof or his attorney duly authorized in writing, upon
                 surrender of this Bond at said office, together with the
                 attached instrument of transfer duly executed by the Owner or
                 his duly authorized attorney.

          (ii)   The 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.

          (iii)  With certain exceptions as provided therein, the Indenture and
                 the Agreement may be modified or amended only with the consent
                 of the owners of not less than a majority in aggregate
                 principal amount of all Bonds outstanding under the Indenture.

          (iv)   Reference is hereby made to the Indenture and the 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 Issuer, the
                 Borrower, the Trustee, the Tender Agent and the Remarketing
                 Agent appointed pursuant to the Indenture and the

                                       18

<PAGE>

          Owners of the Bonds. The 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 Agreement.

     (v)  The Issuer, the Trustee, the Registrar, the Paying Agent, the Tender
          Agent, the Remarketing Agent and the Bank may deem and treat the
          person in whose name this Bond is registered on the registration books
          of the Issuer maintained by the Registrar as the absolute owner hereof
          for all purposes, whether or not this Bond is overdue, and neither the
          Issuer, the Trustee, the Registrar, the Paying Agent, the Tender
          Agent, the Remarketing Agent nor the Bank shall be affected by any
          notice to the contrary.

     (vi) No covenant or agreement contained in this Bond or the Indenture shall
          be deemed to be the covenant or agreement of any elected or appointed
          commissioner, official, officer, agent, servant or employee of the
          Issuer in his individual capacity, and neither the members of the
          Board of Directors of the Issuer, 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 of this
          Bond.

     IT IS HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and
things required by the Constitution and the statutes of the State of Arizona,
the governing rules and procedures of the Issuer and the Indenture to exist, to
have happened and to have been performed precedent to and in the issuance of
this Bond, do exist, have happened and have been performed.

     No officer or official of the Issuer shall be individually or personally
liable for payment of the Bonds or the interest thereon or be subject to any
personal liability or accountability by reason of the issuance thereof.

     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 manual execution by the Trustee, or its
successor as Trustee, of the certificate of authentication inscribed hereon.

                                       19

<PAGE>

     IN WITNESS WHEREOF, Maricopa County, Arizona Pollution Control Corporation
has caused this Bond to be executed by its President, Vice President, Secretary,
Treasurer, Assistant Secretary or Assistant Treasurer by his or her manual or
facsimile signature and has caused such execution to be attested by its
President, Vice President, Secretary, Treasurer, Assistant Secretary or
Assistant Treasurer with his or her manual or facsimile signature; provided,
however, that the officer so attesting this Bond shall not be the same officer
who executed this Bond.

Dated as of the Original
Issue Date set forth above.

                                               MARICOPA COUNTY, ARIZONA
                                               POLLUTION CONTROL CORPORATION

                                               By:  ____________________________
                                                    Authorized Officer

ATTEST:

By: ___________________________
    Authorized Officer

<PAGE>

               (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.

                                    JPMORGAN CHASE BANK,
                                        as Trustee

                                    By: __________________________
                                        Authorized Signature

                                    Date of Authentication:_______

<PAGE>

                               (Form for Transfer)

                         COMPLETE AND SIGN THIS FORM FOR
                      REGISTRATION OF TRANSFER OR TRANSFER

     For value received __________ hereby sells, assigns and transfers unto
__________ this Bond and hereby irrevocably constitutes and appoints
____________________ Attorney to register such transfer on the books of
registration in the office of the Registrar with full power of substitution in
the premises.

Dated:________________________      ____________________________________________
NOTE: The signatures on this assignment must correspond with the names as
written on the face of this Bond in every particular, without alteration,
enlargement or any change whatsoever.

________________________________
Signatures must be guaranteed in
accordance with the terms of one
of the nationally recognized
medallion signature guarantee
programs.

                                       A-1<PAGE>

                                                                    EXHIBIT 4.27

                                                                  EXECUTION COPY

================================================================================

                                 LOAN AGREEMENT

                                    Between

                            MARICOPA COUNTY, ARIZONA
                         POLLUTION CONTROL CORPORATION

                                      and

                            EL PASO ELECTRIC COMPANY

                                  relating to

                                  $37,100,000
                            Maricopa County, Arizona
                         Pollution Control Corporation
            Pollution Control Refunding Revenue Bonds, 2002 Series A
                 (El Paso Electric Company, Palo Verde Project)

                           Dated as of August 1, 2002

================================================================================

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
<S>                                                                        <C>
                                    ARTICLE I

                                   DEFINITIONS

Section 1.01  Definitions of Terms ......................................     2
Section 1.02  Interpretation ............................................     7
Section 1.03  Captions and Headings .....................................     7

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

Section 2.01  Representations and Warranties of the Issuer ..............     7
Section 2.02  Representations and Warranties of the Borrower ............     7

                                   ARTICLE III

                                   [RESERVED]

                                   ARTICLE IV

                                   [RESERVED]

                                    ARTICLE V

                     LOAN TO BORROWER; REPAYMENT PROVISIONS

Section 5.01  Loan to Borrower ..........................................     9
Section 5.02  Amounts and Dates for Payment .............................     9
Section 5.03  Payments by Borrower to be Assigned to the Trustee;
               Obligation for Payments Absolute .........................    10
Section 5.04  Payment of Expenses .......................................    10
Section 5.05  Issuer Access to Facilities ...............................    10
Section 5.06  Maintenance of Facilities .................................    10
Section 5.07  Insurance .................................................    11
Section 5.08  Indemnification of Issuer; Statements for Services ........    11
Section 5.09  Notices of Damage .........................................    13
Section 5.10  No Warranty by the Issuer .................................    13
Section 5.11  Liens .....................................................    14
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                          <C>
Section 5.12  Payments of Taxes and Assessments; No Liens or Charges ...      14
Section 5.13  Additional Payments by the Borrower ......... ............      14

                                  ARTICLE VI

                       SPECIAL COVENANTS; CREDIT FACILITY

Section 6.01  [RESERVED] ...............................................      14
Section 6.02  Maintenance of Existence .................................      14
Section 6.03  Agreement as to Ownership and Use of the Project .........      15
Section 6.04  Cooperation in Applications for Permits and Licenses .....      15
Section 6.05  Recordation and Other Instruments ........................      15
Section 6.06  Issuer's Access to Facilities ............................      15
Section 6.07  Tax Covenants ............................................      15
Section 6.08  Credit Facility ..........................................      16
Section 6.09  Annual Statement .........................................      17

                                  ARTICLE VII

                                   [RESERVED]

                                  ARTICLE VIII
                         EVENTS OF DEFAULT AND REMEDIES

Section 8.01  Events of Default ........................................      18
Section 8.02  Force Majeure ............................................      18
Section 8.03  Remedies .................................................      19
Section 8.04  No Remedy Exclusive ......................................      19
Section 8.05  Reimbursement of Attorneys' Fees .........................      20
Section 8.06  Waiver of Breach .........................................      20

                                   ARTICLE IX

                         OPTIONS OF BORROWER TO PREPAY.

Section 9.01  Options of Borrower to Prepay Repayment Installments .....      20
Section 9.02  Exercise of Option .......................................      20
Section 9.03  Mandatory Prepayment of Repayment Installments ...........      21
Section 9.04  Amount of Prepayment .....................................      21
</TABLE>

                                       ii

<PAGE>

<TABLE>
                                   ARTICLE X

                       PURCHASE AND REMARKETING OF BONDS
<S>                                                                          <C>
Section 10.01  Purchase of Bonds ........................................     21
Section 10.02  Optional Purchase of Bonds ...............................     22
Section 10.03  Determination of Interest Rate Periods ...................     22

                                   ARTICLE XI

                                 MISCELLANEOUS

Section 11.01  Term of Agreement .....................................        22
Section 11.02  Notices ...............................................        22
Section 11.03  Parties in Interest ...................................        23
Section 11.04  Extent of Covenants of the Issuer; No Personal
                Liability ............................................        23
Section 11.05  Confirmation of Request by the Borrower ...............        24
Section 11.06  Amendments ............................................        24
Section 11.07  Counterparts ..........................................        24
Section 11.08  Severability ..........................................        24
Section 11.09  Governing Law; Venue. .................................        24
Section 11.10  Statutory Notice. .....................................        24

EXHIBIT A      DESCRIPTION OF THE PROJECT
</TABLE>

                                      iii

<PAGE>

                                 LOAN AGREEMENT

         THIS LOAN AGREEMENT, dated as of August 1, 2002 (this "Agreement"), is
made by and between MARICOPA COUNTY, ARIZONA POLLUTION CONTROL CORPORATION, a
nonprofit corporation designated as a political subdivision of the State of
Arizona, incorporated for and with the approval of the County of Maricopa,
Arizona, existing under the Constitution and laws of the State of Arizona (the
"Issuer"), and EL PASO ELECTRIC COMPANY, a corporation organized and existing
under the laws of the State of Texas (the "Borrower").

                              W I T N E S S E T H :

         WHEREAS, Title 35, Chapter 6, Arizona Revised Statutes (formerly Title
9, Chapter 12, Arizona Revised Statutes, enacted by Chapter 69, Section 2, Laws
of Arizona of 1972), as amended (hereinafter called the "Act"), empowers any
pollution control corporation organized pursuant to Article 1 of the Act to
issue revenue bonds in accordance with Article 2 of 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, 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 corporation and any
agreements made in connection therewith, whenever the board of directors finds
such loans to be in furtherance of the purposes of the corporation; and

         WHEREAS, Chapter 69, Section 1, Laws of Arizona of 1972 declares it to
be the purpose of the Act to authorize the incorporation in the several
municipalities and counties of the State of Arizona (the "State") of
corporations which shall constitute political subdivisions of the State, to
finance the acquisition and installation of, or the construction and leasing of,
properties, machinery and equipment intended to prevent or limit air, water and
other forms of pollution for the purpose of protecting the health and welfare of
the citizens of the State, and to facilitate compliance with existing or future
air, water and other quality standards designed to improve the environment, and
declares that such corporations shall serve a public purpose and perform an
essential governmental function; and

         WHEREAS, in response to an application by four qualified electors of
the County of Maricopa, Arizona (the "County"), a political subdivision of the
State, the Board of Supervisors of said County on December 5, 1983, adopted a
resolution by which it determined that it was wise, expedient, advisable and in
the public interest that said application be approved, approved said
application, and authorized said four electors to proceed with the incorporation
of the Issuer as a pollution control corporation for said County, all in
accordance with Section 35-802 of the Act to issue bonds and to carry out the
other functions and fulfill the purposes of the Issuer; and

         WHEREAS, the Issuer was thereupon organized and incorporated in
accordance with the provisions of the Act, and, on December 5, 1983, the
Articles of Incorporation of the Issuer were filed with the Arizona Corporation
Commission, in accordance with Section 35-809 of the Act; and

         WHEREAS, the Issuer has heretofore issued and sold its $37,100,000
aggregate principal amount of Pollution Control Refunding Revenue Bonds, 1984
Series E (El Paso Electric

<PAGE>

Company Palo Verde Project) (the "Prior Bonds"), the proceeds of which were used
to finance and refinance a portion of the costs of acquisition, construction,
improvement or equipping of the Project; and

         WHEREAS, the Issuer intends to issue its Pollution Control Refunding
Revenue Bonds, 2002 Series A (El Paso Electric Company, Palo Verde Project) (the
"Bonds") pursuant to an Indenture of Trust dated as of August 1, 2002, between
the Issuer and JPMorgan Chase Bank, as Trustee, and to lend the proceeds of the
Bonds to the Borrower for the purpose of providing a portion of the moneys
necessary to refund the outstanding principal amount of the Prior Bonds; and

         WHEREAS, the appropriate agencies exercising jurisdiction over the
Project have certified that the Project, as described in Exhibit A hereto, as
designed, is in furtherance of the purpose of abating or controlling atmospheric
or water pollutants or contaminants resulting from the generation of electricity
at the Plant;

         NOW, THEREFORE, in consideration of the premises and the respective
representations and covenants herein contained, the parties hereto agree as
follows (provided, that in the performance of the agreements of the Issuer
herein contained, any obligation it may thereby incur shall not constitute or
give rise to a pecuniary liability or a charge upon its general credit or
against its taxing powers but shall be payable solely out of the Receipts and
Revenues (as defined in the hereinafter defined Indenture) derived from this
Agreement and the Bonds):

                                    ARTICLE I

                                   DEFINITIONS

         Section 1.01 Definitions of Terms.

         As used herein:

         "Act" shall mean Title 35, Chapter 6, Arizona Revised Statutes
(formerly Title 9, Chapter 12, Arizona Revised Statutes, enacted by Chapter 69,
Section 2, Laws of Arizona of 1972), and all acts supplemental thereto or
amendatory thereof.

         "Administration Expenses" shall mean the reasonable expenses incurred
by the Issuer with respect to this Agreement, the Indenture and any transaction
or event contemplated by this Agreement or the Indenture, including, without
limitation, the reasonable fees and disbursements of counsel and out-of-pocket
expenses of the Issuer incurred in connection with the authorization, issuance
and sale of the Bonds and the compensation and reimbursement of reasonable fees,
expenses and advances payable to the Trustee, the Registrar, the Paying Agent,
the Tender Agent, the Bank and the Remarketing Agent under the Indenture.

         "Agreement" shall mean this Loan Agreement dated as of August 1, 2002
and any and all modifications, alterations, amendments and supplements hereto.

                                       2

<PAGE>

         "Alternate Credit Support" shall mean any letter of credit, credit
facility, insurance policy, guarantee or other credit support agreement or
security mechanism provided by the Borrower in accordance with Section 6.08
hereof and any extension thereof.

         "Authorized Borrower Representative" shall mean each person at the time
designated to act on behalf of the Borrower by written certificate furnished to
the Issuer and the Trustee containing the specimen signature of such person and
signed on behalf of the Borrower.

         "Bank" shall mean the issuer of a Letter of Credit, if any, delivered
in conjunction with the Bonds, and the issuer of any subsequently issued Credit
Facility so long as such other Credit Facility shall be in effect, and in its
capacity as such issuer, its successors in such capacity and their assigns.

         "Bond" or "Bonds" shall mean the bonds authorized to be issued under
the Indenture.

         "Bond Counsel" shall mean any firm of nationally recognized bond
counsel experienced in the financing of pollution control facilities and
acceptable to the Issuer, the Remarketing Agent, the Trustee and the Borrower.

         "Bond Fund" shall mean the fund created by Section 5.01 of the
Indenture.

         "Borrower" shall mean El Paso Electric Company, a corporation formed
and existing under the laws of the State of Texas, its successors and their
assigns and any transferee entity to the extent permitted by Section 6.02
hereof.

         "Borrower Indentures" shall mean (i) that certain Indenture of
Mortgage, dated as of October 1, 1946, between the Borrower and State Street
Bank and Trust Company, as trustee, as supplemented and modified by the
indentures supplemental thereto, (ii) that certain Indenture of Mortgage, dated
as of June 1, 1981, from the Borrower to IBJ Schroder Bank & Trust Company, as
successor trustee, as the same has heretofore been supplemented and may be
hereafter supplemented and modified or (iii) any indenture or mortgage made by
the Borrower in accordance with the Plan to secure substantially the same
obligations as are currently secured by the Borrower Indentures, and subjecting
thereto substantially the same property, and subject to substantially the same
prior liens and encumbrances, and having substantially similar provisions for
the issuance of additional debt thereunder, as the Borrower Indentures.

         "Claim" shall mean liabilities, obligations, losses, damages, taxes
(other than taxes on income), penalties, claims (including, without limitation,
claims involving liability in tort, whether strict or otherwise), actions,
suits, judgments, costs, interest, expenses and disbursements, whether or not
any of the foregoing shall be founded or unfounded, contingent or otherwise
(including, without limitation, legal fees and expenses and costs of
investigation) of any kind and nature whatsoever without any limitation as to
amount.

         "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time. Each reference herein to a section of the Code shall be deemed to
include the United States Treasury Regulations adopted under the Code, as the
same may be in effect from time to time, unless the context clearly requires
otherwise.

                                       3

<PAGE>

         "Counsel" shall mean an attorney at law selected by the Borrower (who
may be counsel to either or both of the Issuer and the Borrower) and acceptable
to the Trustee or, if not selected by the Borrower within a reasonable time
following any request therefor, by the Issuer and acceptable to the Trustee.

         "County" shall mean Maricopa, Arizona.

         "Credit Facility" shall mean, collectively, a Letter of Credit, if any,
and any extensions thereof, and, upon the issuance and delivery of any Alternate
Credit Support in accordance with Section 6.08 hereof, "Credit Facility" shall
mean such Alternate Credit Support.

         "Environmental Law" shall mean any federal, state or local law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
relating to the environment, health or safety or to the release or threatened
release of any materials into the environment, including, without limitation,
the Clean Air Act, as amended, the Clean Water Act of 1977, as amended, the
comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, the Hazardous Materials Transportation Act, as amended, the Toxic
Substance Control Act, as amended, and the Resource Conservation and Recovery
Act of 1976, as amended.

         "Facilities" or "Project" shall mean the pollution control systems and
facilities presently existing, under construction and to be constructed at the
Plant, which are described in Exhibit A hereto, as from time to time revised,
changed, amended or modified and related improvements and any substitutions
therefor.

         "Hazardous Materials" shall mean all materials that are, or become,
subject to any Environmental Law, including, without limitation, materials
listed in 49 I.E. (S)172.101, materials defined as hazardous pursuant to Section
101(14) of the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, flammable, explosive or radioactive materials,
hazardous or toxic wastes or substances, petroleum or petroleum distillates,
PCB's or asbestos or urea formaldehyde containing materials.

         "Issuance Expenses" shall mean any and all expenses incurred in
connection with the issuance of the Bonds including, but not limited to, any (a)
underwriters' compensation; (b) counsel fees; (c) financing advisor fees; (d)
rating agency fees; (e) trustee fees; (f) paying agent and certifying and
authenticating agent fees; (g) accounting fees; (h) printing costs; (i) costs
incurred in connection with the required public approval process; (j) costs of
engineering and feasibility studies necessary to the issuance of the Bonds (as
opposed to such studies relating to completion of the Project); and (k) the
issuance fee charged by, and expenses and disbursements of, the Issuer.
Notwithstanding anything to the contrary herein, "Issuance Expenses" shall not
include any bond insurance premiums and certain letter of credit fees that would
be treated as interest expenses under the arbitrage restrictions of the Code.

         "Issuer" shall mean Maricopa County, Arizona Pollution Control
Corporation, an Arizona nonprofit corporation designated as a political
subdivision existing under the laws of the State of Arizona, incorporated for
and with the approval of the County, pursuant to the provisions of the
Constitution of the State of Arizona and the Act, and its successors and
assigns.

                                       4

<PAGE>

         "Letter of Credit" shall mean an irrevocable, direct-pay letter of
credit, if any, issued by the Bank and delivered to the Trustee in accordance
with Section 6.08 hereof and any extension thereof.

         "Moody's" shall mean Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, its successors
and their assigns, and, if such corporation shall be dissolved or liquidated or
shall no longer perform the functions of a securities rating agency, "Moody's"
shall be deemed to refer to any other nationally-recognized securities
rating-agency designated by the Borrower, with the approval of the Remarketing
Agent and the Bank, by notice to the Trustee, the Tender Agent and the Issuer.

         "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;

               (i)    those cancelled at or prior to such date or delivered to
         or held by the Trustee at or prior to such date for cancellation;

               (ii)   those deemed to have been paid in accordance with Article
         IX of the Indenture;

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

               (iv)   Undelivered Bonds.

         "Owner" shall mean the person or entity in whose name any Bond is
registered upon the registration books maintained pursuant to Section 2.04 of
the Indenture.

         "Permitted Encumbrances" shall mean and include (a) liens for taxes,
assessments and other governmental charges not delinquent or which can be paid
without penalty; (b) unfiled, inchoate mechanics' and materialmen's liens for
construction work in progress; (c) workmen's, repairmen's, warehousemen's and
carriers' liens and other similar liens, if any, arising in the ordinary course
of business; (d) all the following, if they do not individually or in the
aggregate materially impair the use of the Facilities or materially detract from
the value thereof to the Borrower, viz. any easements, restrictions, mineral,
oil, gas and mining rights and reservations, zoning laws and defects in title or
other encumbrances to which the Facilities may be subject because of the
installation thereof at the Plant; (e) any lien for the satisfaction and
discharge of which a sum of money or surety bond deemed adequate by the Trustee
is on deposit with the Trustee; (f) the rights of the Issuer under this
Agreement or any other sale agreement or lease agreement between the Issuer and
the Borrower relating to the issuance of bonds under the Act; and (g) the lien
of the Borrower Indentures and the permitted encumbrances and other prior liens
referred to therein.

         "Plant" shall mean the Palo Verde Nuclear Generating Station in
Maricopa County, Arizona, at which the Project is located.

                                       5

<PAGE>

         "Prior Bonds" shall mean the Maricopa County, Arizona Pollution Control
Corporation Pollution Control Refunding Revenue Bonds, 1984 Series E (El Paso
Electric Company, Palo Verde Project).

         "Reimbursement Agreement" shall mean (i) any Reimbursement Agreement,
made by the Borrower in favor of the Bank, relating to payments for moneys drawn
under the Letter of Credit, if any, and any amendments, modifications and
supplements thereto, and (ii) from and after the issuance of an Alternate Credit
Support, any letter of credit reimbursement agreement or other arrangement
between the Borrower and the issuer of any Alternate Credit Support, and any
amendments, modifications and supplements thereto.

         "Remarketing Agent" shall mean any remarketing agent appointed in
accordance with Section 14.01(a) of the Indenture.

         "Repayment Installment" shall mean any amount that the Borrower is
required to pay to the Trustee pursuant to Section 5.02 hereof as a repayment of
the loan made by the Issuer under this Agreement.

         "Representation and Indemnity Agreement" shall mean the Representation
and Indemnity Agreement dated as of July 23, 2002 among the Issuer, the Borrower
and Salomon Smith Barney Inc.

         "S&P" shall mean Standard & Poor's Ratings Group (a Division of
McGraw-Hill Inc.), a corporation organized and existing under the laws of the
State of New York, its successors and their assigns, and, if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
nationally-recognized securities rating agency designated by the Borrower, with
the approval of the Remarketing Agent and the Bank, by notice to the Trustee,
the Tender Agent and the Issuer.

         "State" shall mean the State of Arizona.

         "Tax Exempt" shall mean, with respect to interest on any obligations of
a state or local government, including the Bonds, that such interest is excluded
from the gross income of the holders thereof (other than any holder who is a
"substantial user" of facilities financed with such obligations or a "related
person" within the meaning of Section 147(a) of the Code) for federal income tax
purposes, whether or not such interest is includable as an item of tax
preference or otherwise includable directly or indirectly for purposes of
calculating other tax liabilities, including any alternative minimum tax or
environmental tax under the Code.

         "Tender Agent" shall mean any tender agent appointed in accordance with
Section 14.01(b) of the Indenture.

         "Trustee" shall mean JPMorgan Chase Bank, as trustee under the
Indenture, and its successor or successors in accordance with the Indenture.
"Principal Office" of the Trustee shall mean the principal office of the Trustee
in Texas at which at any particular time its corporate trust business shall be
administered, which office at the effective date of the Indenture is 600 Travis,
Suite 1150, Houston, TX 77002, Attention: Institutional Trust Services; except
that with respect to the presentation of Bonds for payment or for registration
of transfer, exchange or

                                       6

<PAGE>

tender, such term shall mean the office or agency of the Trustee at 2001 Bryan
Street, 9/th/ Floor, Dallas, Texas 75202 Attention: Registered Bond Events.

         Section 1.02 Interpretation. Unless the context indicates otherwise,
words importing the singular number include the plural number, and vice versa:
the terms "hereof", "hereby", "herein", "hereto", "hereunder" and similar terms
refer to this Agreement: and the term "hereafter" means after, and the term
"heretofore" means before, the date of delivery of the Bonds. Words of any
gender include the correlative words of the other genders, unless the sense
indicates otherwise.

         Section 1.03 Captions and Headings. The captions and headings in this
Agreement are solely for convenience of reference and in no way define, limit or
describe the scope or intent of any Articles, Sections, subsections, paragraphs,
subparagraphs or clauses hereof.

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

         Section 2.01 Representations and Warranties of the Issuer. The Issuer
makes the following representations and warranties as the basis for its
undertakings herein contained:

               (a)  The Issuer is an Arizona nonprofit corporation designated as
a political subdivision under the laws of the State, incorporated pursuant to
the Act for and with the approval of the County, created and existing under the
Constitution and laws of the State;

               (b)  The Issuer has the power to enter into the transactions
contemplated by this Agreement and the Indenture and to carry out its
obligations hereunder and thereunder;

               (c)  The Issuer has the power to enter into this Agreement and by
proper corporate action has duly authorized the execution and delivery hereof;
and

               (d)  The execution and delivery of this Agreement and the
Indenture and compliance with the provisions hereof and thereof will not
conflict with, or constitute on the part of the Issuer a breach of or a default
under, any existing law, court or administrative regulation, decree or order to
which the Issuer is subject or any agreement, ordinance, indenture, mortgage,
lease or other instrument by which the Issuer is or may be bound.

         Section 2.02 Representations and Warranties of the Borrower. The
Borrower makes the following representations and warranties as the basis for the
undertakings on the part of the Issuer herein contained:

               (a)  (i) The Borrower is a corporation duly incorporated under
the laws of the State of Texas and is in good standing under the laws of the
State of Texas, 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, (ii) the
Borrower is duly qualified to hold property and transact business as a foreign
corporation and is in good standing under the laws of the State of Arizona,
(iii) all of the proceeds of the Bonds will be used to redeem and refund the
Prior Bonds, (iv) prior to the

                                       7

<PAGE>

issuance of the Bonds, the Federal Energy Regulatory Commission will have
approved all matters relating to the Borrower'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
Borrower's participation therein except such as have been or will have been
obtained prior to the issuance of the Bonds or such, if any, as may be required
under state securities or Blue Sky laws, and (v) the execution and delivery of
this Agreement by the Borrower do not, and consummation of the transactions
contemplated hereby and fulfillment of the terms hereof 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
Borrower is a party, or the Restated Articles of Incorporation or Bylaws of the
Borrower, or any order, rule or regulation applicable to the Borrower of any
court or of any Federal or state regulatory body or administrative agency or
other governmental body having jurisdiction over the Borrower or over any of its
properties, or any statute of any jurisdiction applicable to the Borrower other
than breaches or defaults that individually or in the aggregate are not expected
to have a material adverse effect on the Borrower.

               (b)  The Facilities meet applicable Federal, state and local
requirements for the control of pollution now in effect and are used for the
reduction, abatement and prevention of pollution;

               (c)  The Borrower does not presently expect that the description
of the Facilities contained in Exhibit A hereto will be revised;

               (d)  To the extent necessary to preserve the security for the
Bonds, the validity of the Bonds under the Act and the Tax-Exempt status of
interest on the Bonds, all material certificates, approvals, permits and
authorizations of agencies of applicable local governmental agencies, the State
and the federal government have been obtained with respect to the construction
of the Project and, pursuant to such certificates, approvals, permits and
authorizations, the Project has been constructed and is in operation.

               (e)  To the best knowledge of the Borrower, no member, officer or
other official of the Issuer has any interest whatsoever in the Borrower or in
the transactions contemplated by this Agreement.

                                       8

<PAGE>

                                  ARTICLE III

                                   [RESERVED]

                                   ARTICLE IV

                                   [RESERVED]

                                   ARTICLE V

                     LOAN TO BORROWER; REPAYMENT PROVISIONS

         Section 5.01 Loan to Borrower. The Issuer covenants and agrees, upon
the terms and conditions in this Agreement, to make a loan to the Borrower for
the purpose of refunding the Prior Bonds. Pursuant to said covenant and
agreement, the Issuer will issue the Bonds upon the terms and conditions
contained in this Agreement and the Indenture. The Issuer and the Borrower agree
that the application of the proceeds of sale of the Bonds to refund and redeem
the Prior Bonds will be deemed to be and treated for all purposes as a loan to
the Borrower of an amount equal to the aggregate principal amount of the Bonds.
The Borrower covenants and agrees to pay to the trustee for the Prior Bonds an
amount which, when added to the amounts transferred to such trustee pursuant to
Section 3.02 of the Indenture, will be sufficient to pay, on or before August 1,
2002, the redemption price of the Prior Bonds and all other amounts due under
the indenture pursuant to which such Prior Bonds were issued all in accordance
with the terms of such indenture.

         Section 5.02 Amounts and Dates for Payment.

               (a)  With respect to the Bonds, the Borrower covenants and agrees
to pay to the Trustee as a Repayment Installment on or before each date provided
in the Indenture, an amount equal to the aggregate principal, premium, if any,
and interest due on the Bonds, whether at maturity or by reason of redemption,
or otherwise. The Borrower shall, and hereby agrees to, pay the Repayment
Installment by delivery or causing delivery of such further installments, in
immediately available funds, necessary on the dates and in the amounts and in
the manner in the Indenture as may be necessary to enable the Issuer to cause
payment to be made to the Trustee of principal of and premium, if any, and
interest on the Bonds, whether at maturity, upon redemption, or otherwise,
provided that any amount credited under the Indenture against any cash payment
required to be made by the Issuer thereunder shall be credited against the
corresponding cash payment required to be made by the Borrower hereunder

               (b)  The Borrower shall, and hereby agrees to, pay in addition to
the Repayment Installment an amount equal to the aggregate of all other payments
to be made out of the Bond Fund, payment thereof to be made not later than the
principal or interest payment date next following any such payment out of the
Bond Fund but in any event in time to prevent any failure to pay when due the
principal of, premium, if any, and interest on any of the Bonds.

               (c)  In the event the Borrower shall fail to make any of the
payments required in this Section 5.02, the item or installment so in default
shall continue as an obligation of the

                                       9

<PAGE>

Borrower until the amount in default shall have been fully paid. Draws by the
Trustee under the Credit Facility to pay the principal of, premium, if any, or
interest on the Bonds shall be deemed to satisfy the Borrower's obligation to
make purchase price payments to the extent of such draws.

            (d) The obligation of the Borrower to make the payments described in
subsection (a) of this Section may be accelerated or prepaid in accordance with
the provisions of this Agreement, notwithstanding the provisions of this
Section.

         Section 5.03 Payments by Borrower to be Assigned to the Trustee;
Obligation for Payments Absolute.

         It is understood and agreed that all payments under Section 5.02 of
this Agreement are, by the Indenture, to be pledged by the Issuer to the
Trustee, and that all rights and interest of the Issuer under this Agreement,
except for the Issuer's rights under Sections 5.04, 5.08 and 8.05 of this
Agreement and any rights of the Issuer to receive notices, certificates,
requests, requisitions, directions and other communications hereunder, are to be
pledged and assigned to the Trustee. The Borrower assents to such pledge and
assignment and agrees that the obligation of the Borrower to make the payments
under Section 5.02 hereof shall be absolute, irrevocable and unconditional and
shall not be subject to any defense (other than payment) or any right of
set-off, counterclaim or recoupment arising out of any breach under this
Agreement, the Reimbursement Agreement, the Indenture, the Credit Facility or
otherwise by the Issuer, the Trustee, the Tender Agent, the Remarketing Agent,
the Bank or any other party, or out of any obligation or liability at any time
owing to the Borrower by the Issuer, the Trustee, the Tender Agent, the
Remarketing Agent, the Bank or any other party. The Issuer directs the Borrower,
and the Borrower agrees, to pay to the Trustee at its Corporate Trust Office all
payments pursuant to Section 5.02 of this Agreement.

         Section 5.04 Payment of Expenses. The Borrower agrees to pay all
compensation and reasonable fees and expenses of, and to reimburse for the
expenses and advances incurred by each of the Trustee, the Registrar, the
Remarketing Agent, the Paying Agent and the Tender Agent under the Indenture. So
long as any Bonds are Outstanding, the Borrower will pay to the Issuer
semiannually, on a date to be agreed upon, or within 30 days of receipt of a
statement therefor submitted to the Borrower pursuant to Section 5.08 hereof,
the amount of any other Administration Expenses not theretofore provided for
which have accrued and become payable.

         Section 5.05 Issuer Access to Facilities. The Borrower agrees that the
Issuer shall have the right, upon appropriate prior notice to the Borrower, to
have reasonable access to the Facilities during normal business hours for the
purpose of making examinations and inspections of the same.

         Section 5.06 Maintenance of Facilities. So long as any Bonds are
Outstanding, the Borrower will maintain, preserve and keep the Facilities or to
cause such Facilities to be maintained, preserved and kept in good repair,
working order or condition and from time to time to make or cause to be made all
necessary and proper repairs, replacements and renewals; provided, however, that
the Borrower will have no obligation to maintain, preserve, keep, repair,
replace or renew any item or portion of such Facilities (a) the maintenance,
preservation,

                                       10

<PAGE>

keeping, repair, replacement or renewal of which becomes uneconomic to the
Borrower because of damage or destruction by a cause not within the control of
the Borrower, or obsolescence (including economic obsolescence) or change in
governmental standards and regulations, or the termination by the Borrower of
the operation of the generating facilities to which the portion of such
Facilities is an adjunct, and (b) with respect to which the Borrower has
furnished to the Issuer and the Trustee a certificate executed by an Authorized
Borrower Representative that the maintenance, preservation, keeping, repair,
replacement or renewal of such portion of such Facilities is being discontinued
for one of the foregoing reasons, which shall be stated therein.

     The Borrower shall have the privilege at its own expense of remodeling such
Facilities or making substitutions, modifications and improvements to such
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 such
Facilities.

     Section 5.07 Insurance. So long as any Bonds are Outstanding and the
Borrower, itself or through its agents, operates the Facilities, the Borrower
shall maintain or cause to be maintained, through a program of self-insurance or
otherwise, such fire, casualty, public liability and other insurance with
respect to the Facilities owned or leased by the Borrower as is customarily
carried by electric utility companies with respect to similar facilities.

     Section 5.08 Indemnification of Issuer; Statements for Services. The
Borrower agrees, whether or not any of the transactions contemplated hereby
shall be consummated and whether or not this Agreement, the Indenture, the
Credit Facility or any other document relating to the Bonds shall have expired
or been terminated to release, to assume liability for, and agrees to indemnify
and hold harmless, on an after-tax basis, the Issuer, the Trustee, the Paying
Agent and the Registrar and each of the officers, officials, directors,
employees, staff members, agents, shareholders and partners of each of the
Trustee, the Paying Agent and the Registrar (each an "Indemnified Party" and
collectively, the "Indemnified Parties") from and against, any and all Claims
that are imposed on, incurred by or asserted against any Indemnified Party
(whether or not because of an act or omission by such Indemnified Party and
whether or not such Indemnified Party shall also be indemnified by another
person), in whole or in part, as a result of, caused by, arising out of or in
any way relating to:

             (a) any injury to or death of any person or damage to property in
or upon the Facilities or growing out of or connected with the use, non-use,
condition or occupancy of the Facilities or any part thereof;

             (b) violation of any agreement or condition of this Agreement;

             (c) violation by the Borrower of any contract, agreement or
restriction relating to the Facilities;

             (d) violation of any law, ordinance or regulation affecting the
Facilities or a part thereof or the ownership, occupancy or use thereof;

             (e) any statement or information contained in the Indenture, this
Agreement, any official statement, any certificate or any other documents
relating to the Bonds and the

                                       11

<PAGE>

proceedings relating to their issuance and sale, furnished by the Borrower to
the Issuer which is misleading, untrue or incorrect in any material respect or
use thereof;

             (f) any investigation, litigation, proceeding, cleanup, audit,
violation or other matter, related to, of, or involving the application or
compliance with any Environmental Law, the protection of the environment or the
release by the Borrower of any Hazardous Material;

             (g) the presence on or under, or the escape, seepage, leakage,
spillage, discharge, emission, discharging or releases from, any property owned
or operated by the Borrower of any Hazardous Material, whether caused by, or
within the control of, the Borrower; and

             (h) the administration of the trust created by the Indenture, the
exercise of any rights under the Indenture and the performance of any remedial
measures permitted by the Indenture, except for (i) a Claim against an
Indemnified Party (other than the Issuer) that arises by reason of such
Indemnified Party's gross negligence or willful misconduct or, in the case of
clause (h) above, negligence or willful misconduct; provided, however, if and to
the extent the foregoing agreement to indemnify is unenforceable for any reason,
the Borrower agrees to make the maximum contribution to the payment and
satisfaction of each of the agreed indemnities that is permissible under
applicable law.

     In addition, the Borrower will indemnify and hold the Issuer, the Trustee,
the Paying Agent, the Registrar, the Trustee's, the Paying Agent's and the
Registrar's officers, directors, employees and agents free and harmless from any
loss, claim, damage, tax, penalty, liability (including but not limited to
liability for any patent infringement), disbursement, cause of action, suit,
demand, judgment, litigation expenses, attorneys' fees and expenses or court
costs arising out of, or in any way relating to (a) any errors or omissions of
any nature whatsoever contained in any legal proceedings or other official
representation or inducement made by the Issuer pertaining to the Bonds, (b) any
fraud or misrepresentations or omissions contained in the proceedings of the
Issuer relating to the issuance of the Bonds or pertaining to the financial
condition of the Borrower which, if known to a purchaser or holder of the Bonds,
might be considered a material factor in a decision whether or not to buy the
Bonds, and (c) the execution or performance of this Agreement, the issuance or
sale of the Bonds and actions taken under the Indenture or any other cause
whatsoever pertaining to the Facilities and the approval under the Act.

     Promptly after receipt by an Indemnified Party under this Section 5.08 of
written notice of the existence of a claim in respect of which indemnity
hereunder may be sought or of the commencement of any action against the
Indemnified Party in respect of which indemnity hereunder may be sought, the
Indemnified Party shall notify the Borrower in writing of the existence of such
Claim or commencement of such action. In case any such action shall be brought
against an Indemnified Party under this Section 5.08, the Indemnified Party
shall notify the Borrower of the commencement thereof and the Borrower shall be
entitled to participate in and, to the extent that it may wish, to assume the
defense thereof, with counsel satisfactory to the Indemnified Party; provided,
however, that if the Indemnified Party shall have been advised in an opinion of
counsel to the Indemnified Party that there may be legal defenses available to
it

                                       12

<PAGE>

which are adverse to or in conflict with those available to the Borrower or
other Indemnified Parties, which in the opinion of counsel to the Indemnified
Party, should be handled by separate counsel, the Borrower shall not have the
right to assume the defense of such action on behalf of the Indemnified Party,
but shall be responsible for the reasonable fees and expenses of the Indemnified
Party in conducting its defense; and provided, further, that if the Borrower
shall not have assumed the defense of such action, and shall not have employed
counsel therefor satisfactory to the Indemnified Party within a reasonable time
after notice of commencement of such action, such reasonable fees and expenses
incurred by the Indemnified Party in conducting its own defense shall be borne
by the Borrower.

     The Borrower's responsibility for the reasonable fees and expenses of any
Indemnified Party in conducting its defense as provided in the preceding
paragraph shall commence from the time the Claim is known of by the Borrower,
and such responsibility shall exist and continue regardless of the merits of the
Claim.

     In addition, the Borrower agrees that if it initiates any action, suit or
other proceeding with respect to any claim, demand or request for relief,
whether judicial or administrative, in which the Issuer, the Trustee, the
Registrar or the Paying Agent is named or joined as a party, the Borrower will
pay and reimburse to such party the full amount of all reasonable fees and
expenses incurred by such party with respect to such party's defense of or
participation in such action, suit or other proceeding.

     The Issuer may submit to the Borrower periodic statements, not more
frequently than monthly, for the reasonable value of services of any Issuer
employees utilized, and for the full amount of any Issuer expenses incurred by
the Issuer in connection with the performance or attainment by the Issuer of its
obligations and rights under the Indenture, the Bonds or this Agreement, and the
Borrower shall make payment to the Issuer of the full amount of each such
statement within 30 days after the Borrower receives such statement; provided
that the Borrower within such 30-day period may in writing and in good faith
specifically protest all or any portion of the amounts included in such
statement and in such event the Borrower shall not be obligated to make payment
to the Issuer of the amount which has been protested in such manner until ten
days after such protest shall have been resolved either by agreement between the
Issuer and the Borrower or by an appropriate tribunal.

     Under this Section 5.08, the Borrower shall also be deemed to release,
indemnify and agree to hold harmless each employee, official or officer of the
Issuer to the same extent as the Issuer.

     Section 5.09 Notices of Damage. After the occurrence of any material damage
or loss to the Facilities, if any Bonds are then Outstanding, the Borrower shall
notify the Issuer and the Trustee as to the nature and extent of such damage or
loss and whether it is practicable and desirable to rebuild, repair, or restore
such damage or loss.

     Section 5.10 No Warranty by the Issuer.The Issuer makes no warranty, either
express or implied, as to the Project or that it will be suitable for the
purposes of the Borrower or needs of the Borrower.

                                       13

<PAGE>

     Section 5.11 Liens. The Borrower hereby agrees not to create any lien upon
the Bond Fund or upon the Receipts and Revenues (as defined in the Indenture)
other than the lien created in the Indenture. The Borrower hereby agrees that it
shall not have any interest in the Bond Fund or the moneys or Investment
Securities (as defined in the Indenture) therein.

     Section 5.12 Payments of Taxes and Assessments; No Liens or Charges. The
Borrower will: (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 Project or upon any
part of either or upon any installment payments hereunder when the same shall
become due and (b) pay or cause to be discharged or make adequate provision to
satisfy and discharge, within sixty (60) days after the same shall accrue, any
lien or charge upon any installment payment hereunder and all lawful claims or
demands for labor, materials, supplies or other charges which, if unpaid, might
be or become a lien upon any installment payment hereunder, except Permitted
Encumbrances; provided with respect to both clause (a) and clause (b) of this
Section 5.12 that the Borrower may in good faith contest any such tax,
assessment, lien, charge, claim or demand in appropriate legal proceedings if
the Borrower shall notify the Issuer and the Trustee of its intention so to do
at or prior to the time of initiating such contest, and in such event may permit
the items so contested to remain unpaid, undischarged and unsatisfied during the
period of such contest and any appeal therefrom, unless the Issuer or the
Trustee shall notify the Borrower in writing that, in the opinion of Counsel, by
nonpayment of any such items the lien of the Indenture as to the payments of the
Repayment Installments will be materially endangered, in which event the
Borrower shall promptly pay and cause to be satisfied and discharged all such
unpaid items. The Issuer will cooperate fully with the Borrower in any such
contest.

     Section 5.13 Additional Payments by the Borrower. The Borrower will pay, or
cause be paid, in addition to the payments provided for in Section 5.02(a)
hereof, all of the expenses of operation of the portions of the Project
including, without limitation, the cost of all necessary and proper repairs,
replacements and renewals made pursuant to Section 5.06 hereof and premiums for
insurance pursuant to Section 5.07 hereof.

                                   ARTICLE VI

                       SPECIAL COVENANTS; CREDIT FACILITY

     Section 6.01 [RESERVED].

     Section 6.02 Maintenance of Existence. The Borrower covenants that it will
maintain its corporate existence, will not dissolve or otherwise dispose of all
or substantially all its assets and will not consolidate with or merge into
another corporation; provided, however, that the Borrower may consolidate with
or merge with or into, or sell or otherwise transfer all or substantially all of
its assets (and may thereafter dissolve), to another corporation, incorporated
under the laws of the United States, one of the states thereof or the District
of Columbia, provided, in the event the Borrower is not the surviving, resulting
or transferee corporation, as the case may be, such corporation prior to such
merger, consolidation, sale or transfer assumes,

                                       14

<PAGE>

by delivery to the Trustee of an instrument in writing satisfactory in form and
substance to the Trustee, all the obligations of the Borrower herein.

         If consolidation, merger or sale or other transfer is made as permitted
by this Section, the provisions of this Section 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. The Borrower
shall notify the Trustee of its affiliates from time to time and of the filing
of a petition in bankruptcy by or on behalf of any of itself or its affiliates
from time to time.

         Section 6.03 Agreement as to Ownership and Use of the Project. The
Issuer and the Borrower agree that title to the Project shall be in and remain
in the Borrower, and that the Project shall be the sole property of the Borrower
in which the Issuer shall have no interest. Notwithstanding the provisions of
this Section 6.03, the Borrower in its sole discretion and business judgment may
choose to cease operation of the Project or transfer the Project to another
entity which may cease such operation, and in such circumstances the covenants
contained in this Section 6.03 shall no longer apply.

         Section 6.04 Cooperation in Applications for Permits and Licenses. In
the event it may be necessary for the proper performance of this Agreement on
the part of the Issuer or the Borrower 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 or on behalf of the Borrower or the Issuer, the
Borrower and the Issuer each agree, upon the request of either, to execute such
application or applications.

         Section 6.05 Recordation and Other Instruments. The Borrower shall
cause such security agreements, financing statements and all supplements thereto
and other instruments as may be required from time to time to be kept, to be
recorded and to be filed in such manner and in such places as may be required by
law in order to fully preserve, protect and perfect the security of the holders
of the Bonds and the rights of the Trustee and to perfect the security interest
created by the Indenture.

         Section 6.06 Issuer's Access to Facilities. The Borrower agrees that
the Issuer and the Trustee shall have the right, upon appropriate prior notice
to the Borrower, to have reasonable access to the Facilities owned or leased by
the Borrower during normal business hours for the purpose of making examinations
and inspections of the same; provided, however, that the Borrower reserves the
right to restrict access to any of its generating facilities in accordance with
reasonably adopted procedures relating to safety and security.

         Section 6.07 Tax Covenants. The Borrower covenants that it will not
take any action or fail to take any action reasonably within its control which
would, under the Code, cause the interest payable on the Bonds to be includable
in gross income of the holders thereof for Federal income tax purposes (other
than a "substantial user" of the Facilities or a "related person" as those terms
are used in Section 147(a) of the Code).

         The Borrower covenants that it will pay to the United States of
America, on behalf of the Issuer, at or before the times required by or under
Section 148(f) of the Code, the amounts required to cause to be met with respect
to the Bonds the rebate requirement of said Section and

                                       15

<PAGE>

such rules and regulations applicable to the Bonds. The Borrower covenants that
in directing the investment of the gross proceeds of the Bonds it will comply
with the applicable requirements of Section 148 of the Code. The Borrower
covenants that it will maintain on behalf of the Issuer such records and file
such reports, and file copies thereof with the Issuer and, if requested by the
Trustee, with the Trustee, as may be necessary to be maintained to demonstrate
compliance with this paragraph.

         Section 6.08 Credit Facility.

             (a) In order to provide credit support for the payment of all or a
portion of the obligations of the Borrower under Section 5.02 or 10.01(a)
hereof, or both, the Borrower may, but shall not be obligated to, provide a
Credit Facility at any time, and from time to time. Subject to the provisions of
subsections (c) and (d) of this Section 6.08, the Borrower may at any time, and
from time to time, terminate, or cause or allow to be terminated or to expire
any such Credit Facility. The Borrower hereby authorizes and directs the Trustee
to draw moneys under the Credit Facility, if any, in accordance with the terms
thereof and of the Indenture.

             (b) Any Credit Facility, at the option of the Borrower, may provide
that drawings may be made thereunder to pay to the Trustee, in accordance with
the terms thereof, (i) an amount equal to (A) the principal of the Bonds when
due upon maturity, redemption or acceleration and (B) the portion of the
purchase price of Bonds purchased pursuant to Section 14.03(b) of the Indenture
equal to the principal amount thereof; (ii) an amount equal to a specified
number of days' interest, computed at the Maximum Interest Rate (as defined in
the Indenture), on the Bonds to pay (A) accrued and unpaid interest on the Bonds
and (B) the portion of the purchase price of Bonds purchased pursuant to Section
14.03(b) of the Indenture equal to the accrued interest thereon; (iii) any part
of the portion of the purchase price of Bonds purchased pursuant to Section
14.03(b) of the Indenture corresponding to redemption premium on the Bonds; and,
(iv) an amount to pay redemption premium, if any, on the Bonds which may be
payable upon the redemption thereof. The Credit Facility shall be reduced to the
extent of any drawings thereunder and reinstated in accordance with the terms
thereof.

         The Borrower may, at its election, provide for one or more extensions
of any Credit Facility in accordance with the terms of the Reimbursement
Agreement in respect thereof.

             (c) On or prior to the 35th day preceding the mandatory purchase
date occurring pursuant to Section 4.08(c) of the Indenture, the Borrower shall
deliver to the Trustee, the Tender Agent, the Remarketing Agent and the Bank:

                 (i)   a notice which (A) states the effective date of
         expiration or termination of the existing Credit Facility, (B)
         describes any substitute Credit Facility which may be provided in lieu
         thereof, and (C) directs the Trustee, after taking such actions
         thereunder as are required to be taken to provide moneys due under the
         Indenture in respect of the Bonds or the purchase thereof, to surrender
         the Credit Facility to expire or to be terminated to the obligor
         thereon on the effective date of the substitute Credit Facility to be
         provided in lieu of the Credit Facility to expire or to be terminated
         or, if no such Credit Facility is to be so provided, on the effective
         date of such expiration or termination; and

                                       16

<PAGE>

                 (ii) written evidence from Moody's, if the Bonds are then rated
         by Moody's, and S&P, if the Bonds are then rated by S&P, of the action
         that such rating agency will take with respect to the rating assigned
         to the Bonds on such expiration or termination and delivery of a new
         Credit Facility, if any.

             (d) On or prior to the 35th day preceding the effective date of
expiration or termination of any Credit Facility and the substitution of another
Credit Facility that does not result in a downgrading or withdrawal of any
rating assigned to the Bonds, the Borrower shall deliver to the Trustee, the
Tender Agent, the Remarketing Agent and the Bank:

                 (i)  a notice which (A) states the effective date of expiration
         or termination of the existing Credit Facility, (B) describes the
         Credit Facility which is to be provided in lieu thereof, and (C)
         directs the Trustee to surrender the Credit Facility to expire or to be
         terminated to the obligor thereon on the effective date of the
         substitute Credit Facility to be provided in lieu of the Credit
         Facility to expire or to be terminated; and

                 (ii) written evidence from Moody's, if the Bonds are then rated
         by Moody's, and S&P, if the Bonds are then rated by S&P, that such
         expiration or termination and delivery of a new Credit Facility will
         not result in a downgrading or withdrawal of the rating assigned to the
         Bonds by such rating agency.

             (e) In connection with any termination of a Credit Facility and/or
the provision of a new Credit Facility, if any, the Borrower also shall furnish
to the Trustee a Favorable Opinion of Bond Counsel (as defined in the Indenture)
and such other opinions of counsel as to such other matters as the Issuer or the
Trustee may request.

         Section 6.09 Annual Statement. The Borrower agrees during the term of
this Agreement to have an annual audit made by its regular independent certified
public accountants and to furnish the Trustee (within 30 days after receipt by
the Borrower) with a balance sheet and statement of income and surplus showing
the financial condition of the Borrower and its consolidated subsidiaries, if
any, at the close of each fiscal year and the results of operations of the
Borrower and its consolidated subsidiaries, if any, for each fiscal year,
accompanied by a report of said accountants that such statements have been
prepared in accordance with generally accepted accounting principles. The
Borrower's obligations under this Section 6.09 may be satisfied by delivering a
copy of the Borrower's Annual Report to the Trustee at the same time that it is
mailed to stockholders. The Trustee shall have no duty or obligation with
respect to such financial statements or reports except to make them available to
any requesting Bondholders.

                                       17

<PAGE>

                                  ARTICLE VII

                                   [RESERVED]

                                  ARTICLE VIII
                         EVENTS OF DEFAULT AND REMEDIES

         Section 8.01 Events of Default. Each of the following events shall be
and is referred to in this Agreement as an "Event of Default":

                (a) failure by the Borrower to pay or cause to be paid any
amounts required to be paid under Section 5.02 or Section 10.01(a) hereof when
due which failure shall have resulted in an "Event of Default" under clause (i),
(ii) or (iii) of Section 10.01(a) of the Indenture;

                (b) a failure by the Borrower (i) to pay when due any other
payment required to be made under this Agreement or (ii) to observe and perform
any other covenant, condition or agreement on its part to be observed or
performed, other than as referred to in this Section 8.01, which failure
continues for a period of 30 days after written notice, specifying such failure
and requesting that it be remedied, is given to the Borrower by the Issuer or
the Trustee, which may give such notice in its discretion and shall give such
notice at the written request of the holders of not less than a majority in
principal amount of the Bonds then Outstanding (other than Bonds held by, or on
behalf of the Borrower), unless the Issuer and the Trustee or the Issuer, the
Trustee and the holders of a principal amount of Bonds not less than the
principal amount of Bonds the holders of which requested such notice, as the
case may be, shall agree to an extension of such period prior to its expiration;
or

                (c) the dissolution or liquidation of the Borrower, or the
filing by the Borrower of a voluntary petition in bankruptcy, or failure by the
Borrower promptly to forestall or lift any execution, garnishment or attachment
of such consequence as will impair its ability to continue its business or 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 Borrower for the
benefit of its creditors, or the entry by the Borrower into an agreement of
composition with its creditors (the term "dissolution or liquidation of the
Borrower", as used in this clause, shall not be construed to include the
cessation of the existence of the Borrower resulting from a dissolution or
liquidation of the Borrower following a transfer of all or substantially all its
assets as an entirety, under the conditions permitting such actions contained in
Section 6.02 hereof); or

                (d) the occurrence and continuance of an Event of Default under
the Indenture.

         The Issuer (or the Borrower, in the case of clause (c)) shall promptly
notify the Trustee and the Bank of the occurrence of any Event of Default under
this Section 8.01.

         Section 8.02 Force Majeure. The provisions of Section 8.01(b) 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

                                       18

<PAGE>

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; tornados; floods; washouts; droughts; arrests; restraint of
government and civil disturbances; explosions; breakage or accident to
machinery; or entire failure of utilities; or any cause or event not reasonably
under the control of the Borrower, the Borrower 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 5.02, 5.04, 5.08, 5.12, 6.02, 8.05 and
10.01(a) hereof, the Borrower 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 Borrower shall use
reasonable efforts to remedy 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 Borrower,
and the Borrower shall not be required to make settlement of strikes, lockouts
and other disturbances by acceding to the demands of the opposing party or
parties when such course is, in the judgment of the Borrower, unfavorable to the
Borrower.

         Section 8.03 Remedies.

                 (a) Upon the occurrence and continuance of any Event of Default
described in 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 unpaid balance of the loan payable under Section 5.02 hereof shall, without
further action, become and be immediately due and payable.

                 (b) 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.

                 (c) Upon the occurrence and continuance of any Event of
Default, the Issuer may take, or cause to be taken, 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 Borrower hereunder.

                 (d) Any amounts collected from the Borrower 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 Issuer 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 Issuer 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.

                                       19

<PAGE>

         Section 8.05 Reimbursement of Attorneys' Fees. If the Borrower shall
default under any of the provisions hereof (i) and the Issuer or the Trustee
shall employ attorneys 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 Borrower contained herein, the
Borrower will on demand therefor reimburse the Issuer or the Trustee, as may be,
for the reasonable fees of such attorneys and such other reasonable expenses so
incurred, to the extent permitted by law, and (ii) the Borrower shall pay the
Trustee reasonable compensation for extraordinary services, including default
administration.

         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 Issuer's rights and
interests hereunder to the Trustee, the Issuer shall have no power to waive any
default hereunder by the Borrower in respect of such rights and interests
without the consent of the Trustee, and the Trustee may exercise any of the
rights of the Issuer hereunder.

                                   ARTICLE IX

                         OPTIONS OF BORROWER TO PREPAY.

         Section 9.01 Options of Borrower to Prepay Repayment Installments.

                (a) The Borrower shall have, and is hereby granted, the option
to prepay the loan payable under Section 5.02 hereof in whole or in part by
causing the Bonds to be called for redemption pursuant to Section 4.01 of the
Indenture in which case all or a portion of the balance of the loan payable
under Section 5.02 hereof shall become due and payable on the redemption date
specified pursuant to Section 9.02 hereof in an amount sufficient to pay the
principal of any premium, if any, and interest on the Bonds so called for
redemption.

                (b) The Borrower shall also have, and is hereby granted, the
option to prepay the amounts payable under Section 5.02 hereof in whole or in
part by causing Bonds to be deemed to have been paid pursuant to Section 9.01 of
the Indenture by depositing with the Trustee moneys or obligations, or a
combination thereof, as required by such Section 9.01 and by giving the
irrevocable instructions required by such Section 9.01.

         Section 9.02 Exercise of Option.

                (a) To exercise an option granted in Section 9.01 hereof, the
Borrower shall give written notice to the Trustee which shall designate therein
the principal amount of the Bonds to be caused to be redeemed, or to be deemed
to be paid in accordance with Section 9.01 of the Indenture and, in the event a
redemption of Bonds is to be effected, such notice shall be given to the Trustee
not less than five Business Days (as defined in the Indenture) prior to the day
on which the Trustee shall be required to give notice of any such redemption and
shall specify therein (i) the date or dates of redemption and (ii) the
applicable redemption provision of the Indenture. The exercise of an option
granted in Section 9.01 hereof shall be revocable by the

                                       20

<PAGE>

Borrower at any time before the receipt by the Trustee of the Repayment
Installments to be prepaid.

          (b)  Upon receipt of a notice furnished pursuant to this Section 9.02,
the Issuer shall cooperate fully with the Trustee to permit the Trustee to take
or cause to be taken all actions required of it under the Indenture to cause
Bonds to be paid or redeemed in accordance with such notice.

          (c)  In the event the Borrower exercises its rights to cause the Bonds
to be redeemed or deemed to have been paid as provided in Section 9.01 hereof,
it shall give the Trustee directions to draw moneys under the applicable Credit
Facility in accordance with the terms hereof and of the Indenture in the amounts
so specified by the Borrower in such direction or order to effect the redemption
of the Bonds entitled to the benefits of the Credit Facility or cause such Bonds
to be deemed to have been paid as provided in Section 9.01 of the Indenture.

     Section 9.03  Mandatory Prepayment of Repayment Installments.

     The Borrower shall prepay the necessary portion of the unpaid balance of
the Repayment Installments on such dates on which the Bonds are required to be
redeemed pursuant to Section 4.01(b) of the Indenture.

     Section 9.04  Amount of Prepayment.

     The Borrower agrees to and shall pay (or cause to be paid) directly to the
Trustee any amount permitted or required to be paid by it under this Article IX.
The Trustee shall use the moneys so paid to it by the Borrower to effect
redemption of the Bonds in accordance with Article IV of the Indenture.

                                   Article X

                        PURCHASE AND REMARKETING OF BONDS

     Section 10.01 Purchase of Bonds.

          (a)  In consideration of the issuance of the Bonds by the Issuer, but
for the benefit of the Owners of the Bonds, the Borrower does hereby covenant
and agree to cause the necessary arrangements to be made and to be thereafter
continued whereby, from time to time, the Bonds will be purchased from the
owners thereof under the circumstances provided in Section 4.08 of the
Indenture. In furtherance of the foregoing covenant of the Borrower, the Issuer,
at the direction of the Borrower, has set forth in Section 4.08 of the Indenture
the terms and conditions relating to such purchases and has set forth in Article
XIV of the Indenture the duties and responsibilities of the Tender Agent with
respect to the purchase of Bonds and of the Remarketing Agent with respect to
the remarketing of Bonds. At the direction of the Borrower, Salomon Smith Barney
Inc. has been designated as the initial Remarketing Agent and as the initial
Tender Agent and the Borrower hereby authorizes and directs the Tender Agent and
the

                                       21

<PAGE>

Remarketing Agent to purchase, offer, sell and deliver Bonds in accordance with
the provisions of Section 4.08 and Article XIV of the Indenture.

     Without limiting the generality of the foregoing covenant of the Borrower,
and in consideration of the Issuer's having set forth in the Indenture the
aforesaid provisions of Section 4.08 and Article XIV thereof, the Borrower
covenants, for the benefit of the Owners of the Bonds, to pay, or cause to be
paid, to the Tender Agent such amounts as shall be necessary to enable the
Tender Agent to pay the purchase price of Bonds, all as more particularly
described in Section 4.08 and Article XIV of the Indenture.

          (b)  The Issuer shall have no obligation or responsibility financial
or otherwise, with respect to the purchase or remarketing of Bonds or the making
or continuation of arrangements therefor, except that the Issuer shall generally
cooperate with the Borrower, the Trustee, the Tender Agent and the Remarketing
Agent as contemplated in Article XIV of the Indenture.

     Section 10.02 Optional Purchase of Bonds. Subject to the limitations of the
Indenture, the Borrower, at any time and from time to time, may furnish moneys
to the Tender Agent accompanied by a notice directing that such moneys be
applied to the purchase of Bonds to be purchased pursuant to Section 4.08 and
Article XIV of the Indenture. Bonds so purchased shall be delivered to the
Borrower in accordance with Section 14.05(a) of the Indenture.

     Section 10.03 Determination of Interest Rate Periods. The Borrower may
determine the duration and type of the Interest Rate Periods and certain other
provisions relating to Interest Rate Periods as, and to the extent, set forth in
Section 2.01 of the Indenture.

                                   Article XI

                                  MISCELLANEOUS

     Section 11.01 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 shall have ceased, terminated or become void
in accordance with Article IX of the Indenture and until all payments required
under this Agreement shall have been made.

     Section 11.02 Notices. All notices, certificates, requests or other
communications hereunder shall be sufficiently given and shall be deemed given
when delivered or telecopied or if mailed, when mailed by registered mail,
postage prepaid, addressed as follows:

If to the Issuer:                  Maricopa County, Arizona
                                   Pollution Control Corporation
                                   c/o Ryley Carlock & Applewhite
                                   One North Central Avenue, Suite 1200
                                   Phoenix, Arizona 85004-4417

                                   Attention:   President

                                       22

<PAGE>

If to the Borrower:                El Paso Electric Company
                                   100 North Stanton
                                   El Paso, Texas 79901

                                   Attention:   Treasurer

If to the Trustee:                 JPMorgan Chase Bank
                                   600 Travis, Suite 1150
                                   Houston, Texas 77002

                                   Attention:   Institutional Trust Services

If to the Remarketing Agent:       Salomon Smith Barney Inc.
                                   390 Greenwich Street, 4/th/ Fl.
                                   New York, New York 10013

                                   Attention: James A. Brodt

If to the Tender Agent:            Salomon Smith Barney Inc.
                                   390 Greenwich Street, 4/th/ Fl.
                                   New York, New York 10013

                                   Attention: James A. Brodt

A copy of each notice, certificate, request or other communication given
hereunder to the Issuer, the Borrower, the Trustee, the Bank, the Tender Agent
or the Remarketing Agent shall also be given to the others. The Issuer, the
Borrower, the Trustee, the Bank, the Tender Agent and the Remarketing Agent may,
by notice given hereunder, designate further or different addresses to which
subsequent notices, certificates, requests or other communications shall be
sent. Such notice shall be given to all others listed above.

     Section 11.03 Parties in Interest. This Agreement shall inure to the
benefit of and shall be binding upon the Issuer, the Borrower and their
respective successors and assigns, and no other person, firm or corporation,
other than the Owners, the Trustee, the Registrar or the Paying Agent under the
Indenture, the Tender Agent, the Remarketing Agent and the Bank, shall have any
right, remedy or claim under or by reason of this Agreement; provided, however,
that the obligations of the Borrower under Section 5.08 hereof shall inure to
the benefit of the persons specified therein, and such obligations shall be
enforceable by such persons as a third-party beneficiary; and subject to the
limitation that any obligation of the Issuer created by or arising out of this
Agreement shall not be a general debt of the Issuer, but shall be payable solely
out of the revenues derived from this Agreement or the sale of the Bonds or
income earned on invested funds as provided herein and in the Indenture.

     Section 11.04 Extent of Covenants of the Issuer; No Personal Liability. All
covenants, obligations and agreements of the Issuer contained in this Agreement
or the Indenture shall be effective to the extent authorized and permitted by
applicable law. No such covenant, obligation or agreement shall be deemed to be
a covenant, obligation or agreement of any official, officer,

                                       23

<PAGE>

agent, or employee of the Issuer in other than his official capacity, and
neither the members of the Issuer Council 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 or by reason of the
covenants, obligations or agreements of the Issuer contained in this Agreement
or in the Indenture.

     Section 11.05 Confirmation of Request by the Borrower. The Borrower hereby
confirms that it has requested that the Issuer enter into the Indenture
including, without limitation, all of the terms and provisions relating to the
Bonds, the Trustee, Paying Agent, Registrar, Remarketing Agent and Tender Agent
and designating the parties named therein as Trustee, Paying Agent, Registrar,
Remarketing Agent and Tender Agent.

     Section 11.06 Amendments. This Agreement may be amended only by written
agreement of the parties hereto with the consent of the Bank or the provider of
any other Credit Facility, for so long as the Credit Facility is in effect,
subject to the limitations set forth herein and in the Indenture.

     Section 11.07 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 11.08 Severability. If any clause, provision or section of this
Agreement shall, for any reason, be held illegal or invalid, such illegality or
invalidity shall not affect any other provision of this Agreement, and this
Agreement shall be construed and enforced as if such illegal or invalid
provisions had not been contained herein.

     Section 11.09 Governing Law; Venue. This Agreement shall be construed in
accordance with and governed by the Constitution and laws of the State of
Arizona.

     Section 11.10 Statutory Notice. In accordance with the terms thereof,
notice is hereby given of Title 38, Chapter 3, Section 38-511, Arizona Revised
Statutes, which provides, among other things, that the State, its political
subdivisions or any department or agency of either may, within three years after
its execution, cancel any contract, without penalty or further obligation, made
by said State, its political subdivisions, or any of the departments or agencies
of either if any person significantly involved in initiating, negotiating,
securing, drafting or creating the contract on behalf of said State, its
political subdivisions, or any of the departments or agencies of either 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.

                                       24

<PAGE>

     IN WITNESS WHEREOF, the Issuer has caused this Agreement to be executed in
its name by its duly authorized officer, and the Borrower has caused this
Agreement to be executed in its name and its seal to be hereunto affixed and
attested by its duly authorized officer, all as of the date first above written.

                                              MARICOPA COUNTY, ARIZONA POLLUTION
                                              CONTROL CORPORATION

                                              By: /s/ Thomas L. Camp
                                                  ------------------------------
                                                          President

                                              EL PASO ELECTRIC COMPANY

                                              By: /s/ Kathryn Hood
                                                  ------------------------------
                                                          Treasurer

[Seal]

Attest:

By ____________________________
      Assistant Secretary

<PAGE>

                                    EXHIBIT A

                           DESCRIPTION OF THE PROJECT

     The Project consists of the following systems at the Plant and, in each
case, include related machinery, equipment and facilities:

     Section 1.01 Condensate Demineralizer Resin Regeneration System. The
Condensate Demineralizer Resin Regeneration System for each Unit recycles spent
resin from the full flow condensate demineralizers, and is located in the Unit's
turbine building. This system recycles spent resin by chemical regeneration
using acid and caustic treatment. Spent resin is transferred from the condensate
demineralizers to the regeneration vessels where it is chemically regenerated
and then transferred to the resin mix and hold vessel prior to transfer back to
the demineralizer.

     The resin regeneration system includes the following components and
equipment:

          (a)  One resin separation cation regeneration vessel that is a rubber-
lined, vertical-cylindrical tank, with internal baffles and distributors.

          (b)  One anion regeneration vessel that is a rubber-lined vertical-
cylindrical tank, with internal baffles and distributors.

          (c)  One resin mix and hold vessel that is a rubber-lined, vertical-
cylindrical tank, with internal baffle and distributor plate.

          (d)  One acid day-tank that is a vertical-cylindrical tank of 400-
gallon capacity, with a hinged cover, desiccant air breather and gauge glass.

          (e)  Two motor-driven, diaphragm type, acid pumps with adjustable
stroke.

          (f)  One caustic day-tank that is a plastic-lined vertical-cylindrical
tank of 2500 gallon capacity, with a gauge glass and electric heaters.

          (g)  Two motor-driven centrifugal type caustic pumps.

          (h)  Waste collection tank.

          (i)  The portions of the central acid and caustic chemical supply
systems that are dedicated solely to the Condensate Demineralizer Resin
Regeneration System.

          (j)  Associated piping, valves, instrumentation and mechanical
equipment.

     Section 1.02 Steam Generator Blowdown Demineralizer Resin Regeneration
System. The Steam Generator Blowdown Demineralizer Resin Regeneration System for
each Unit recycles spent resin in the steam generator blowdown demineralizer and
is located in the Unit's turbine building. This system recycles spent resin by
chemical regeneration using acid and caustic treatment. Spent resin is treated
in place by injecting these chemicals directly into the

<PAGE>

steam generator blowdown demineralizer vessels that hold the resin. There are
two mixed-bed demineralizer vessels operated in series for each Unit. This
allows isolation of an individual vessel for chemical regeneration while
blowdown flow is maintained in the other vessel.

     The Steam Generator Blowdown Demineralizer Resin Regeneration System
includes the following equipment and components:

          (a)  One acid day-tank that is a 30 inch diameter x 36 inch plasite
lined tank.

          (b)  One acid supply package including acid supply pumps with
associated piping and instrumentation.

          (c)  One caustic day-tank with immersion heater.

          (d)  One caustic supply package including caustic supply pumps,
instantaneous heater and associated piping and instrumentation.

          (e)  Waste collection equipment including sumps and piping.

          (f)  The portions of the central acid and caustic chemical supply
systems that are dedicated solely to the Steam Generator Blowdown Demineralizer
Resin Regeneration System.

          (g)  Associated piping, valves, instrumentation and mechanical
equipment.

     Section 1.03 Make-up Demineralizer Resin Regeneration System. The Make-up
Demineralizer Resin Regeneration System serves all three Units and recycles
spent resin from the make-up water demineralizer by chemical regeneration using
acid and caustic treatment. Spent resin is treated in place by injecting
chemicals directly into the make-up demineralizer vessels that hold the resin.
There are three mixed bed demineralizers. The system is operated with two mixed
beds in series with the third bed isolated for regeneration.

     The Make-up Demineralizer Resin Regeneration System includes the following
components and equipment:

          (a)  One acid regenerant day tank that is a 238 gallon unlined steel
tank.

          (b)  One caustic regenerant day tank that is a fiberglass reinforced
tank of 3,396 gallon capacity and contains an electric immersion heater.

          (c)  Two plasite lined hot water storage tanks each with a 5519 gallon
capacity and two electric immersion heaters.

          (d)  Two rinse water pumps.

          (e)  Two acid injection pumps.

          (f)  Two caustic feed pumps.

                                      A-2

<PAGE>

          (g)  The portions of the central acid and caustic chemical supply
systems that are dedicated solely to the Make-up Demineralizer Resin
Regeneration System.

          (h)  Associated piping, valves, instrumentation and mechanical
equipment.

     Section 1.04 Decontamination Facilities. The Decontamination Facilities
recycle solid waste consisting of contaminated tools and equipment by removing
radioactive contamination from such items.

     There are four Decontamination Facilities; one in the Radwaste Building for
each Unit and a central facility for handling heavier tools and equipment that
cannot be handled by the smaller individual Decontamination Facilities.

     The central decontamination facility includes the following equipment:

          (a)  Ultrasonic cleaning system.

          (b)  Spray booth with pressure and steam washers.

          (c)  Filtered turbulator apparatus.

          (d)  Decontamination tanks and sinks.

          (e)  Central decontamination building consisting of shielded
walls, filtered ventilation systems, air lock, laydown areas and associated
building services.

     Each of the three Radwaste Building Decontamination Facilities includes the
following equipment:

          (a)  Ultrasonic cleaning system.

          (b)  Spray booth with turntable, pressure and steam washers.

          (c)  Tank, workbench and sink.

          (d)  The portion of each Radwaste Building housing Decontamination
Facilities.

     Section 1.05 Water Reclamation Facility. The Water Reclamation Facility
will receive the sewage effluent from the Effluent Pipeline System and provide a
multistage biochemical treatment process, including (a) reduction of ammonia and
alkalinity by the use of trickling filters; (b) addition of lime slurry and
polymer in first stage solid contact clarifiers to remove phosphate, magnesium,
silica and some calcium; (c) addition of soda ash, polymer and carbon dioxide
gas in second-stage solid contact clarifiers to remove calcium carbonate; (d)
injection of sulfuric acid to reduce pH, polymer to aid in removal of suspended
solids and chlorine to control biological growth; and (e) gravity filtration
through graded media filters equipped for backwash. Sludge extracted from the
backwash and solid contact clarifier and dewatered in the Water Reclamation
Facility Water Pollution Control Facilities (which are not a part of the Series
B

                                      A-3

<PAGE>

Facilities) will be recalcined in a furnace provided for this purpose. The
Water Reclamation Facility also includes related valves, piping,
instrumentation, monitoring and other equipment.

     Section 1.06 Sanitary Drainage and Treatment System (ST). The sanitary
drainage system collects and transports sanitary waste from Power Block
facilities, Water Reclamation Facility ancillary buildings and construction
facilities to the on-site sanitary treatment system.

     The sanitary treatment system treats, clarifies, and returns the wastewater
to the WRF for reuse. Equipment includes: a wet well, a sewage lift station, a
surge tank, three package sewage treatment plants, a chlorine contact chamber, a
sump with two sump pumps, and piping, valves, controls, and instrumentation.

     Also included are related groundwater monitoring wells and equipment.

     Section 1.07 Oily Waste and Nonradioactive Waste Systems (OW). The oily
waste system for each Unit collects, for processing and disposal, nonradioactive
waste from normally nonradioactive areas where oil may be present.

          (a)  Turbine building - OW drains and collects waste from the
equipment and floor drains. The waste is collected in one turbine building sump
and two condenser area sumps. The waste is normally discharged from the sumps to
the oil/water separator, oil/water separator sump, retention basin, and
eventually to the evaporation pond.

          (b)  Control building and diesel generator building - OW drains
and collects waste from the equipment and floor drains. The waste is discharged
from two control room sumps and two diesel generator sumps to the oil/water
separator, oil water separator sump, retention basin, and eventually to the
evaporation pond.

     Each oily waste system consists of floor drains, equipment drains, vertical
drain risers, pipes, sumps, sump pumps, an oil/water separator, an oil/water
separator sump and associated valves, instrumentation and controls. Also
included are related groundwater monitoring wells and equipment.

     Section 1.08 Chemical Waste Systems (CM). The chemical waste system for
each Unit consists of five subsystems:

          (a)  The radioactive chemical waste subsystem collects by
gravity the corrosive radioactive waste from the chemical laboratory and
decontamination stations and transfers the waste to the chemical drain tank. The
chemical drain tank effluent is handled by the liquid radwaste system. This
subsystem consists only of drains and piping.

          (b)  The cooling water waste subsystem collects by gravity the
chemically treated cooling water from the auxiliary and radwaste building for
disposal. The waste collects in the cooling water holdup tank and is pumped to
the chemical waste neutralizer tank. From the neutralizer tank it is pumped to
either the retention basin and evaporation pond or the liquid radwaste holdup
tank. This subsystem consists of drains, a cooling water holdup tank, pumps,
valves, piping, controls and instrumentation.

                                      A-4

<PAGE>

          (c) The condensate polishing demineralizer waste subsystem
collects and neutralizes the potentially radioactive waste for disposal to the
retention basin or the evaporation pond if it is nonradioactive, or discharges
to the liquid radwaste system if it is radioactive. This subsystem consists of
drains, sumps, sump pumps, chemical waste neutralizer tanks with agitators,
transfer pumps, piping, valves, controls and instrumentation.

          (d) The spent regenerate waste subsystem collects and
neutralizes the rinse wastes from the makeup demineralizers for disposal. This
subsystem consists of drains, sumps, sump pumps, valves, controls and
instrumentation.

          (e) The chemical tank drains located in the yard areas are
installed on concrete slabs with retaining curbs. Small sumps are provided to
collect equipment leakage. In some locations portable pumps are used to dispose
of the waste.

     Also included is related groundwater monitoring equipment.

     Section 1.09 Retention Basin (Sedimentation Basin - J. Hook). The retention
basin collects and disposes (by evaporation) of yard drainage to prevent
discharge of sedimentation to the Gila River and the groundwater regional
aquifer well water system. The basin consists of earthen dikes and related
groundwater monitoring wells and equipment.

     Section 1.10 Evaporation Pond.The evaporation pond collects start-up flush
water and cooling tower blowdown wastewater for disposal. This allows for
disposal of settleable solids and pollutants on a rubberized liner which
prevents the start-up and blowdown wastewater from entering the Gila River and
the groundwater regional aquifer well water system. The present pond is 250
surface acres. The future ponds will comprise an additional 455 acres. This
system includes the earthen dike surrounding the pond, a rubberized liner and
related environmental monitoring wells and equipment.

     Section 1.11 Water Reclamation Facility Pollution Control Systems. The
Water Reclamation Facility (WRF) air and water pollution control facilities
collect environmental pollutants to prevent their discharge to the environment
and/or treat such pollutants prior to such discharge. This pollution control
equipment includes:

          (a)  Air Pollution Control Facilities - Furnace stack gas pollution
control components include the cyclone separator, lime dust return screw and
rotary feeder, the precooler and venturi scrubber, the impingement tray
separator, the induced draft fan, all associated ducting, piping, valves,
controls and instrumentation and all piping to supply process water to this
equipment.

     Lime and soda ash dust collection equipment includes dust collectors on
each of the storage and supply silos and associated instrumentation and piping,
and the filter separator at each unloading station and the associated piping and
instrumentation.

          (b)  Water Pollution Control Facilities - Sludge handling and
dewatering equipment includes:

                                      A-5

<PAGE>

          (i)   Sludge pumps and associated piping, valves, controls,
     instrumentation and flush water piping at the first and second stage
     clarifiers;

          (ii)  Thickeners and associated structures and sludge pumps, tunnel
     sump pumps and associated piping, valves, controls, instrumentation, and
     flush water piping for the first and second stage thickeners, the waste
     thickeners, and the spent washwater thickeners;

          (iii) Centrifuges, piping, valves, controls, instrumentation, flush
     water piping, screw conveyors, and associated structures for the
     classification, dewatering, and waste centrifuges;

          (iv)  Also included is related groundwater monitoring equipment.

     Section 1.12 Gaseous Radwaste Systems (GRS).The gaseous radwaste system
(GRS) for each Unit collects and processes potentially radioactive gases
generated within the Plant so that offsite exposure is kept as low as reasonably
achievable (ALARA). High activity waste gas, containing primarily hydrogen and
nitrogen, is collected and stored in the oxygen-free system to guard against a
rapid hydrogen/oxygen reaction and to permit decay of short-lived isotopes.
Subsequent to decay, the decayed gases are sampled to determine their
constituency and radioactivity content, filtered, monitored, and released at a
controlled rate to the plant vent.

     Each system is comprised of a surge tank, two prefilters, two waste gas
compressors, three waste gas decay tanks, one discharge filter, discharge flow
control valves and instrumentation and related radiation monitoring equipment.

     Section 1.13 Solid Radwaste Systems (SRS).The solid radwaste system (SRS)
for each Unit handles radioactive waste consisting of trash, spent ion exchange
resins, waste evaporator concentrates, chemical drain tank effluents, crud tank
effluents, used filter cartridges, contaminated steam generator blowdown
demineralizer resins and contaminated condensate polishing demineralizer resins.
The wastes are solidified in the waste solidification system and stored in a
shielded storage location while awaiting shipment off site.

     Spent resin from the fuel pool cooling system, liquid radwaste system ion
exchangers, the chemical and volume control system preholdup ion exchanger,
deborating ion exchanger and purification ion exchangers are sluiced to the high
activity spent resin tank or the low activity spent resin tank. The spent resin
tanks hold the resin until it is ready to be sluiced to the waste feed tank.

     Radwaste from the crud tank, chemical drain tanks, spent resin tanks, and
concentrates from the liquid radwaste system are piped directly into the waste
feed tank.

     Chemicals are added to the waste feed tank to adjust pH by the chemical
addition storage and feed subsystem. The cement handling and storage subsystem
delivers cement to the radwaste/cement mixing and filling subsystem.

     The dry additive storage and feed subsystem delivers the dry chemical
additive to the radwaste/cement mixing and filling subsystem.

                                      A-6

<PAGE>

     The radwaste/cement mixing and filling subsystem delivers radwaste from the
waste feed tank, mixes the radwaste with cement and dry chemical additives and
discharges the mixture to either a 55 gallon drum or disposable liner. This
subsystem also provides for capping, decontamination, swiping and placement of
solidified waste containers in a shielded storage location in the Unit,
transportation and temporary storage of the solidified waste containers.

     Spent filter cartridges are transported to the solidification system
disposable liner or drum via a monorail, and remotely placed in a filter basket
inside the container. The filter basket holds the filter cartridge in place
while cement is poured around the filter cartridge encapsulating it.

     Each system consists of a low activity spent resin tank and associated
piping, a high activity spent resin tank and associated piping, a resin
transfer/dewatering pump, a waste feed pump, a waste feed tank, a chemical
addition pump, a chemical addition tank, a waste/cement processor, a 30-ton
capacity overhead bridge crane, a container transfer cart and related switches,
valves and instrumentation. The system also includes related radiation
monitoring equipment.

     Section 1.14 Future Interim on Site Low-level Radioactive Waste Storage
Facility (RS).The function of the Future Interim On Site Low-Level Radioactive
Waste Storage Facility (RS) is to provide the capabilities for handling and
storing for up to a maximum of five (5) years, solidified wastes and dry active
wastes, prior to shipment off site. Wastes temporarily held in the RS will be
ready for shipment off site without further processing.

     This facility consists of a non-seismic concrete building, a metal sided
building, a truck bay and docking area, a control room, a container inspection
and decontamination station, a truck washdown station, a remotely operated
overhead crane, associated lighting, heating and ventilation systems, sumps,
drains and related instrumentation and monitoring equipment and related access
road and fencing.

     Section 1.15 Liquid Radwaste Systems (LRS).The major functions of the
liquid radwaste system (LRS) for each Unit are to:

             (a)  Collect and store for processing radioactive or potentially
radioactive waste fluids from the following sources external to the Liquid
Radwaste System:

                  (i)    Containment radwaste sumps

                  (ii)   Radwaste building sumps

                  (iii)  Auxiliary building sumps

                  (iv)   Fuel building sumps

                  (v)    Decontamination facility (Unit One only)

                  (vi)   Radiochemistry lab

                  (vii)  Solid radwaste resin transfer/dewatering pump

                                       A-7

<PAGE>

               (viii) Condensate polishing and blowdown demineralizer regenerant
               wastes

               (ix)   Turbine building sumps

               (x)    Auxiliary steam condensate receiver tank

               (xi)   Chemical waste neutralizer tank

               (xii)  Boric acid concentrator (BAC) bottoms

               (xiii) BAC distillate.

          (b)  Process revived wastes by filtration, absorption, ion exchange,
and evaporation to obtain a maximum amount of high grade water for reuse in the
reactor plant systems. This system also includes related radiation monitoring
equipment.

          (c)  Minimize the quantity of liquid wastes which must be solidified
for offsite disposal.

     Each system consists of three holdup tanks, two holdup pumps, chemical
drain tanks and pumps, ion exchange prefilters, an evaporator package, mixed bed
ion exchangers and an adsorption bed, recycle monitor tanks and pump,
concentrate monitor tanks and pumps, a caustic tank and batch tank, an acid tank
and batch tank, an anti-foam tank and pump, Y-strainers, a desiccant breather
and associated instrumentation, switches, valves and piping.

     Section 1.16 Radwaste Buildings.The radwaste building for each Unit
contains systems used for the processing of liquid, solid, and gaseous
radioactive wastes generated in such Unit. The hot machine shop and the
decontamination station which have not been financed are also housed in the
radwaste building.

     Each radwaste building is a three-story rectangular, seismic (category
IIe), reinforced concrete structure. A series of interior reinforced concrete
walls form compartments for housing waste-related equipment and provide
radiation shielding. The solid waste solidification, storage, and disposal areas
are serviced by a crane and monorail system. Each radwaste building is designed
to be independent of any other structure and is supported on a rigid foundation
mat.

     Section 1.17 Filtration Equipment.The auxiliary building and the
containment building for each Unit each contain normal exhaust air filtration
units (AFU). Each AFU contains high efficiency particulate air (HEPA) filter
banks and charcoal absorbers that have been included in the financing. The
laundry and decontamination facility AFU contains HEPA filters that have been
included in the financing. The function of the HEPA filter banks and charcoal
absorbers is to maintain offsite exposure ALARA.

     The condenser air removal system for each Unit contains HEPA filters,
charcoal absorbers and related mechanical equipment necessary to remove
radioactive contaminants from condenser vacuum pump discharges in order to
maintain offsite exposure ALARA. Also included is related effluent monitoring
equipment.

                                      A-8

<PAGE>

     Section 1.18 Radiation Laundry.The system is housed in the laundry and
decontamination facility which is located near the radwaste building of Unit 1,
and is a common facility for three units. The system uses four "RADKLEEN" dry
cleaning machines, especially designed by Health Physics Systems, Inc., for
decontamination of cloth and rubber protective clothing, and utilizes Dupont's
Valclene dry cleaning solvent. The system consists of cleaning chamber, solvent
tank, still drying fan, evaporator refrigeration compressor, and several
filters. The system contains two separate filtration systems. One set of micron
filters, arranged in the parallel banks, filters solvent before it enters the
cleaning drum. The other set of filters, arranged in series, comprises a
recirculation filtration system which continually removes contamination from
solvent in the contaminated sump, then returns the solvent to the clean sump.
The system does not require any cooling water, plumbing, or connected cooling
towers.

     Section 1.19 Spent Fuel Storage and Handling System (SFS).There are three
Fuel Buildings at this three unit plant, one for each unit. Each Fuel Building
is a five-story reinforced concrete structure located adjacent to the
Containment Building. Each Fuel Building is approximately 107 feet tall (above
and below grade), 88 feet wide, and 124 feet long. Each Fuel Building contains
one spent fuel storage pool, new fuel unloading and storage areas, spent fuel
cask loading pit, fuel transfer canal, spent fuel cask washdown area, spent fuel
pool equipment rooms, spent fuel equipment laydown area, new fuel container
storage area and a railroad loading bay for spent fuel containers. The SFS for
each Unit includes the spent fuel storage pool, spent fuel cask loading pit,
spent fuel cask washdown area, spent fuel pool equipment rooms, spent fuel
equipment laydown area and the railroad loading bay and the portion of the Fuel
Building that houses such equipment.

     Fuel assemblies are brought into the fuel handling building by truck in
shipping containers containing two assemblies each. The assemblies are unloaded
by means of the new fuel handling crane and stored on racks in the new fuel
storage pit. When needed, the new fuel handling crane lifts the fuel assembly
from the new fuel storage pit and carries it to a new fuel elevator, located at
the containment building end of the transfer canal, which lowers the assembly to
the floor of the transfer canal. The fuel handling machine then picks up the
assembly and places it on an upending device (upender) in the transfer canal.
The upender lowers the upright fuel assembly to a horizontal position and puts
it on the fuel transfer car. The car carries the assembly through the transfer
tube to the reactor containment building. Spent fuel is removed from the
containment building and transferred back to the fuel handling building in the
reverse process. Once inside the fuel handling building, the spent fuel handling
machine places the spent fuel into high density storage racks in the spent fuel
pool for storage. Spent fuel is stored in the spent fuel pools prior to shipment
offsite. When spent fuel is to be shipped offsite a spent fuel cask is brought
into the fuel handling building by rail. The cask is then cleaned. The cask
handling bridge crane lifts the cask from the railcar into the cask loading pit
and the lid of the cask is removed. The cask loading pit is then flooded and the
spent fuel handling machine removes the fuel assembly to be shipped from the
spent fuel pool storage rack and transfers them into the spent fuel cask in the
cask loading pit. The cask is then capped and transferred by the bridge crane to
the spent fuel cask washdown area where it is inspected, cleaned and
decontaminated. The cask handling bridge crane then lifts the loaded cask to a
railcar for shipment offsite.

     Each SFS consists of the following components:

                                      A-9

<PAGE>

          (a)  Spent Fuel Cask Handling Bridge Crane - This 150-ton crane is
designed to lift and transport the spent fuel casks.

          (b)  Spent Fuel Pool (SFP) - The SFP is designed to contain 1329 spent
fuel assemblies in high density storage racks after addition of inserts which
have not been included in the financing. It is 41 feet 6 inches deep, 28 feet
wide, and 39 feet long and contains approximately 352,000 gallons of borated
water at operating level. The outer walls of the Fuel Building form two walls of
the SFP and the SFP is an integral structural part of the Fuel Building. It is
lined with stainless steel plate.

          (c)  Cask Loading Pit (CLP) - The CLP is designed to allow loading of
spent fuel into a cask for shipment offsite. It is approximately 45 feet deep,
16 feet wide and 16 feet long. It is connected to the SFP by a short canal.

          (d)  Cask Washdown Area - This area is designed to washdown a loaded
cask and inspect it prior to shipment.

          (e) Spent Fuel Railroad Loading Bay - This area is 76 feet long by 25
feet wide and is used to bring railroad cars into the building in order to load
the spent fuel casks on the railroad cars for off-site shipment.

          (f)  Spent Fuel Equipment Laydown Area - This area is reserved for the
spent fuel cask handling tools and crane rigging.

          (g)  Spent-Fuel Pool Cooling and Cleanup System - This system is
designed to remove decay heat from the spent fuel assemblies and maintain
clarity and chemistry of the spent fuel pool water. The system is composed of
two subsystems, the spent fuel pool cooling system (SFPCS) and the spent fuel
pool cleanup system. The SFPCS is a closed loop system consisting of two pumps,
two heat exchangers, piping, valves, controls and instrumentation required to
form a complete functional system. All equipment is located within the Fuel
Building.

     The spent fuel pool cleanup system is composed of two flow trains, each
consisting of a strainer, pump, filter and a mixed bed ion exchanger. Either one
or both trains can be aligned to clean the water in the Spent Fuel Pool. The
system also consists of the piping, valves, controls and instrumentation to form
a complete functional system. The pumps are located in the Fuel Building with
the remaining equipment contained in the Auxiliary Building. Only the equipment
and piping related to the spent fuel pool cleanup system that is located in the
Auxiliary Building itself is financed. No part of the Auxiliary Building is
included as part of the SFS.

          (h)  Fuel Building Ventilation System - This system filters, purifies,
and monitors normal building exhaust.

     Section 1.20 Effluent Pipeline System.The Effluent Pipeline system is an
underground sewage effluent conveyance pipeline system to convey sewage effluent
from the Phoenix 91st Avenue and City of Tolleson water treatment plants to the
water reclamation facility at the site of the Plant, and includes (a)
approximately 28.5 miles of 114- and 96-inch diameter pipe operating by gravity
flow from the 91st Avenue and Tolleson interfaces to the Hassayampa Pumping

                                      A-10

<PAGE>

Station, (b) the Hassayampa Pumping Station, and (c) approximately 8 miles of
66-inch diameter pipe from the Hassayampa Pumping Station to the water
reclamation facility.

     Section 1.21 Containment Building.Each Unit has a Containment Building
housing the reactor and reactor coolant system for such Unit.

     Each Containment Building is a Seismic Category I pre-stressed concrete
cylinder with a hemispherical dome. The base mat is a flat circular slab of
reinforced concrete. The interior of the structure is lined with a continuous,
welded steel plate one quarter inch thick. The Containment Building has an
approximate inside diameter of 106 feet and an inside height of 206.5 feet. The
base mat has an approximate diameter of 161 feet and a thickness of 10.5 feet.
Wall thickness varies from approximately 4 feet in the vertical walls to
approximately 3.5 feet at the apex of the dome.

     Under the most severe of postulated loading conditions -- including the
combined effects of permanent loads, design basis Loss of Coolant Accident
loads, and either the safe-shutdown earthquake or tornado loads -- the
Containment Building is designed to maintain its structural and leak-tight
integrity. Together with isolation valves, penetration assemblies, and its
continuous, welded-steel liner, the structure contains the released fission
products and maintains a leak rate below the design leak rate levels.

     The Containment Building is designed to provide long-term control of
fission products following an accident.

     Housed within the Containment Building and supported by the base mat are
the reinforced concrete and structural steel internal structures which support
the reactor and reactor coolant system. These internal structures, the reactor
and reactor coolant system are not included in this financing.

                                      A-11

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00044-of-00352.parquet"}]]