Document:

Exhibit 4(a)

Exhibit 4(a)

 

INDENTURE OF TRUST

(2009 SERIES A)

BETWEEN

THE INDUSTRIAL DEVELOPMENT AUTHORITY

OF THE COUNTY OF PIMA

AND

U.S. BANK TRUST NATIONAL ASSOCIATION

 

DATED AS OF OCTOBER 1, 2009

 

Authorizing

Pollution Control Revenue Bonds,

2009 Series A

(Tucson Electric Power Company San Juan Project)

 

 

 

 

TABLE OF CONTENTS*

	 	 	 	 	 
	 	 	Page	 
	 
	Parties
	 	 	1	 
	Recitals
	 	 	1	 
	Granting Clause
	 	 	2	 
	 
	 	 	 	 
	ARTICLE I — DEFINITIONS
	 	 	3	 
	Section 1.01 Definitions
	 	 	3	 
	 
	 	 	 	 
	ARTICLE II — THE BONDS
	 	 	8	 
	Section 2.01 Creation of Bonds
	 	 	8	 
	Section 2.02 Form of Bonds
	 	 	9	 
	Section 2.03 Execution of Bonds
	 	 	10	 
	Section 2.04 Authentication of Bonds
	 	 	10	 
	Section 2.05 Bonds Not General Obligations
	 	 	10	 
	Section 2.06 Prerequisites to Authentication of Bonds
	 	 	10	 
	Section 2.07 Lost or Destroyed Bonds or Bonds Canceled in Error
	 	 	11	 
	Section 2.08 Transfer, Registration and Exchange of Bonds
	 	 	12	 
	Section 2.09 Other Obligations
	 	 	13	 
	Section 2.10 Temporary Bonds
	 	 	13	 
	Section 2.11 Cancellation of Bonds
	 	 	13	 
	Section 2.12 Payment of Principal and Interest
	 	 	14	 
	Section 2.13 Applicability of Book-Entry Provisions
	 	 	14	 
	 
	 	 	 	 
	ARTICLE III — REDEMPTION OF BONDS
	 	 	14	 
	Section 3.01 Redemption Provisions
	 	 	14	 
	Section 3.02 Selection of Bonds to be Redeemed
	 	 	15	 
	Section 3.03 Procedure for Redemption
	 	 	16	 
	Section 3.04 Payment of Redemption Price
	 	 	16	 
	Section 3.05 No Partial Redemption After Default
	 	 	16	 
	 
	 	 	 	 
	ARTICLE IV — THE BOND FUND
	 	 	17	 
	Section 4.01 Creation of Bond Fund
	 	 	17	 
	Section 4.02 Liens
	 	 	17	 
	Section 4.03 Deposits into Bond Fund
	 	 	17	 
	Section 4.04 Use of Moneys in Bond Fund
	 	 	17	 
	Section 4.05 Custody of Bond Fund; Withdrawal of Moneys
	 	 	17	 
	Section 4.06 Bonds Not Presented for Payment
	 	 	18	 
	Section 4.07 Moneys Held in Trust
	 	 	18	 
	 
	 	 	 	 
	ARTICLE V — DISPOSITION OF PROCEEDS
	 	 	19	 
	Section 5.01 Disposition of Proceeds
	 	 	19	 

 

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

 

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	 	 	Page	 
	 
	ARTICLE VI — INVESTMENTS
	 	 	19	 
	Section 6.01 Investments
	 	 	19	 
	 
	 	 	 	 
	ARTICLE VII — GENERAL COVENANTS
	 	 	19	 
	Section 7.01 No General Obligations
	 	 	19	 
	Section 7.02 Performance of Covenants of the Authority; Representations
	 	 	 20	 
	Section 7.03 Maintenance of Rights and Powers; Compliance with Laws
	 	 	20	 
	Section 7.04 Enforcement of Obligations of the Company; Amendments
	 	 	20	 
	Section 7.05 Further Instruments
	 	 	20	 
	Section 7.06 No Disposition of Trust Estate
	 	 	20	 
	Section 7.07 Financing Statements
	 	 	20	 
	Section 7.08 Tax Covenants; Rebate Fund
	 	 	21	 
	Section 7.09 Notices of Trustee
	 	 	21	 
	 
	 	 	 	 
	ARTICLE VIII — DEFEASANCE
	 	 	22	 
	Section 8.01 Defeasance
	 	 	22	 
	 
	 	 	 	 
	ARTICLE IX — DEFAULTS AND REMEDIES
	 	 	23	 
	Section 9.01 Events of Default
	 	 	23	 
	Section 9.02 Remedies
	 	 	24	 
	Section 9.03 Restoration to Former Position
	 	 	25	 
	Section 9.04 Owners’ Right to Direct Proceedings
	 	 	25	 
	Section 9.05 Limitation on Owners’ Right to Institute Proceedings
	 	 	25	 
	Section 9.06 No Impairment of Right to Enforce Payment
	 	 	25	 
	Section 9.07 Proceedings by Trustee without Possession of Bonds
	 	 	26	 
	Section 9.08 No Remedy Exclusive
	 	 	26	 
	Section 9.09 No Waiver of Remedies
	 	 	26	 
	Section 9.10 Application of Moneys
	 	 	26	 
	Section 9.11. Severability of Remedies
	 	 	27	 
	 
	 	 	 	 
	ARTICLE X — TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR
	 	 	27	 
	Section 10.01 Acceptance of Trusts
	 	 	27	 
	Section 10.02 No Responsibility for Recitals
	 	 	27	 
	Section 10.03 Limitations on Liability
	 	 	27	 
	Section 10.04 Compensation, Expenses and Advances
	 	 	28	 
	Section 10.05 Notice of Events of Default
	 	 	28	 
	Section 10.06 Action by Trustee
	 	 	29	 
	Section 10.07 Good Faith Reliance
	 	 	29	 
	Section 10.08 Dealings in Bonds and with the Authority and the Company
	 	 	29	 
	Section 10.09 Allowance of Interest
	 	 	29	 
	Section 10.10 Construction of Indenture
	 	 	30	 
	Section 10.11 Resignation of Trustee
	 	 	30	 
	Section 10.12 Removal of Trustee
	 	 	30	 
	Section 10.13 Appointment of Successor Trustee
	 	 	30	 
	Section 10.14 Qualifications of Successor Trustee
	 	 	31	 
	Section 10.15 Judicial Appointment of Successor Trustee
	 	 	31	 

 

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	 	 	Page	 
	 
	Section 10.16 Acceptance of Trusts by Successor Trustee
	 	 	31	 
	Section 10.17 Successor by Merger or Consolidation
	 	 	31	 
	Section 10.18 Standard of Care
	 	 	32	 
	Section 10.19 Notice to Owners of Bonds of Event of Default
	 	 	32	 
	Section 10.20 Intervention in Litigation of the Authority
	 	 	32	 
	Section 10.21 Paying Agent; Co-Paying Agents
	 	 	32	 
	Section 10.22 Qualifications of Paying Agent and Co-Paying
Agents; Resignation; Removal
	 	 	33	 
	Section 10.23 Registrar
	 	 	33	 
	Section 10.24 Qualifications of Registrar; Resignation; Removal
	 	 	34	 
	Section 10.25 Several Capacities
	 	 	34	 
	 
	 	 	 	 
	ARTICLE XI — EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND
PROOF OF OWNERSHIP OF BONDS
	 	 	35	 
	Section 11.01 Execution of Instruments; Proof of Ownership
	 	 	35	 
	 
	 	 	 	 
	ARTICLE XII — MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT
	 	 	35	 
	Section 12.01 Limitations
	 	 	35	 
	Section 12.02 Supplemental Indentures without Owner Consent
	 	 	35	 
	Section 12.03 Supplemental Indentures with Consent of Owners
	 	 	36	 
	Section 12.04 Effect of Supplemental Indenture
	 	 	37	 
	Section 12.05 Consent of the Company
	 	 	37	 
	Section 12.06 Amendment of Loan Agreement without Consent of Owners
	 	 	38	 
	Section 12.07 Amendment of Loan Agreement with Consent of Owners
	 	 	38	 
	 
	 	 	 	 
	ARTICLE XIII — MISCELLANEOUS
	 	 	38	 
	Section 13.01 Successors of the Authority
	 	 	38	 
	Section 13.02 Parties in Interest
	 	 	39	 
	Section 13.03 Severability
	 	 	39	 
	Section 13.04 No Personal Liability of Authority Officials
	 	 	39	 
	Section 13.05 Bonds Owned by the Authority or the Company
	 	 	39	 
	Section 13.06 Counterparts
	 	 	39	 
	Section 13.07 Governing Law
	 	 	40	 
	Section 13.08 Notices
	 	 	40	 
	Section 13.09 Holidays
	 	 	40	 
	Section 13.10 Statutory Notice Regarding Cancellation of Contracts
	 	 	40	 
	 
	 	 	 	 
	Testimonium
	 	 	41	 
	Signatures
	 	 	41	 
	 
	 	 	 	 
	Exhibit A — Form of 2009 Series A Bond
	 	 	A-1	 
	Exhibit B — Form of Endorsement of Transfer
	 	 	B-1	 
	Exhibit C — Form of Certificate of Authentication
	 	 	C-1	 

 

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INDENTURE OF TRUST

THIS INDENTURE OF TRUST (2009 Series A), dated as of October 1, 2009 (this “Indenture”),
between THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit
corporation designated by law as a political subdivision of the State of Arizona (hereinafter
called the “Authority”), and U.S. Bank Trust National Association, as trustee (hereinafter called
the “Trustee”),

W I T N E S S E T H:

WHEREAS, the Authority is authorized and empowered under Title 35, Chapter 5, Arizona Revised
Statutes, as amended (the “Act”), to issue its bonds in accordance with the Act and to make secured
or unsecured loans for the purpose of financing or refinancing the acquisition, construction,
improvement or equipping of projects consisting of land, any building or other improvement, and all
real and personal properties, including but not limited to machinery and equipment, whether or not
now in existence or under construction, whether located within or without the State of Arizona or
Pima County, which shall be suitable for, among other things, facilities for the furnishing of
electric energy, gas or water, air and water pollution control facilities and sewage and solid
waste disposal facilities, and to charge and collect interest on such loans and pledge the proceeds
of loan agreements as security for the payment of the principal of and interest on bonds, or
designated issues of bonds, issued by the Authority and any agreements made in connection
therewith, whenever the Board of Directors of the Authority finds such loans to further advance the
interest of the Authority or the public and in the public interest;

WHEREAS, pursuant to the provisions of the Pollution Control Revenue Bond Act, Chapter 397,
Laws of 1973 of the State of New Mexico, 31st Legislature, 1st Session, as amended, the City of
Farmington, New Mexico (the “City”) has heretofore issued and sold $80,410,000 aggregate principal
amount of City of Farmington, New Mexico Pollution Control Revenue Bonds, 1997 Series A (Tucson
Electric Power Company San Juan Project), all of which remain outstanding (the “1997 Bonds”), the
proceeds of which were used to refund and redeem prior bonds issued by the City, which financed
certain costs of the acquisition, construction and installation of projects consisting of undivided
interests in certain air and water pollution control facilities at the San Juan Generating Station
(the “Facilities”), an electric power generating plant located in San Juan County, New Mexico,
undivided interests in which are owned by Tucson Electric Power Company, a corporation organized
and existing under the laws of the State of Arizona (the “Company”);

WHEREAS, the Authority proposes to issue and sell its revenue bonds as provided herein (the
“Bonds”) to refinance, by the payment or redemption of the 1997 Bonds, or provision therefor, the
portion of the costs of the acquisition, construction and installation of the Facilities paid from
the proceeds of the 1997 Bonds, all as described in Exhibit A to the Loan Agreement, dated as of
October 1, 2009 (the “Loan Agreement”), between the Authority and the Company;

 

 

 

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

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

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

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

 

2

 

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

ARTICLE I

DEFINITIONS

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

Act:

“Act” shall mean Title 35, Chapter 5, Arizona Revised Statutes, and all acts supplemental
thereto or amendatory thereof.

Administration Expenses:

“Administration Expenses” shall mean the reasonable expenses incurred by the Authority with
respect to the Loan Agreement, this Indenture and any transaction or event contemplated by the Loan
Agreement or this Indenture, including the compensation and reimbursement of expenses and advances
payable to the Trustee, to the Paying Agent, any Co-Paying Agent and the Registrar and a pro rata
share of the Authority’s annual operating expenses in accordance with the provisions of Section
4.02(c) of The Industrial Development Authority of the County of Pima Procedural Pamphlet II, as
more fully described in the Tax Agreement.

Authority:

“Authority” shall mean The Industrial Development Authority of the County of Pima, an Arizona
nonprofit corporation designated by law as a political subdivision of the State of Arizona
incorporated for and with the approval of Pima County, Arizona, pursuant to the provisions of the
Constitution of the State of Arizona and the Act, its successors and their assigns.

Authorized Company Representative:

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

Bond Counsel:

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

Bond Fund:

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

Bonds:

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

 

3

 

Code:

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

Company:

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

Depositary:

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

Facilities:

“Facilities” shall mean the systems and facilities for the reduction, abatement or prevention
of pollution caused by the operation of the Plant which are described in Exhibit A to the Loan
Agreement, as from time to time amended or modified, and related improvements, as revised from time
to time to reflect any changes therein, additions thereto, substitutions therefor and deletions
therefrom permitted by the terms of the Loan Agreement, subject, however, to the provisions of
Section 7.01 of the Loan Agreement.

Government Obligations:

“Government Obligations” shall mean:

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

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

 

4

 

Indenture:

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

Investment Securities:

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

Loan Agreement:

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

Loan Payments:

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

1954 Code:

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

 

5

 

1997 Bonds:

“1997 Bonds” shall mean the $80,410,000 aggregate principal amount of City of Farmington, New
Mexico Pollution Control Revenue Bonds, 1997 Series A (Tucson Electric Power Company San Juan
Project) issued by the City of Farmington, New Mexico, all of which remain outstanding.

Notice by Mail:

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

Notice by Publication:

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

Plant:

“Plant” shall mean Units 1 and 2 and related common facilities of the San Juan Generating
Station, an electric power generating plant located northwest of and within 15 miles of the
corporate limits of the City in San Juan County, New Mexico, and any additions or improvements
thereto or replacements thereof.

Outstanding:

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

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

(b) those paid pursuant to Section 2.07 hereof;

 

6

 

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

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

Owner:

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

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

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

Rebate Fund:

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

Receipts and Revenues of the Authority from the Loan Agreement:

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

Record Date:

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

Registrar; Principal Office thereof:

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

Supplemental Indenture:

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

 

7

 

Supplemental Loan Agreement:

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

Tax Agreement:

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

Trust Estate:

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

Trustee; Principal Office thereof:

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

ARTICLE II

THE BONDS

Section 2.01 Creation of Bonds. There is hereby authorized and created under this Indenture,
for the purpose of providing moneys to pay, or redeem, or provide for the redemption therefor, of
the 1997 Bonds, an issue of Bonds, entitled to the benefit, protection and security of this
Indenture, in the aggregate principal amount of Eighty Million Four Hundred Ten Thousand Dollars
($80,410,000). Each of the Bonds shall be designated by the title “The Industrial Development
Authority of the County of Pima Pollution Control Revenue Bond, 2009 Series A (Tucson Electric
Power Company San Juan Project)”. The Bonds shall mature, subject to prior
redemption upon the terms and conditions hereinafter set forth, on October 1, 2020 and shall
bear interest from the date thereof until payment of the principal or redemption price thereof
shall have been made or provided for in accordance with the provisions hereof, whether at maturity,
upon redemption or otherwise, at the rate of FOUR POINT NINE FIVE PER CENTUM (4.95%) per annum,
with interest thereon payable semi-annually on each April 1 and October 1, commencing April 1,
2010. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day
months.

 

8

 

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

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

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

 

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

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

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

Section 2.05 Bonds Not General Obligations. Neither Pima County, Arizona nor the State of
Arizona shall in any event be liable for the payment of the principal of or premium, if any, or
interest on the Bonds, and neither the Bonds nor the premium, if any, or the interest thereon,
shall be construed to constitute an indebtedness of Pima County, Arizona or the State of Arizona
within the meaning of any constitutional or statutory provisions whatsoever. The Bonds and the
premium, if any, and the interest thereon shall be limited obligations of the Authority payable
solely from the Receipts and Revenues of the Authority from the Loan Agreement and the other moneys
pledged therefor under this Indenture, and such fact shall be plainly stated on the face of each
Bond.

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

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

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

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

 

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

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

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

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

 

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

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

Section 2.13 Applicability of Book-Entry Provisions. Anything in this Indenture to the
contrary notwithstanding, (a) the provisions of the Blanket Issuer Letter of Representations, dated
February 26, 1996, between the Authority and The Depository Trust Company relating to the manner of
and procedures for payment and redemption of Bonds and related matters shall apply so long as such
Depositary shall be the Owner of all Outstanding Bonds and (b) the Authority, the Trustee or the
Paying Agent, as applicable, may enter into a similar agreement, on terms satisfactory to the
Company, with any subsequent Depositary and the provisions thereof shall apply so long as such
Depositary shall be the Owner of all Outstanding Bonds.

ARTICLE III

REDEMPTION OF BONDS

Section 3.01 Redemption Provisions. (a) The Bonds shall be subject to redemption by the
Authority, at the direction of the Company, in whole at any time at the principal amount thereof
plus accrued interest to the redemption date, if:

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

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

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

 

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

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

 

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

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

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

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

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

 

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ARTICLE IV

THE BOND FUND

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

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

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

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

(ii) all Loan Payments; and

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

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

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

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

 

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

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

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

 

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ARTICLE V

DISPOSITION OF PROCEEDS

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

ARTICLE VI

INVESTMENTS

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

ARTICLE VII

GENERAL COVENANTS

Section 7.01 No General Obligations. Each and every covenant herein made, including all
covenants made in the various sections of this Article VII, is predicated upon the condition that
neither Pima County, Arizona nor the State of Arizona shall in any event be liable for the payment
of the principal of, or premium, if any, or interest on the Bonds or for the performance of any
pledge, mortgage, obligation or agreement created by or arising out of this Indenture or the
issuance of the Bonds, and further that neither the Bonds, nor the premium, if any, or interest
thereon, nor any such obligation or agreement of the Authority shall be construed to constitute an
indebtedness of Pima County, Arizona or the State of Arizona within the meaning of any
constitutional or statutory provisions whatsoever. The Bonds and the interest and premium, if any,
thereon shall be limited obligations of the Authority payable solely from the Receipts and Revenues
of the Authority from the Loan Agreement and the other moneys pledged therefor.

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

 

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

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

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

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

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

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

 

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

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

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

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

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

 

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ARTICLE VIII

DEFEASANCE

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

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

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

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

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

 

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

ARTICLE IX

DEFAULTS AND REMEDIES

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

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

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

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

 

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

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

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

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

(b) bring suit upon the Bonds; or

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

 

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

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

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

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

 

25

 

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

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

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

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

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

 

26

 

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

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

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

ARTICLE X

TRUSTEE; PAYING AGENT AND CO-PAYING AGENTS; REGISTRAR

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

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

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

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

 

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

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

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

 

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

 

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

Section 10.24 Qualifications of Registrar; Resignation; Removal. The Registrar shall be a
corporation or association duly organized under the laws of the United States of America or any
state or territory thereof, having a combined capital stock, surplus and undivided profits of at
least $15,000,000 and authorized by law to perform all the duties imposed upon it by this
Indenture. The Registrar may at any time resign and be discharged of the duties and obligations
created by this Indenture by giving at least sixty (60) days’ notice to the Authority, the Trustee
and the Company. The Registrar may be removed at any time, at the direction of the Company, by an
instrument signed by the Authority 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 Authority shall fail to appoint a Registrar hereunder, or in the event
that the Registrar shall resign or be removed, or be dissolved, or if the property or affairs of
the Registrar shall be taken under the control of any state or federal court or administrative body
because of bankruptcy or insolvency, or for any other reason, and the Authority shall not have
appointed its successor as Registrar, the Trustee shall ipso facto be deemed to be the Registrar
for all purposes of this Indenture until the appointment by the Authority of the Registrar or
successor Registrar, as the case may be.

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

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

 

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ARTICLE XI

EXECUTION OF INSTRUMENTS BY OWNERS OF BONDS AND

PROOF OF OWNERSHIP OF BONDS

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

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

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

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

ARTICLE XII

MODIFICATION OF THIS INDENTURE AND THE LOAN AGREEMENT

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

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

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

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

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

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

 

35

 

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

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

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

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

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

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

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

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

 

36

 

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

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

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

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

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

 

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

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

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

ARTICLE XIII

MISCELLANEOUS

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

 

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

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

Section 13.04 No Personal Liability of Authority Officials. No covenant or agreement
contained in the Bonds or in this Indenture shall be deemed to be the covenant or agreement of any
director, official, officer, agent, or employee of the Authority in his individual capacity, and
neither the members of the Board of Directors of the Authority 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 13.05 Bonds Owned by the Authority or the Company. In determining whether Owners of
the requisite aggregate principal amount of the Bonds have concurred in any direction, consent or
waiver under this Indenture, Bonds which are owned by the Authority or the Company or by any person
directly or indirectly controlling or controlled by or under direct or indirect common control with
the Company (unless the Authority, the Company or such person owns all Bonds which are then
Outstanding, determined without regard to this Section 13.05) shall be disregarded and deemed not
to be Outstanding for the purpose of any such determination, except that, for the purpose of
determining whether the Trustee shall be protected in relying on any such direction, consent or
waiver, only Bonds which the Trustee knows are so owned shall be so disregarded. Upon the request
of the Trustee, the Company and the Authority shall furnish to the Trustee a certificate
identifying all Bonds, if any, actually known to either of them to be owned or held by or for the
account of any of the above-described persons, and the Trustee shall be entitled to rely on such
certificate as conclusive evidence of the facts set forth therein and that all other Bonds are
Outstanding for the purposes of such determination. Bonds so owned which have been pledged in good
faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee
the pledgee’s right so to act with respect to such Bonds and that the pledgee is not the Authority
or the Company or any person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company. In case of a dispute as to such right, any decision by
the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

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

 

39

 

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

Section 13.08 Notices. Except as otherwise provided in this Indenture, all notices,
certificates, requests requisitions or other communications by the Authority, the Company, the
Trustee, the Paying Agent, any Co-Paying Agent or the Registrar pursuant to this Indenture shall be
in writing and shall be sufficiently given and shall be deemed given when mailed by registered
mail, postage prepaid, addressed as follows: If to the Authority, c/o Russo, Russo & Slania, P.C.,
6700 North Oracle Road, Suite 100, Tucson, Arizona 85704; if to the Company, One South Church
Avenue, Suite 100, Tucson, Arizona 85701, Attention: Treasurer; if to the Trustee, at 100 Wall
Street, Suite 1600, New York, New York 10005, Attention: Vice President; and if to the Paying
Agent, any Co-Paying Agent or the Registrar, at the address designated in the acceptance of
appointment or engagement. Any of the foregoing may, by notice given hereunder to each of the
others, designate any further or different addresses to which subsequent notices, certificates,
requests or other communications shall be sent hereunder.

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

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

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

 

40

 

IN WITNESS WHEREOF, The Industrial Development Authority of the County of Pima has caused this
Indenture to be executed by its President and U.S. Bank Trust National Association has caused this
Indenture to be executed on its behalf by its Vice President, all as of the day and year first
above written.

	 	 	 	 	 	 	 	 	 
	 	 	THE INDUSTRIAL DEVELOPMENT AUTHORITY	 	 
	 	 	OF THE COUNTY OF PIMA	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Stanley Lehman	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Stanley Lehman	 	 
	 

	 	 	 	Title:
	 	President	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	U.S. BANK TRUST NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	/s/ Patrick J. Crowley	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Patrick J. Crowley	 	 
	 

	 	 	 	Title:
	 	Vice President	 	 

 

 

 

EXHIBIT A

(FORM OF BOND)

No.

THE INDUSTRIAL DEVELOPMENT AUTHORITY

OF THE COUNTY OF PIMA

POLLUTION CONTROL REVENUE BOND,

2009 SERIES A

(TUCSON ELECTRIC POWER COMPANY SAN JUAN PROJECT)

	 	 	 
	INTEREST RATE (PER ANNUM):
	 	 
	MATURITY DATE:

	 	DATED:
	CUSIP:
	 	 
	REGISTERED OWNER:
	 	 
	PRINCIPAL AMOUNT:

	 	DOLLARS

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

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

 

A-1

 

This Bond is one of the duly authorized The Industrial Development Authority of the County of
Pima Pollution Control Revenue Bonds, 2009 Series A (Tucson Electric Power Company San Juan
Project) (the “Bonds”) of the Authority, aggregating Eighty Million Four Hundred Ten Thousand
Dollars ($80,410,000) in principal amount, issued under and pursuant to the Constitution and laws
of the State of Arizona, particularly Title 35, Chapter 5, Arizona Revised Statutes, as amended
(the “Act”), and the Indenture of Trust, dated as of October 1, 2009 (the “Indenture”), between the
Authority and U.S. Bank Trust National Association, as trustee (the “Trustee”), for the purpose of
refinancing, by payment or redemption of the City of Farmington, New Mexico’s Pollution Control
Revenue Bonds, 1997 Series A (Tucson Electric Power Company San Juan Project), or provision
therefor, a portion of the costs of the acquisition, construction and installation of projects
consisting of undivided interests in certain air and water pollution control facilities (the
“Facilities”) at the San Juan Generating Station (the “Plant”), an electric power generating plant
located in San Juan County, New Mexico, undivided interests in which are owned by Tucson Electric
Power Company, a corporation organized and existing under the laws of the State of Arizona (the
“Company”). Pursuant to the Loan Agreement, dated as of October 1, 2009 (the “Loan Agreement”),
between the Authority and the Company, the proceeds of the Bonds, other than accrued interest, if
any, paid by the initial purchasers thereof, will be loaned to the Company.

Neither Pima County, Arizona nor the State of Arizona shall in any event be liable for the
payment of the principal of or premium, if any, or interest on the Bonds, and neither the Bonds,
nor the premium, if any, or the interest thereon, shall be construed to constitute an indebtedness
of Pima County, Arizona or the State of Arizona within the meaning of any constitutional or
statutory provisions whatsoever. The Bonds and the premium, if any, and the interest thereon are
limited obligations of the Authority payable solely from the Receipts and Revenues of the Authority
from the Loan Agreement and other moneys pledged therefor under the Indenture.

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

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

 

A-2

 

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

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

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

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

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

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

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

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

 

A-3

 

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

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

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

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

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

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

 

A-4

 

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

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

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

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

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

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

 

A-5

 

IN WITNESS WHEREOF, The Industrial Development Authority of the County of Pima has caused this
Bond to be executed with the manual or facsimile signature of its President or Vice President and
attested with the manual or facsimile signature of its Secretary or Assistant Secretary.

	 	 	 	 	 	 	 
	 	 	THE INDUSTRIAL DEVELOPMENT	 	 
	 	 	AUTHORITY OF THE COUNTY OF PIMA	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

President
	 	 

ATTEST:

	 	 	 
	 

Secretary

	 	 

 

A-6

 

EXHIBIT B

(FORM FOR ORDINARY REGISTRATION OF TRANSFER)

COMPLETE AND SIGN THIS FORM FOR ORDINARY

REGISTRATION OF TRANSFER

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

Please Insert Social Security Or Other Identifying Number of Assignee

	 	 	 
	 

	 	 
	 
	 	 
	 

	 	 

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

	 	 	 

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

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

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

 

B-1

 

EXHIBIT C

(FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION)

CERTIFICATE OF AUTHENTICATION

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

	 	 	 	 	 	 	 
	 	 	U.S. BANK TRUST NATIONAL ASSOCIATION,	 	 
	 	 	as Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Authorized Officer
	 	 

Date of Authentication: ______________________

 

C-1Exhibit 4(b)

  Exhibit  4(b)

 

LOAN AGREEMENT

(2009 SERIES A)

BETWEEN

THE INDUSTRIAL DEVELOPMENT AUTHORITY

OF THE COUNTY OF PIMA

AND

TUCSON ELECTRIC POWER COMPANY

 

DATED AS OF OCTOBER 1, 2009

 

RELATING TO

POLLUTION CONTROL REVENUE BONDS,

2009 SERIES A

(TUCSON ELECTRIC POWER COMPANY SAN JUAN PROJECT)

 

 

 

 

TABLE OF CONTENTS*

	 	 	 	 	 
	 	 	Page	 
	 
	LOAN AGREEMENT
	 	 	1	 
	 
	ARTICLE I — DEFINITIONS
	 	 	2	 
	SECTION 1.01. Definitions
	 	 	2	 
	SECTION 1.02. Incorporation of Certain Definitions by Reference
	 	 	5	 
	 
	ARTICLE II REPRESENTATIONS AND WARRANTIES
	 	 	5	 
	SECTION 2.01. Representations and Warranties of the Authority
	 	 	5	 
	SECTION 2.02. Representations and Warranties of the Company
	 	 	6	 
	 
	ARTICLE III THE FACILITIES
	 	 	6	 
	SECTION 3.01. Facilities; Property of the Company
	 	 	6	 
	SECTION 3.02. Maintenance of Facilities; Remodeling
	 	 	7	 
	SECTION 3.03. Insurance
	 	 	7	 
	SECTION 3.04. Condemnation
	 	 	7	 
	 
	ARTICLE IV ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS OF THE BONDS
	 	 	7	 
	SECTION 4.01. Issuance of the Bonds
	 	 	7	 
	SECTION 4.02. Issuance of Other Obligations
	 	 	8	 
	SECTION 4.03. The Loan; Disposition of Bond Proceeds
	 	 	8	 
	SECTION 4.04. Investment of Moneys in Funds and Accounts
	 	 	8	 
	 
	ARTICLE V LOAN PAYMENTS; OTHER OBLIGATIONS
	 	 	8	 
	SECTION 5.01. Loan Payments
	 	 	8	 
	SECTION 5.02. Payments Assigned; Obligation Absolute
	 	 	8	 
	SECTION 5.03. Payment of Expenses
	 	 	9	 
	SECTION 5.04. Indemnification
	 	 	9	 
	SECTION 5.05. Payment of Taxes; Discharge of Liens
	 	 	10	 
	 
	ARTICLE VI SPECIAL COVENANTS
	 	 	10	 
	SECTION 6.02. Permits or Licenses
	 	 	11	 
	SECTION 6.03. Authority’s Access to Facilities
	 	 	11	 
	SECTION 6.04. Tax-Exempt Status of Interest on Bonds
	 	 	11	 

 

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

 

 

	 	 	 	 	 
	 	 	Page	 
	 
	SECTION 6.05. Use of Facilities
	 	 	12	 
	SECTION 6.06. Financing Statements
	 	 	12	 
	 
	ARTICLE VII ASSIGNMENT, LEASING AND SELLING
	 	 	13	 
	SECTION 7.01. Conditions
	 	 	13	 
	SECTION 7.02. Instrument Furnished to the Authority and Trustee
	 	 	15	 
	SECTION 7.03. Limitation
	 	 	15	 
	 
	ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
	 	 	15	 
	SECTION 8.01. Events of Default
	 	 	15	 
	SECTION 8.02. Force Majeure
	 	 	16	 
	SECTION 8.03. Remedies
	 	 	16	 
	SECTION 8.04. No Remedy Exclusive
	 	 	17	 
	SECTION 8.05. Reimbursement of Attorneys’ and Agents’ Fees
	 	 	17	 
	 
	ARTICLE IX REDEMPTION OF BONDS
	 	 	17	 
	SECTION 9.01. Redemption of Bonds
	 	 	17	 
	SECTION 9.02. Compliance with the Indenture
	 	 	17	 
	 
	ARTICLE X MISCELLANEOUS
	 	 	18	 
	SECTION 10.01. Term of Agreement
	 	 	18	 
	SECTION 10.02. Notices
	 	 	18	 
	SECTION 10.03. Parties in Interest
	 	 	18	 
	SECTION 10.04. Amendments
	 	 	18	 
	SECTION 10.05. Counterparts
	 	 	19	 
	SECTION 10.06. Severability
	 	 	19	 
	SECTION 10.07. Governing Law
	 	 	19	 
	SECTION 10.08. Notice Regarding Cancellation of Contracts
	 	 	19	 
	 
	 	 	 	 
	Signatures
	 	 	18	 
	Exhibit A — Description of the Facilities
	 	 	A-1	 

 

iii

 

LOAN AGREEMENT

THIS LOAN AGREEMENT (2009 Series A), dated as of October 1, 2009 (this “Agreement”), between
THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE COUNTY OF PIMA, an Arizona nonprofit corporation
designated by law as a political subdivision of the State of Arizona (hereinafter called the
“Authority”), and TUCSON ELECTRIC POWER COMPANY, a corporation organized and existing under the
laws of the State of Arizona (hereinafter called the “Company”),

W I T N E S S E T H:

WHEREAS, the Authority is authorized and empowered under Title 35, Chapter 5, Arizona Revised
Statutes, as amended (the “Act”), to issue its bonds in accordance with the Act and to make secured
or unsecured loans for the purpose of financing or refinancing the acquisition, construction,
improvement or equipping of projects consisting of land, any building or other improvement, and all
real and personal properties, including but not limited to machinery and equipment, whether or not
now in existence or under construction, whether located within or without the State of Arizona or
Pima County, which shall be suitable for, among other things, facilities for the furnishing of
electric energy, gas or water, air and water pollution control facilities and sewage and solid
waste disposal facilities, and to charge and collect interest on such loans and pledge the proceeds
of loan agreements as security for the payment of the principal of and interest on bonds, or
designated issues of bonds, issued by the Authority and any agreements made in connection
therewith, whenever the Board of Directors of the Authority finds such loans to further advance the
interest of the Authority or the public and in the public interest;

WHEREAS, pursuant to the provisions of the Pollution Control Revenue Bond Act, Chapter 397,
Laws of 1973 of the State of New Mexico, 31st Legislature, 1st Session, as amended, the City of
Farmington, New Mexico (the “City”) has heretofore issued and sold $80,410,000 aggregate principal
amount of City of Farmington, New Mexico Pollution Control Revenue Bonds, 1997 Series A (Tucson
Electric Power Company San Juan Project), all of which remain outstanding (the “1997 Bonds”), the
proceeds of which were used to refund and redeem prior bonds issued by the City, which financed
certain costs of the acquisition, construction and installation of projects consisting of undivided
interests in certain air and water pollution control facilities at the San Juan Generating Station
(the “Facilities”), an electric power generating plant located in San Juan County, New Mexico,
undivided interests in which are owned by Tucson Electric Power Company, a corporation organized
and existing under the laws of the State of Arizona (the “Company”);

WHEREAS, the Authority proposes to issue and sell its revenue bonds (the “Bonds”) to
refinance, by the payment or redemption of the 1997 Bonds, or provision therefor, the portion of
the costs of the acquisition, construction and installation of the Facilities paid from the
proceeds of the 1997 Bonds, all as described in Exhibit A to this Agreement;

 

 

 

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

ARTICLE I

DEFINITIONS

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

Act:

“Act” shall mean Title 35, Chapter 5, Arizona Revised Statutes, and all acts supplemental
thereto or amendatory thereof.

Administration Expenses:

“Administration Expenses” shall mean the reasonable expenses incurred by the Authority with
respect to this Agreement, the Indenture and any transaction or event contemplated by this
Agreement or the Indenture, including the compensation and reimbursement of expenses and advances
payable to the Trustee, to the Paying Agent, any Co-Paying Agent and the Registrar under the
Indenture and a pro rata share of the Authority’s annual operating expenses in accordance with the
provisions of Section 4.02(c) of the Industrial Development Authority of the County of Pima
Procedural Pamphlet II.

Agreement:

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

Authority:

“Authority” shall mean The Industrial Development Authority of the County of Pima, an Arizona
nonprofit corporation designated by law as a political subdivision of the State of Arizona
incorporated for and with the approval of Pima County, Arizona, pursuant to the provisions of the
Constitution of the State of Arizona and the Act, its successors and their assigns.

Authorized Company Representative:

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

 

2

 

Bond Counsel:

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

Bond Fund:

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

Bonds:

“Bond” or “Bonds” shall mean The Industrial Development Authority of the County of Pima
Pollution Control Revenue Bonds, 2009 Series A (Tucson Electric Power Company San Juan Project).

Code:

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

Company:

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

Facilities:

“Facilities” shall mean the systems and facilities for the reduction, abatement or prevention
of pollution caused by the operation of the Plant which are described in Exhibit A hereto, as from
time to time amended or modified, and related improvements, as revised from time to time to reflect
any changes herein, additions hereto, substitutions herefor and deletions herefrom permitted
hereunder, subject, however, to the provisions of Section 7.01 hereof.

Indenture:

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

 

3

 

Loan Payments:

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

1954 Code:

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

1997 Bonds:

“1997 Bonds” shall mean the $80,410,000 aggregate principal amount of City of Farmington, New
Mexico Pollution Control Revenue Bonds, 1997 Series A (Tucson Electric Power Company San Juan
Project) issued by the City of Farmington, New Mexico, all of which remain outstanding.

Outstanding:

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

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

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

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

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

Person:

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

Plant:

“Plant” shall mean Units 1 and 2 and related common facilities of the San Juan Generating
Station, an electric power generating plant located northwest of and within 15 miles of the
corporate limits of the City in San Juan County, New Mexico, and any additions or improvements
thereto or replacements thereof.

 

4

 

Plant Agreements:

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

Tax Agreement:

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

Trustee:

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

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

ARTICLE II

REPRESENTATIONS AND WARRANTIES

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

(a) The Authority is an Arizona nonprofit corporation designated by law as a
political subdivision of the State of Arizona created and existing under the Constitution
and laws of the State of Arizona;

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

(c) The execution and delivery of this Agreement and the Indenture by the Authority do
not, and consummation of the transactions contemplated hereby and fulfillment of the terms
hereof and thereof by the Authority 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 Authority is now a party or by which it is now
bound, or, to the best knowledge of the Authority, any order, rule or regulation applicable
to the Authority of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction over the Authority
or over any of its properties, or the Constitution or laws of the State of Arizona.

 

5

 

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

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

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

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

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

(e) The Facilities consist of those facilities described in Exhibit A attached hereto,
and so long as the Company owns an interest in the Facilities, the Company shall cause the
Facilities to be used solely for purposes contemplated by the Act ;

(f) The Facilities are located in the State of New Mexico;

(g) The Company presently owns an undivided interest in the Plant; and

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

ARTICLE III

THE FACILITIES

SECTION 3.01. Facilities; Property of the Company. The Company presently owns an undivided
interest in the Plant and the Authority shall have no right, title or interest in the Facilities.

 

6

 

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

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

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

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

ARTICLE IV

ISSUANCE OF THE BONDS; THE LOANS; DISPOSITION OF PROCEEDS

OF THE BONDS

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

 

7

 

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

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

The Authority shall establish the Bond Fund with the Trustee in accordance with Section 4.01
of the Indenture.

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

ARTICLE V

LOAN PAYMENTS; OTHER OBLIGATIONS

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

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

 

8

 

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

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

The Company will indemnify and hold the Authority, the County of Pima, Arizona and the
Trustee, free and harmless from any loss, claim, damage, tax, penalty, liability, disbursement,
litigation expenses, attorneys’ and other agents’ fees and expenses or court costs arising out of,
or in any way relating to, the execution or performance of this Agreement, the issuance or sale of
the Bonds, actions taken under the Indenture or any other cause whatsoever pertaining to the
Facilities, except (i) in the case the Trustee, as a result of the negligence or bad faith or
willful misconduct of the Trustee; and (ii) in the case of the Authority and the County of Pima,
Arizona, as a result of gross negligence or bad faith of the Authority or the County of Pima,
Arizona.

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

 

9

 

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

ARTICLE VI

SPECIAL COVENANTS

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

 

10

 

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

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

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

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

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

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

 

11

 

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

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

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

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

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

 

12

 

ARTICLE VII

ASSIGNMENT, LEASING AND SELLING

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

 

13

 

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

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

For purposes of this Section 7.01:

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

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

 

14

 

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

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

ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

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

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

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

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

 

15

 

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

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

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

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

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

 

16

 

SECTION 8.04. No Remedy Exclusive. No remedy conferred upon or reserved to the Authority
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 Authority to exercise any remedy reserved to
it in this Article VIII, it shall not be necessary to give any notice, other than such notice as
may be herein expressly required.

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

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

ARTICLE IX

REDEMPTION OF BONDS

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

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

 

17

 

ARTICLE X

MISCELLANEOUS

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

SECTION 10.02. Notices. Except as otherwise provided in this Agreement, all notices,
certificates, requests, requisitions and other communications hereunder shall be in writing and
shall be sufficiently given and shall be deemed given when mailed by registered mail, postage
prepaid, addressed as follows: if to the Authority, c/o Russo, Russo & Slania, P.C., 6700 North
Oracle Road, Suite 100, Tucson, Arizona 85704; if to the Company, at One South Church Avenue, Suite
100, Tucson, Arizona 85701, Attention: Treasurer; and if to the Trustee, at such address as shall
be designated by it in the Indenture. A copy of each notice, certificate, request or other
communication given hereunder to the Authority, the Company, or the Trustee shall also be given to the others.
The Authority, the Company, and the Trustee may, by notice given hereunder, designate any further
or different addresses to which subsequent notices, certificates, requests or other communications
shall be sent.

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

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

 

18

 

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

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

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

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

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

[Remainder of Page Intentionally Left Blank]

 

19

 

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

	 	 	 	 	 
	 	THE INDUSTRIAL DEVELOPMENT AUTHORITY

OF THE COUNTY OF PIMA

 	 
	 	By:  	/s/ Stanley Lehman
 	 
	 	 	Name:  	Stanley Lehman 	 
	 	 	Title:  	President 	 

	 	 	 	 	 
	 	TUCSON ELECTRIC POWER COMPANY

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

Signature Page to Loan Agreement

 

 

EXHIBIT A

A portion of the costs of the acquisition, construction and installation of the following
Facilities will be refinanced with the proceeds of The Industrial Development Authority of the
County of Pima Pollution Control Revenue Bonds, 2009 Series A (Tucson Electric Power Company San
Juan Project) issued by The Industrial Development Authority of the County of Pima and referred to
in the foregoing Loan Agreement.

 

DESCRIPTION OF THE FACILITIES

The Facilities consist of various systems and facilities to abate or control water and
atmospheric pollution from the generation of electricity by Units 1 and 2 of the San Juan
Generating Station (the “Plant”). Such systems and facilities contain equipment to collect,
remove, alter, and dispose of air and water pollutants so that gaseous and liquid emissions to the
environment from Units 1 and 2 meet all applicable government air and water quality standards.
Both Units 1 and 2 are coal-fired, steam turbine electric generating units. Combustion of
pulverized coal in these Units is the primary cause of pollution at the Plant. Ash, nitrogen
oxide, and sulfur oxides are by-products of combustion that must be controlled in order to meet
environmental quality standards. Because pulverized coal is used as a fuel, coal dust must be
suppressed when coal is loaded, transported, or crushed. Also, the generation of steam requires
large quantities of fresh water for boiler makeup and condenser cooling. Cooling tower blowdown
has a high concentration of dissolved solids and must be treated in order to prevent the
possibility of contamination of surrounding surface water with inorganic salts. In addition,
wastewater from the Plant’s sanitary system must be treated.

Major components of the project are as follows:

(A) Ash Handling System. A pneumatic system including blowers, valves, pipes, storage silos,
unloading facilities, associated structural supports and controls to transfer and store fly ash
collected from the steam generator economizer and precipitator hoppers of both Units 1 and 2. A
high pressure water sluicing system including pumps, valves, ash grinder, pipes, dewatering tanks,
unloading facilities, associated structural supports, and controls to transfer and store bottom ash
from the steam generators of both Units 1 and 2.

(B) Nitrogen Oxides Reduction System. Windbox modification to include overfire air ports to
reduce NOx formation by off stoichiometric combustion for Unit 2. Windbox modification to include
overfire air ports and duct work, dampers, fan and motor for gas recirculation to reduce NOx
formation by reducing flame temperatures and diluting combustion air for Unit 1.

 

 

(C) Electrostatic Precipitators. High efficiency electrostatic precipitators for both Units 1
and 2, along with associated structural supports and duct work, to remove fly ash from flue gas
exiting the steam boiler.

(D) Sulfur Oxide and Particulate Removal System. Duplicate equipment is provided at both
Units 1 and 2.

(1) Venturi scrubber—A variable throat venturi to provide (i) backup fly ash removal to the
electrostatic precipitators and (ii) incidental sulfur oxide removal.

(2) Sulfur oxide absorber—Open, multi-stage, spray chamber to contact a reagent solution with
sulfur oxide in the flue gas in order to chemically remove the sulfur oxide.

(3) Demisting train—Cyclone separator followed by a chevron demister and a mesh pad demister
(i) to remove fly ash from the flue gas in case of precipitator upset and (ii) to prevent particle
reentrainment from the scrubber system itself by physical entrapment of particulate matter.

(4) Reheat section—Oil burner and related duct work to reheat flue gas in order to keep
sulfur oxide in a gaseous form to maintain operating reliability of the Scrubber System and to
provide additional plume buoyancy.

(5) Calcium sulfate stabilization system—Primary and secondary dewatering tanks, a mixing and
conditioning tank, reagent dispensing tanks, and associated piping, conveyors, pumps, and other
equipment to chemically fix calcium sulfate residue.

(E) Dust Suppression System. Pipes, pumps, pipe nozzles, tanks, and associated equipment to
spray water over coal transfer points in order to control the escape of coal dust to the
atmosphere.

(F) Wastewater Treatment System.

(1) Collecting basin—A two and one-half million gallon soil cement pond to receive and settle
wastewater from steam boiler blowdown, cooling tower blowdown, and sanitary waste treatment.

(2) Evaporator—Mechanical evaporator to remove inorganic salts from process wastewater.

(3) Sanitary system—An extended aeration system to treat sanitary wastes.

(4) Sewer system—Sewers, pipes, pumps, sumps, and associated equipment necessary to
interconnect the various components of the Wastewater Treatment System.

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