Document:

indenture.htm

    Exhibit
4(c)

     

    
      EXECUTION  COPY

      

       

      INDENTURE
OF TRUST

      (2008
SERIES B)

       

       

      BETWEEN

      
 

      THE
INDUSTRIAL DEVELOPMENT AUTHORITY

      OF THE
COUNTY OF PIMA

       

       

      AND

       

       

      U.S. BANK
TRUST NATIONAL ASSOCIATION

       

      

      ________

      

       

       

      DATED AS
OF JUNE 1, 2008

       

       

      
        ________

       

      Authorizing

       

      Industrial
Development Revenue Bonds,

      2008
Series B

      (Tucson
Electric Power Company Project)

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      
         

      

      TABLE OF
CONTENTS*

       

      Page

      

      
        	 
      	
                ARTICLE
      I

DEFINITIONS

              	 
      
	 
      	 
      	 
      
	
                Section
      1.01.

              	
                Definitions

              	
                3

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      II

                 

                THE
      BONDS

              	 
      
	 
      	 
      	 
      
	
                Section
      2.01.

              	
                Creation
      of Bonds

              	
                15

              
	
                Section
      2.02.

              	
                Denominations
      and Maturity; Interest Rates

              	
                15

              
	
                Section
      2.03.

              	
                Form
      of Bonds

              	
                24

              
	
                Section
      2.04.

              	
                Execution
      of Bonds

              	
                25

              
	
                Section
      2.05.

              	
                Authentication
      of Bonds

              	
                25

              
	
                Section
      2.06.

              	
                Bonds
      Not General Obligations

              	
                25

              
	
                Section
      2.07.

              	
                Prerequisites
      to Authentication of Bonds

              	
                25

              
	
                Section
      2.08.

              	
                Lost
      or Destroyed Bonds or Bonds Canceled in Error

              	
                26

              
	
                Section
      2.09.

              	
                Transfer,
      Registration and Exchange of Bonds

              	
                26

              
	
                Section
      2.10.

              	
                Other
      Obligations

              	
                28

              
	
                Section
      2.11.

              	
                Temporary
      Bonds

              	
                28

              
	
                Section
      2.12.

              	
                Cancellation
      of Bonds

              	
                29

              
	
                Section
      2.13.

              	
                Payment
      of Principal and Interest

              	
                29

              
	
                Section
      2.14.

              	
                Applicability
      of Book-Entry Provisions

              	
                29

              
	
                Section
      2.15.

              	
                Disposition
      of Proceeds

              	
                29

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      III

                 

                REDEMPTION
      OF BONDS

              	 
      
	 
      	 
      	 
      
	
                Section
      3.01.

              	
                Redemption
      Provisions

              	
                29

              
	
                Section
      3.02.

              	
                Selection
      of Bonds to be Redeemed

              	
                31

              
	
                Section
      3.03.

              	
                Procedure
      for Redemption

              	
                32

              
	
                Section
      3.04.

              	
                Payment
      of Redemption Price

              	
                33

              
	
                Section
      3.05.

              	
                No
      Partial Redemption After Default

              	
                33

              
	
                Section
      3.06.

              	
                Purchase
      in Lieu of Redemption

              	
                33

              

      

       

      
        
          

        

        
          	
                  *

                	
                  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.

                

        

         

      

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	 
      	
                ARTICLE
      IV

                 

                THE
      BOND FUND

              	 
      
	 
      	 
      	 
      
	
                Section
      4.01.

              	
                Creation
      of Bond Fund

              	
                33

              
	
                Section
      4.02.

              	
                Liens

              	
                35

              
	
                Section
      4.03.

              	
                Custody
      of Bond Fund; Withdrawal of Moneys

              	
                35

              
	
                Section
      4.04.

              	
                Bonds
      Not Presented for Payment

              	
                35

              
	
                Section
      4.05.

              	
                Moneys
      Held in Trust

              	
                36

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      V

                 

                PURCHASE
      AND REMARKETING OF BONDS

              	 
      
	 
      	 
      	 
      
	
                Section
      5.01.

              	
                Purchase
      of Bonds

              	
                36

              
	
                Section
      5.02.

              	
                Remarketing
      of Bonds

              	
                39

              
	
                Section
      5.03.

              	
                Purchase
      Fund; Purchase of Bonds Delivered to Tender Agent

              	
                39

              
	
                Section
      5.04.

              	
                Delivery
      of Remarketed or Purchased Bonds

              	
                41

              
	
                Section
      5.05.

              	
                Bonds
      Pledged to the Credit Facility Issuer

              	
                41

              
	
                Section
      5.06.

              	
                Drawings
      on Credit Facility

              	
                42

              
	
                Section
      5.07.

              	
                Delivery
      of Proceeds of Sale

              	
                43

              
	
                Section
      5.08.

              	
                Limitations
      on Purchase

              	
                43

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      VI

                 

                INVESTMENTS

              	 
      
	 
      	 
      	 
      
	
                Section
      6.01.

              	
                Investments

              	
                44

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      VII

                 

                CREDIT
      FACILITIES

              	 
      
	 
      	 
      	 
      
	
                Section
      7.01.

              	
                Initial
      Letter of Credit

              	
                44

              
	
                Section
      7.02.

              	
                Termination

              	
                45

              
	
                Section
      7.03.

              	
                Alternate
      Credit Facilities

              	
                45

              
	
                Section
      7.04.

              	
                Mandatory
      Purchase of Bonds

              	
                46

              
	
                Section
      7.05.

              	
                Notices

              	
                47

              
	
                Section
      7.06.

              	
                Other
      Credit Enhancement; No Credit Facility

              	
                48

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      VIII

                 

                GENERAL
      COVENANTS

              	 
      
	 
      	 
      	 
      
	
                Section
      8.01.

              	
                No
      General Obligations

              	
                48

              
	
                Section
      8.02.

              	
                Performance
      of Covenants of the Authority; Representations

              	
                48

              
	
                Section
      8.03.

              	
                Maintenance
      of Rights and Powers; Compliance with Laws

              	
                49

              
	
                Section
      8.04.

              	
                Enforcement
      of Obligations of the Company; Amendments

              	
                49

              

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
      8.05.

              	
                Further
      Instruments

              	
                49

              
	
                Section
      8.06.

              	
                No
      Disposition of Trust Estate

              	
                49

              
	
                Section
      8.07.

              	
                Financing
      Statements

              	
                49

              
	
                Section
      8.08.

              	
                Tax
      Covenants; Rebate Fund

              	
                49

              
	
                Section
      8.09.

              	
                Notices
      of Trustee

              	
                50

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      IX

                 

                DEFEASANCE

              	 
      
	 
      	 
      	 
      
	
                Section
      9.01.

              	
                Defeasance

              	
                51

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      X

                 

                DEFAULTS
      AND REMEDIES

              	 
      
	 
      	 
      	 
      
	
                Section
      10.01.

              	
                Events
      of Default

              	
                53

              
	
                Section
      10.02.

              	
                Remedies

              	
                54

              
	
                Section
      10.03.

              	
                Restoration
      to Former Position

              	
                54

              
	
                Section
      10.04.

              	
                Owners’
      Right to Direct Proceedings

              	
                55

              
	
                Section
      10.05.

              	
                Limitation
      on Owners’ Right to Institute Proceedings

              	
                55

              
	
                Section
      10.06.

              	
                No
      Impairment of Right to Enforce Payment

              	
                55

              
	
                Section
      10.07.

              	
                Proceedings
      by Trustee without Possession of Bonds

              	
                55

              
	
                Section
      10.08.

              	
                No
      Remedy Exclusive

              	
                56

              
	
                Section
      10.09.

              	
                No
      Waiver of Remedies

              	
                56

              
	
                Section
      10.10.

              	
                Application
      of Moneys

              	
                56

              
	
                Section
      10.11.

              	
                Severability
      of Remedies

              	
                57

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      XI

                 

                TRUSTEE;
      PAYING AGENT AND CO PAYING AGENTS; REGISTRAR

              	 
      
	 
      	 
      	 
      
	
                Section
      11.01.

              	
                Acceptance
      of Trusts

              	
                57

              
	
                Section
      11.02.

              	
                No
      Responsibility for Recitals

              	
                57

              
	
                Section
      11.03.

              	
                Limitations
      on Liability

              	
                57

              
	
                Section
      11.04.

              	
                Compensation,
      Expenses and Advances

              	
                57

              
	
                Section
      11.05.

              	
                Notice
      of Events of Default

              	
                58

              
	
                Section
      11.06.

              	
                Action
      by Trustee

              	
                58

              
	
                Section
      11.07.

              	
                Good
      Faith Reliance

              	
                59

              
	
                Section
      11.08.

              	
                Dealings
      in Bonds and with the Authority and the Company

              	
                59

              
	
                Section
      11.09.

              	
                Allowance
      of Interest

              	
                59

              
	
                Section
      11.10.

              	
                Construction
      of Indenture

              	
                59

              
	
                Section
      11.11.

              	
                Resignation
      of Trustee

              	
                59

              
	
                Section
      11.12.

              	
                Removal
      of Trustee

              	
                60

              
	
                Section
      11.13.

              	
                Appointment
      of Successor Trustee

              	
                60

              
	
                Section
      11.14.

              	
                Qualifications
      of Successor Trustee

              	
                61

              
	
                Section
      11.15.

              	
                Judicial
      Appointment of Successor Trustee

              	
                61

              

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
      11.16.

              	
                Acceptance
      of Trusts by Successor Trustee

              	
                61

              
	
                Section
      11.17.

              	
                Successor
      by Merger or Consolidation

              	
                61

              
	
                Section
      11.18.

              	
                Standard
      of Care

              	
                62

              
	
                Section
      11.19.

              	
                Notice
      to Owners of Bonds of Event of Default

              	
                62

              
	
                Section
      11.20.

              	
                Intervention
      in Litigation of the Authority

              	
                62

              
	
                Section
      11.21.

              	
                Paying
      Agent; Co Paying Agents

              	
                62

              
	
                Section
      11.22.

              	
                Qualifications
      of Paying Agent and Co Paying Agents; Resignation; Removal

              	
                63

              
	
                Section
      11.23.

              	
                Registrar

              	
                63

              
	
                Section
      11.24.

              	
                Qualifications
      of Registrar; Resignation; Removal

              	
                64

              
	
                Section
      11.25.

              	
                Several
      Capacities

              	
                64

              
	
                Section
      11.26.

              	
                Fiduciary
      for Bondholders

              	
                64

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      XII

                 

                THE
      REMARKETING AGENT AND THE TENDER AGENT

              	 
      
	
                Section
      12.01.

              	
                The
      Remarketing Agent

              	
                64

              
	
                Section
      12.02.

              	
                The
      Tender Agent

              	
                65

              
	
                Section
      12.03.

              	
                Notices

              	
                66

              
	
                Section
      12.04.

              	
                Several
      Capacities

              	
                66

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      XIII

                 

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

              	 
      
	 
      	 
      	 
      
	
                Section
      13.01.

              	
                Execution
      of Instruments; Proof of Ownership

              	
                67

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      XIV

                 

                MODIFICATION
      OF THIS INDENTURE AND THE LOAN AGREEMENT

              	 
      
	 
      	 
      	 
      
	
                Section
      14.01.

              	
                Limitations

              	
                67

              
	
                Section
      14.02.

              	
                Supplemental
      Indentures without Owner Consent

              	
                67

              
	
                Section
      14.03.

              	
                Supplemental
      Indentures with Consent of Owners

              	
                69

              
	
                Section
      14.04.

              	
                Effect
      of Supplemental Indenture

              	
                70

              
	
                Section
      14.05.

              	
                Consent
      of the Company or Credit Facility Issuer

              	
                70

              
	
                Section
      14.06.

              	
                Amendment
      of Loan Agreement without Consent of Owners

              	
                71

              
	
                Section
      14.07.

              	
                Amendment
      of Loan Agreement with Consent of Owners

              	
                71

              
	 
      	 
      	 
      
	 
      	
                ARTICLE
      XV

                 

                MISCELLANEOUS

              	 
      
	 	 	 
	
                Section
      15.01.

              	
                Successors
      of the Authority

              	
                72

              
	
                Section
      15.02.

              	
                Parties
      in Interest

              	
                72

              
	
                Section
      15.03.

              	
                Severability

              	
                72

              

      

       

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

       

      
        	
                Section
      15.04.

              	
                No
      Personal Liability of Authority Officials

              	
                72

              
	
                Section
      15.05.

              	
                Bonds
      Owned by the Authority or the Company

              	
                72

              
	
                Section
      15.06.

              	
                Counterparts

              	
                73

              
	
                Section
      15.07.

              	
                Governing
      Law

              	
                73

              
	
                Section
      15.08.

              	
                Notices

              	
                73

              
	
                Section
      15.09.

              	
                Holidays

              	
                73

              
	
                Section
      15.10.

              	
                Statutory
      Notice Regarding Cancellation of Contracts

              	
                74

              
	
                Section
      15.11.

              	
                Notice
      of Change

              	
                74

              

      

      

      

      
        	
                Exhibit
      A – Form of 2008 Series B Bond

              	
                A-1

              
	
                Exhibit
      B – Form of Endorsement of Transfer

              	
                B-1

              
	
                Exhibit
      C – Form of Certificate of Authentication

              	
                C-1

              

      

      

      
        
          
          

        

        
          v

          
            

          

        

        
          
          

        

      

      
         

      

      INDENTURE
OF TRUST

       

      THIS
INDENTURE OF TRUST (2008 Series B), dated as of June 1, 2008 (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,
the Authority has heretofore issued and sold $150,000,000 aggregate principal
amount of The Industrial Development Authority of the County of Pima Industrial
Development Revenue Bonds, 1997 Series B (Tucson Electric Power Company
Project), of which $130,000,000 remain outstanding (the “1997 Bonds”), the
proceeds of which were loaned to the Company to refinance, by the payment or
redemption of The Industrial Development Authority of the County of Pima
Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power
Company General Project) (the “1982 Bonds due June 15, 2022”), and The
Industrial Development Authority of the County of Pima Industrial Development
Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project)
(the “1982 Bonds due July 1, 2022” and, together with the 1982 Bonds due June
15, 2022, the “1982 Bonds”) or provision therefor, the portion of the costs of
the acquisition, construction, improvement and equipping of certain of its
facilities for the furnishing of electric energy (the “Facilities”) paid from
the proceeds of the 1982 Bonds;

       

      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,
improvement and equipping of the Facilities paid from the proceeds of the 1997
Bonds, all as described in Exhibit A to the Loan Agreement, dated as of June 1,
2008 (the “Loan Agreement”), between the Authority and the Company;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      WHEREAS,
the Company has elected to cause and is causing to be delivered to the Trustee
an irrevocable direct pay letter of credit issued by JPMorgan Chase Bank,
N.A.;

       

      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 IX 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 4.04 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.

       

      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:

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      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.

       

      Alternate
Credit Facility:

       

      “Alternate
Credit Facility” shall mean any direct pay letter of credit or any bond
insurance policy, letter of credit, guaranty, surety bond, line of credit,
revolving credit agreement, standby bond purchase agreement or other agreement
or security device delivered to the Trustee pursuant to Section 7.03 and
providing for (i) payment of the principal, interest and redemption premium on
the Bonds or a portion thereof, (ii) payment of the purchase price of the Bonds
or (iii) both (i) and (ii).

       

      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.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      Authorized
Credit Facility Representative:

       

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

       

      Bank:

       

      “Bank”
shall mean the issuer of the Letter of Credit, in its capacity as issuer of the
Letter of Credit, its successors in such capacity and their
assigns.

       

      Bankruptcy
Counsel:

       

      “Bankruptcy
Counsel” shall mean nationally recognized counsel experienced in bankruptcy
matters as selected by the Company.

       

      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.

       

      Book-Entry
Form; Book-Entry System:

       

      “Book-Entry
Form” or “Book-Entry System” means a form or system, as applicable, under which
physical Bond certificates in fully registered form are registered only in the
name of a Depository or its nominee as Owner, with the physical Bond
certificates held by and “immobilized” in the custody of the Depository, and the
book-entry system maintained by and the responsibility of others than the
Authority or the Trustee is the record that identifies and records the transfer
of the interests of the owners of book-entry interests in those
Bonds.

       

      Business
Day:

       

      “Business
Day” shall mean any day other than (i) a Saturday or Sunday or legal holiday or
a day on which banking institutions in the city or cities in which the Principal
Offices of the Trustee, the Tender Agent, the Paying Agent or the Credit
Facility Issuer (or, in the case of a foreign bank, the licensed branch thereof
which has issued, or will honor draws upon, any such

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      Credit
Facility), are located are authorized or required by law or executive order to
close or (ii) a day on which the New York Stock Exchange or the principal office
of the Remarketing Agent is closed.

       

      Commercial
Paper Rate:

       

      “Commercial
Paper Rate” shall mean the Interest Rate Mode for the Bonds in which the
interest rate on such Bonds is determined in accordance with Section
2.02(c)(i).

       

      Commercial
Paper Rate Period:

       

      “Commercial
Paper Rate Period” shall mean with respect to any Bond bearing interest at
a  Commercial Paper Rate, each period determined for such Bond in
accordance with Section 2.02(c)(i).

       

      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.

       

      Company
Account:

       

      “Company
Account” shall mean the account of that name established in the Bond Fund
pursuant to Section 4.01.

       

      Conversion:

       

      “Conversion”
shall mean, with respect to a Bond, any conversion from time to time in
accordance with the terms of this Indenture of that Bond, in whole, from one
Interest Rate Mode to another Interest Rate Mode.

       

      Conversion
Date:

       

      “Conversion
Date” shall mean the date on which any Conversion becomes
effective.

       

      Credit
Facility:

       

      “Credit
Facility” means the Letter of Credit delivered pursuant to Section 7.01 or any
Alternate Credit Facility delivered to the Trustee pursuant to Section
7.03.

       

      Credit
Facility Account:

       

      “Credit
Facility Account” shall mean the account of that name established in the Bond
Fund pursuant to Section 4.01.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      Credit
Facility Issuer:

       

      “Credit
Facility Issuer” shall mean the Bank with respect to the Letter of Credit or the
institution issuing any Alternate Credit Facility.  “Principal Office”
of any Credit Facility Issuer shall mean the principal office thereof designated
in the corresponding Credit Facility and which shall mean, in the case of a
foreign bank, the licensed branch or agency thereof in the United States which
has issued the Credit Facility.  References to the Credit Facility
Issuer in this Indenture shall be given no effect unless there is a Credit
Facility delivered to and held by the Trustee pursuant to Article
VII.

       

      Credit
Facility Proceeds Account:

       

      “Credit
Facility Proceeds Account” shall mean the account of that name established in
the Purchase Fund pursuant to Section 5.03.

       

      Daily
Rate:

       

      “Daily
Rate” shall mean the Interest Rate Mode for Bonds in which the interest rate on
such Bonds is determined on each Business Day in accordance with Section
2.02(c)(ii).

       

      Daily
Rate Period:

       

      “Daily
Rate Period” shall mean the period beginning on, and including, the Conversion
Date of the Bonds to the Daily Rate and ending on, and including, the day
preceding the next Business Day and each period thereafter beginning on, and
including, a Business Day and ending on, and including, the day preceding the
next succeeding Business Day until the day preceding the earlier of the
Conversion of such Bonds to a different Interest Rate Mode or the maturity of
the Bonds.

       

      Date
of the Bonds:

       

      “Date of
the Bonds” shall mean June 25, 2008.

       

      Depositary:

       

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

       

      Electronic
Notice:

       

      “Electronic
Notice” shall mean notice transmitted by facsimile transmission or any other
electronic method acceptable to both the sending and receiving
party.

       

      Eligible
Account:

       

      “Eligible
Account” shall mean an account that is either (a) maintained with a federal or
state-chartered depository institution or trust company that has an S&P
short-term debt rating of at least 'A-2' (or, if no short-term debt rating, a
long-term debt rating of 'BBB+'); or

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (b)
maintained with the corporate trust department of a federal depository
institution or state-chartered depository institution subject to regulations
regarding fiduciary funds on deposit, which, in either case, has corporate trust
powers and is acting in its fiduciary capacity.

       

      Event
of Bankruptcy

       

      “Event of
Bankruptcy” shall mean a petition by or against the Company or by the Authority
under any bankruptcy act or under any similar act which may be enacted which
shall have been filed (other than bankruptcy proceedings instituted by the
Company or the Authority against third parties) unless such petition shall have
been dismissed and such dismissal shall be final and not subject to
appeal.

       

      Event
of Default

       

      “Event of
Default” shall have the meaning set forth in Section 10.01.

       

      Facilities:

       

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

       

      Government
Obligations:

       

      “Government
Obligations” shall mean:

       

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

       

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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      Indenture:

       

      “Indenture”
shall mean this Indenture of Trust, dated as of June 1, 2008, between the
Authority and the Trustee, and any and all modifications, alterations,
amendments and supplements thereto.

       

      Interest
Payment Date:

       

      “Interest
Payment Date” shall mean (a) (i) if the Interest Rate Mode is the Daily Rate or
the Weekly Rate, the first Business Day of each month, (ii) if the Interest Rate
Mode is the Commercial Paper Rate, the day following the last day of each
Commercial Paper Rate Period for such Bond and (iii) if the Interest Rate Mode
is the Term Rate, any day in the sixth calendar month following the Conversion
to a Term Rate and in each sixth calendar month thereafter, as designated by the
Company at the time of such Conversion, and in all cases, on the day after the
last day of the Term Rate Period (whether or not a Business Day), and (b) the
Conversion Date or the effective date of a change to a new Term Rate Period for
such Bond.  In any case, the final Interest Payment Date shall be the
maturity date.

       

      Interest
Period:

       

      “Interest
Period” shall mean for any Bond the period from, and including, each Interest
Payment Date for such Bond to, and including, the day next preceding the next
Interest Payment Date for such Bond, provided, however, that the first Interest
Period for any Bond shall begin on (and include) the Date of the Bonds and the
final Interest Period shall end the day next preceding the maturity date of the
Bonds.

       

      Interest
Rate Mode:

       

      “Interest
Rate Mode” shall mean the Commercial Paper Rate, the Daily Rate, the Weekly Rate
and the Term Rate.

       

      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

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      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.

       

      Letter
of Credit:

       

      “Letter
of Credit” shall mean an irrevocable letter of credit issued and delivered to
the Trustee in accordance with Section 7.01.

       

      Loan
Agreement:

       

      “Loan
Agreement” shall mean the Loan Agreement, dated as of June 1, 2008, 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.

       

      Moody’s:

       

      “Moody’s”
shall mean Moody’s Investors Service, Inc., a Delaware corporation, its
successors and assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, “Moody’s” shall be deemed to refer to any other nationally recognized
securities rating agency designated in writing by the Company, with the consent
of the Authority.  All notices to Moody’s shall be sent to 7 World
Trade Center, 250 Greenwich Street, New York, New York 10007
Attn:  Public Finance-MSPG Surveillance Team, or to such other address
as designated in writing by Moody’s to the Trustee.

       

      1954
Code:

       

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

       

      1986 Code:

      

      “1986 Code” shall mean the Internal
Revenue Code of 1986, as amended from time to time.  Each reference to a
section of the 1986 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 1986 Code section shall, in the
event of a successor to the 1986 Code, be deemed to be a reference to the
successor to such 1986 Code section.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      1997
Bonds:

       

      “1997
Bonds” shall mean the $130,000,000 aggregate principal amount of The Industrial
Development Authority of the County of Pima Industrial Development Revenue
Bonds, 1997 Series B (Tucson Electric Power Company Project).

       

      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 2.09 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.

       

      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)           on
or after any Purchase Date for Bonds pursuant to Article V hereof, all Bonds (or
portions of Bonds) which have been purchased on such date, but which have not
been delivered to the Tender Agent, provided that funds sufficient for such
purchase are on deposit with the Tender Agent in accordance with the provisions
hereof;

       

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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      (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 2.09 hereof.  Each of the Company
and the Credit Facility Issuer 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 11.21 hereof.  “Principal Office”
of the Paying Agent or any Co Paying Agent shall mean the office thereof
designated in writing to the Trustee.

       

      Pledged
Bonds:

       

      “Pledged
Bonds” shall mean Bonds purchased pursuant to Sections 5.01(a) and 5.01(b) that
are purchased from moneys received by the Tender Agent from a demand for payment
under the Credit Facility, if any, then in effect until subsequently remarketed
pursuant to Section 5.02.

       

      Prevailing
Market Conditions:

       

      “Prevailing
Market Conditions” shall mean, without limitation, the following factors:
existing short-term market rates for securities, the interest on which is
excluded from gross income for federal income tax purposes; indexes of such
short-term rates; the existing market supply and demand and the existing yield
curves for short-term and long-term securities for obligations of credit quality
comparable to the Bonds, the interest on which is excluded from gross income for
federal income tax purposes; general economic conditions, economic conditions in
the electric utilities industry and financial conditions that may affect or be
relevant to the Bonds; and such other facts, circumstances and conditions as the
Remarketing Agent, in its sole discretion, shall determine to be relevant to the
remarketing of the Bonds at the principal amount thereof.

       

      Purchase
Date:

       

      “Purchase
Date” shall mean (i) if the Interest Rate Mode is the Daily Rate or the Weekly
Rate, any Business Day as set forth in Section 5.01(a)(i) and Section
5.01(a)(ii), respectively, and (ii) each day that such Bond is subject to
mandatory purchase pursuant to Section 5.01(b); provided, however, that the date
of the stated maturity of the Bonds shall not be a Purchase Date.

       

      Purchase
Fund:

       

      “Purchase
Fund” shall mean the fund so designated which is established pursuant to Section
5.03.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      Rate
Period:

       

      “Rate
Period” shall mean any period during which a single interest rate is in effect
for a Bond.

       

      Rating
Agency:

       

      “Rating
Agency” shall mean Moody’s, S&P and any other nationally recognized
securities rating agency which has assigned a rating on the Bonds or, for
purposes of Section 12.01(i) hereof, which was requested to assign a rating to
the Bonds.

       

      Rebate
Fund:

       

      “Rebate
Fund” shall mean the fund created by Section 8.08 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, including all moneys drawn by the Trustee under the Letter of
Credit,  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 (a) with respect to any Interest Period during which the
Interest Rate Mode is the Commercial Paper Rate, the Daily Rate or the Weekly
Rate, the close of business on the last Business Day of such Interest Period,
and (b) with respect to any Interest Period during which the Interest Rate Mode
is the Term Rate, the Business Day before payment unless, upon a Conversion, the
Company designates some other Record Date to conform to industry conventions at
the time of Conversion.

       

      Registrar;
Principal Office thereof:

       

      “Registrar”
shall mean the registrar appointed in accordance with Section 11.23
hereof.  “Principal Office” of the Registrar shall mean the office
thereof designated in writing to the Trustee.

       

      Reimbursement
Agreement:

       

      “Reimbursement
Agreement” shall mean the Letter of Credit and Reimbursement Agreement, dated as
of April 30, 2008, among the Company, the lenders named therein and from time to
time party thereto, JPMorgan Chase Bank, N.A., as the Issuing Bank, Union Bank
of California, N.A., as Syndication Agent, ABN AMRO Bank N.V., SunTrust Bank and
Wells Fargo Bank, National Association, as Co-Syndication Agents, and JPMorgan
Chase Bank, N.A., as Administrative Agent, as the same may be amended from time
to time, and any other agreement of the Company with a Credit Facility Issuer
setting forth the obligations of the Company to such Credit Facility Issuer
arising out of any payments under a Credit Facility and which provides that it
shall be deemed to be a Reimbursement Agreement for the purpose of this
Indenture.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      Remarketing
Agent:

       

      “Remarketing
Agent” shall mean Morgan Stanley & Co. Incorporated, and its successor or
successors as provided in Section 12.01.  “Principal Office” of the
Remarketing Agent shall mean the office or offices designated in writing to the
Authority, the Trustee, the Tender Agent, the Paying Agent, the Credit Facility
Issuer and the Company.

       

      Remarketing
Agreement:

       

      “Remarketing
Agreement” shall mean the Remarketing Agreement between the Company and the
Remarketing Agent, as the same may be amended from time to time, and any
remarketing agreement between the Company and a successor Remarketing
Agent.

       

      Remarketing
Proceeds Account:

       

      “Remarketing
Proceeds Account” shall mean the account of that name established in the
Purchase Fund pursuant to Section 5.03.

       

      SIFMA
Swap Index:

       

      “SIFMA
Swap Index” shall mean, on any date, a rate determined on the basis of the
seven-day high grade market index of tax-exempt variable rate demand
obligations, as produced by Municipal Market Data, Inc., and published or made
available by the Securities Industry & Financial Markets Association
(formerly the Bond Market Association) (“SIFMA”) or any person acting in
cooperation with or under the sponsorship of SIFMA and effective from such date;
provided, however, that, if such index is no longer provided by Municipal Market
Data, Inc. or its successor, the “Municipal Index” shall mean such other
reasonably comparable index selected by the Remarketing Agent.

       

      S&P:

       

      “S&P”
shall mean Standard & Poor’s Ratings Service, a division of The McGraw Hill
Companies and its successors and assigns, and, if such division shall be
dissolved or liquidated or shall no longer perform the functions of a securities
rating agency, “S&P” shall be deemed to refer to any other nationally
recognized securities rating agency designated in writing by the Company, with
the consent of the Authority.  All notices to S&P shall be sent to
55 Water Street, New York, New York 10041 0003, Attention:  LOC
Surveillance, or to such other address as designated in writing by S&P 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.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      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 Code and the 1954 Code, and any and
all modifications, alterations, amendments and supplements thereto.

       

      Tender
Agent:

       

      “Tender
Agent” shall mean the initial and any successor tender agent appointed in
accordance with Section 12.02.  “Principal Office” and “Delivery
Office” of the Tender Agent means the office or offices thereof designated in
writing to the Authority, the Trustee, the Company, the Credit Facility Issuer
and the Remarketing Agent, which initially is the Designated Office of the
Trustee.

       

      Term
Rate:

       

      “Term
Rate” shall mean the Interest Rate Mode for Bonds in which the interest rate on
such Bonds is determined in accordance with Section 2.02(c)(vi).

       

      Term
Rate Period:

       

      “Term
Rate Period” shall mean any period established by the Company pursuant to
Section 2.02(d)(i) and beginning on, and including, the Conversion Date of Bonds
to the Term Rate and ending on, and including, the day preceding the last
Interest Payment Date for such period and, thereafter, each successive period,
if any, of substantially the same duration as that established period until the
day preceding the earliest of the change to a different Term Rate Period, the
Conversion of such Bonds to a different Interest Rate Mode or the maturity of
the Bonds.

       

      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 5.04,
5.05, 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

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      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 8.08 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 IX hereof or moneys held pursuant to Section 4.04
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 15.08 hereof.

       

      Weekly
Rate:

       

      “Weekly
Rate” means the Interest Rate Mode for the Bonds in which the interest rate on
such Bonds is determined weekly in accordance with Section
2.02(c)(iii).

       

      Weekly
Rate Period:

       

      “Weekly
Rate Period” means the period beginning on, and including, the date of original
issuance of the Bonds or any subsequent Conversion Date of Bonds to the Weekly
Rate and ending on, and including, the next Tuesday and thereafter the period
beginning on, and including, any Wednesday and ending on, and including, the
earliest of the following Tuesday, the day preceding the Conversion of such
Bonds to a different Interest Rate Mode or the maturity of the
Bonds.

       

      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 One Hundred Thirty Million
Dollars ($130,000,000).  Each of the Bonds shall be designated by the
title “The Industrial Development Authority of the County of Pima Industrial
Development Revenue Bond, 2008 Series B (Tucson Electric Power Company
Project)”.

       

      Section
2.02.  Denominations and
Maturity; Interest Rates.

       

      (a)           Denominations and
Maturity.  The Bonds shall be issuable as fully registered
bonds only, when in Weekly Rate or Daily Rate, in denominations of $100,000 and
any larger denomination constituting an integral multiple of $5,000, when in the
Commercial Paper Rate, in denominations of $100,000 and any larger denomination
constituting an integral multiple of $1,000, and when in the Term Rate, in
denominations of $5,000 and any integral multiple thereof.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      The Bonds
shall be dated as of the Date of the Bonds.  Each Bond shall bear
interest from the last Interest Payment Date to which interest has accrued and
has been paid or duly provided for, or if no interest has been paid or duly
provided for, from the Date of the Bonds until payment of the principal or
redemption price thereof shall have been made or provided for in accordance with
the provisions of this Indenture, whether upon maturity, redemption or
otherwise.

       

      The Bonds
shall mature on September 1, 2029 (the “Maturity Date”).

       

      (b)           Interest Rates on the
Bonds.  During each Interest Period for each Interest Rate
Mode, the interest rate or rates for the Bonds shall be determined in accordance
with Section 2.02(c) and shall be payable on an Interest Payment Date for such
Interest Period; provided that the interest rate or rates borne by the Bonds
shall not exceed the lesser of ten percent (10%) per annum or the maximum
interest rate permitted by the Credit Facility, if any.  Interest on
Bonds while they accrue interest at the Daily Rate, Weekly Rate or Commercial
Paper Rate shall be computed upon the basis of a 365  or 366-day year,
as applicable, for the actual number of days elapsed.  Interest on
Bonds while they accrue interest at the Term Rate shall be computed upon the
basis of a 360 day year, consisting of twelve 30 day months.  Each
Bond shall bear interest on overdue principal and, to the extent permitted by
law, on overdue interest at the rate borne by such Bond on the day before the
default or Event of Default occurred, provided that if the Interest Rate Mode
was then the Commercial Paper Rate, the default rate for all of the Bonds shall
be equal to the highest interest rate then in effect for any Bond.

       

      (c)           Interest Rate
Modes.  The Bonds shall bear interest at the Weekly Rate from
the date of original issuance until the Interest Rate Mode is converted to a
different Interest Rate Mode.

       

      Interest
rates on (and, if the Interest Rate Mode is the Commercial Paper Rate,
Commercial Paper Rate Periods for) Bonds shall be determined as
follows:

       

      (i)           (A)           If
the Interest Rate Mode for Bonds is the Commercial Paper Rate, the interest rate
on a Bond for a specific Commercial Paper Rate Period shall be the rate
established by the Remarketing Agent no later than 12:30 p.m. (New York City
time) on the first day of that Commercial Paper Rate Period as the minimum rate
of interest necessary, in the judgment of the Remarketing Agent taking into
account then Prevailing Market Conditions, to enable the Remarketing Agent to
sell such Bond on that day at a price equal to the principal amount
thereof.

       

      (B)           Each
Commercial Paper Rate Period applicable for a Bond shall be determined
separately by the Remarketing Agent on or prior to the first day of such
Commercial Paper Rate Period as being the Commercial Paper Rate Period permitted
hereunder which, in the judgment of the Remarketing Agent, taking into account
then Prevailing Market Conditions, will, with respect to such Bond, be the
period which, if implemented on such day, would result in the Remarketing Agent
being able to remarket such Bond at the principal amount thereof at the lowest
interest rate then available and for the longest Commercial Paper Rate Period
available hereunder at such rate, provided that on such determination date, if
the Remarketing Agent determines that the current or anticipated future market
conditions or anticipated future events are such that a different Commercial
Paper Rate Period would result in a lower average interest

       

      
        
          
          

        

        
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      cost on
such Bond over the succeeding twelve (12) month period, then the Remarketing
Agent shall select the Commercial Paper Rate Period which in the judgment of the
Remarketing Agent would permit such Bond to achieve such lower average interest
cost.  Each Commercial Paper Rate Period shall be from one day to 270
days in length, shall end on a day preceding a Business Day and, if a Credit
Facility is then in effect, shall not be longer than a period equal to the
maximum number of days’ interest coverage provided by such Credit Facility minus
fifteen days and if such 15th day is not a Business Day, then the immediately
preceding Business Day.

       

      (C)           Notwithstanding
subsection (B) above:

       

      (1)           if
a Credit Facility is in effect and if no Alternate Credit Facility has taken
effect, no new Commercial Paper Rate Period shall be established for any Bond
unless the last Interest Payment Date for such Commercial Paper Rate Period
occurs at least 15 days prior to the expiration, termination or cancellation of
the then current Credit Facility;

       

      (2)           if
the Company has previously determined to convert the Interest Rate Mode for any
Bonds from the Commercial Paper Rate, no new Commercial Paper Rate Period for
any such Bond to be converted shall be established unless the last day of such
Commercial Paper Rate Period occurs prior to the Conversion Date;

       

      (3)           no
Commercial Paper Rate Period may be established after the making of a
determination requiring mandatory redemption of all Bonds pursuant to Section
3.01(c) unless the Remarketing Agent discloses such determination to the
purchaser (and evidence of the making of each such disclosure shall be furnished
to the Trustee in writing, the Authority and the Company prior to the
establishment of such Commercial Paper Rate Period) and unless the last day of
such Commercial Paper Rate Period occurs prior to the redemption
date;

       

      (4)           the
Commercial Paper Rate Period for any Bond held by the Tender Agent pursuant to
Section 5.05 shall be the period from and including the date of purchase
pursuant to Section 5.01 through the next day immediately preceding a Business
Day, which period will be re-established automatically until the day preceding
the earliest of the Conversion to a different Interest Rate Mode, the maturity
of the Bonds or the sale of such Bond pursuant to Section 5.02(b), and during
such Commercial Paper Rate Period such Bond shall not bear interest but shall
nevertheless remain Outstanding under this Indenture; and

       

      (5)           if
the Remarketing Agent fails to set the length of a Commercial Paper Rate Period
for any Bond, or if there is no Remarketing Agent in place, a new Commercial
Paper Rate Period lasting through the next day immediately preceding a Business
Day (or until the earlier stated maturity of the Bonds) will be established
automatically and, if in that instance the Remarketing Agent fails for whatever
reason to determine the interest for such Bond, or if there is no Remarketing
Agent in place, then the interest rate for such Bond for that Commercial Paper
Rate Period shall be the interest rate in effect for such Bond for the preceding
Commercial Paper Rate Period.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (ii)           If
the Interest Rate Mode for Bonds is the Daily Rate, the interest rate on such
Bonds for any Business Day shall be the rate established by the Remarketing
Agent no later than 10:30 a.m. (New York City time) on such Business Day as the
minimum rate of interest necessary, in the judgment of the Remarketing Agent,
taking into account the then Prevailing Market Conditions, to enable the
Remarketing Agent to sell such Bonds on such Business Day at a price equal to
the principal amount thereof, plus accrued interest, if any, thereon as of such
day.  For any day which is not a Business Day or in the event that the
interest rate on a Bond is not or cannot be determined by the Remarketing Agent
for whatever reason, or if there is no Remarketing Agent in place, the interest
rate on Bonds in the Daily Rate shall be the interest rate for such Bonds in
effect for the next preceding Business Day.

       

      (iii)           If
the Interest Rate Mode for Bonds is the Weekly Rate, the interest rate on such
Bonds for a particular Weekly Rate Period shall be the rate established by the
Remarketing Agent no later than 5:00 p.m. (New York City time) on the day
preceding the first day of such Weekly Rate Period, or, if such day is not a
Business Day, on the next succeeding Business Day, as the minimum rate of
interest necessary, in the judgment of the Remarketing Agent, taking into
account the then Prevailing Market Conditions, to enable the Remarketing Agent
to sell such Bonds on such first day at a price equal to the principal amount
thereof, plus accrued interest, if any, thereon.

       

      (iv)           If
the Interest Rate Mode for Bonds is the Term Rate, the interest rate on such
Bonds for a particular Term Rate Period shall be the rate established by the
Remarketing Agent no later than 12:00 noon (New York City time) on the Business
Day preceding the first day of such Term Rate Period as the minimum rate of
interest necessary, in the judgment of the Remarketing Agent, taking into
account the then Prevailing Market Conditions, to enable the Remarketing Agent
to sell such Bonds on such first day at a price equal to the principal amount
thereof.

       

      (v)           The
Remarketing Agent shall provide the Trustee, the Paying Agent, the Tender Agent
and the Company with prompt Electronic Notice of each interest rate (and if the
Interest Rate Mode for Bonds is the Commercial Paper Rate, of all Commercial
Paper Rate Periods) determined under this Section 2.02(c).

       

      (vi)           In
the event that the interest rate on a Bond is not or cannot be determined by the
Remarketing Agent for whatever reason pursuant to (iii) or (iv) above, or if
there is no Remarketing Agent in place, the Interest Rate Mode of such Bond
shall be converted automatically to the Weekly Rate (without the necessity of
complying with the requirements of Section 2.02(e), including, but not limited
to, the requirement of mandatory purchase) and the Weekly Rate shall be equal to
the 100% of the SIFMA Swap Index; provided that if any of such Bonds are then in
a Term Rate Period, such Bonds shall bear interest at a Weekly Rate, but only if
there is delivered to the Authority, the Trustee, the Tender Agent, the Credit
Facility Issuer, the Company and the Remarketing Agent an opinion of Bond
Counsel to the effect that so determining the interest rate to be borne by Bonds
at a Weekly Rate is authorized or permitted by the Act and will not, in and of
itself, adversely affect any exclusion of interest on the Bonds from gross
income for purposes of federal income taxation.  If such opinion is
not delivered, such Bonds will bear interest for a Rate Period of the same
length as the immediately preceding Rate Period (or, if shorter, a Rate Period
ending on the day before the maturity date) at the interest rate

       

      
        
          
          

        

        
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      which was
in effect for the preceding Rate Period.  Anything in this Section
2.02(c)(vi) to the contrary notwithstanding, if a Credit Facility is then in
effect, the Rate Period determined shall not extend beyond the remaining term of
such Credit Facility minus fifteen (15) days and if such fifteenth day is not a
Business Day, then the immediately preceding Business Day.

       

      (d)           Term Rate
Periods.

       

      (i)           Selection of Term Rate
Period.  The Term Rate Period for the Bonds shall be
established by the Company in the notice given pursuant to Section 2.02(e) (the
first such Term Rate Period commencing on the Conversion Date for Bonds to a
Term Rate) and thereafter each successive Term Rate Period for such Bonds shall
be the same as that so established by the Company until a different Term Rate
Period is specified by the Company in accordance with this Section or until the
occurrence of a Conversion Date for such Bonds or the maturity of the
Bonds.  Each Term Rate Period shall be at least one year in duration
and shall end on the day next preceding an Interest Payment Date; provided that
no Term Rate Period shall extend beyond the final maturity date of the
Bonds.  Anything in this Section 2.02(d) to the contrary
notwithstanding, if a Credit Facility is then in effect, no Term Rate Period
shall extend beyond the remaining term of such Credit Facility minus fifteen
(15) days and if such fifteenth day is not a Business Day, then the immediately
preceding Business Day.

       

      (ii)           Change of Term Rate
Period.  The Company may change the Bonds from one Term Rate
Period to another Term Rate Period on any Business Day on which the Bonds are
subject to optional redemption pursuant to Section 3.01(a)(iii) by notifying the
Authority, the Trustee, the Paying Agent, the Credit Facility Issuer, the Tender
Agent and the Remarketing Agent in writing at least five Business Days prior to
the thirtieth day prior to the proposed effective date of the change; provided
that, if a Credit Facility is then in effect, the Company shall not be entitled
to elect a change in the Term Rate Period on a date on which the purchase price
determined under Section 5.01(b)(i) includes any premium unless the Trustee has
received written confirmation from the Credit Facility Issuer, on or before the
date on which the Registrar must provide notice of such change to the
Bondholders under Section 2.02(d)(iii), that it can draw under a Credit Facility
on the proposed effective date of the change in an aggregate amount sufficient
to enable the Tender Agent to pay the premium due upon the mandatory purchase of
such Bonds on such proposed effective date pursuant to Section
5.01(b)(i).  Such notice shall specify (A) the information required to
be contained in the notice given by the Registrar to the Bondholders pursuant to
Section 2.02(d)(iii), (B) that the last day of such new Term Rate Period shall
be the earlier of the day before the maturity date of the Bonds or the day
immediately preceding any Interest Payment Date which is more than one year
after the effective date of such change, (C) the purchase price for Bonds
determined under Section 5.01(b)(i), and (D) if such change is conditional on
the interest rate applicable during the new Term Rate Period, the interest rate
limitations.  Any change by the Company of the Term Rate Period may be
conditional upon the establishment of an interest rate within certain limits
chosen by the Company.  The Remarketing Agent shall establish what
would be the interest rate for the proposed Term Rate Period as required by
Section 2.02(c)(iv).  If the interest rate established by the
Remarketing Agent is not within the limits chosen by the Company, then the
change in the Term Rate Period may be cancelled by the Company, in which case
the Company’s notice thereof shall be of no effect and no such change shall
occur.  Notwithstanding the foregoing, no change in the Term Rate
Period shall be effective unless the Credit Facility, if any, held or to be held
by the Trustee after such change in the Term Rate Period shall extend for the
length of such Term Rate Period plus fifteen (15) days.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (iii)           Notice of Change in Term
Rate Period. The Registrar shall notify the affected Bondholders of any
change in the Term Rate Period pursuant to Section 2.02(d)(ii) by first class
mail, postage prepaid, at least 30 but not more than 60 days before the
effective date of such change.  The notice will state:

       

      (A)           that
there is to be a new Term Rate Period; and

       

      (B)           the
effective date of the new Term Rate Period and that, on such effective date,
Bonds will be purchased (and the purchase price therefor) and that if any owner
of the Bonds shall fail to deliver a Bond for purchase with an appropriate
instrument of transfer to the Tender Agent for purchase on said date, and if the
Tender Agent is in receipt of the purchase price therefor, any such Bond not
delivered shall nevertheless be deemed purchased on such effective date and
shall cease to accrue interest on and from such date.

       

      (iv)           Cancellation of Change in
Term Rate Period.  Notwithstanding any provision of this
Section 2.02(d), the Term Rate Period shall not be changed if:  (A)
the Remarketing Agent has not determined the interest rate for the new Term Rate
Period in accordance with this Section 2.02 or (B) all of the Bonds that are to
be purchased pursuant to Section 5.01(b) are not remarketed or sold by the
Remarketing Agent or (C) such change is cancelled by the Company as provided in
Section 2.02(d)(ii) above.  If such change fails to occur, the Bonds
shall be converted automatically to the Weekly Rate and the interest rate shall
be equal to the 100% of the SIFMA Swap Index; provided the Bonds shall bear
interest at a Weekly Rate only if there is delivered to the Authority, the
Trustee, the Tender Agent, the Credit Facility Issuer, the Company and the
Remarketing Agent, an opinion of Bond Counsel to the effect that so determining
the interest rate to be borne by such Bonds at a Weekly Rate is authorized or
permitted by the Act and will not, in and of itself, adversely affect any
exclusion of interest on the Bonds from gross income for purposes of federal
income taxation. If the opinion of Bond Counsel is not delivered on the proposed
effective date of such change, the Bonds will bear interest for a Term Rate
Period of the same length as the Term Rate Period in effect prior to the
proposed change (or, if shorter, the Term Rate Period ending on the date before
the Maturity Date) at a rate of interest determined by the Remarketing Agent on
the proposed effective date of such change.  If the proposed change of
the Term Rate Period is cancelled as provided in this paragraph, any mandatory
purchase of such Bonds will remain effective.  Anything in this
Section 2.02(d)(iv) to the contrary notwithstanding, if a Credit Facility is
then in effect, the Rate Period determined upon a cancellation of a change in
the Term Rate Period shall not extend beyond the remaining term of such Credit
Facility minus fifteen (15) days and if such fifteenth day is not a Business
Day, then the immediately preceding Business Day.

       

      (e)           Conversion of Interest Rate
Mode.

       

      (i)           Method of
Conversion.  The Interest Rate Mode for all of the Bonds is
subject to Conversion to a different Interest Rate Mode from time to time by the
Company, such right to be exercised by notifying the Authority, the Trustee, the
Paying Agent, the Credit Facility Issuer, the Tender Agent, the Remarketing
Agent and, in the case of a Conversion to or from the Commercial Paper Rate, the
Registrar at least five Business Days prior to (x) in the cases of Conversion to
or

       

      
        
          
          

        

        
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      from the
Term Rate, the thirtieth day prior to the effective date of such proposed
Conversion and (y) in all other cases, the fifteenth day prior to such proposed
effective date; provided that, in any event, with respect to Conversion from the
Commercial Paper Rate, the effective date of such Conversion may not occur until
the latest Interest Payment Date relating to the Commercial Paper Rate Period
then in effect for the Bonds to be converted, and, provided further, that no new
Commercial Paper Rate Period for such Bonds may be established subsequent to
such notice which would have an Interest Payment Date later than the proposed
date of Conversion; and provided, further, that, if a Credit Facility is then in
effect, the Company shall not be entitled to elect to convert Bonds to a
different Interest Rate Mode on a date on which the purchase price determined
under Section 5.01(b)(i) includes any premium, unless the Trustee has received
written confirmation, on or before the date on which the Registrar must provide
notice of such Conversion to Bondholders under Section 2.02(e)(iii), from the
Credit Facility Issuer that it can draw under the Credit Facility on the
proposed effective date of the Conversion in an aggregate amount sufficient to
enable the Tender Agent to pay any premium due upon any mandatory purchase of
Bonds on such proposed effective date pursuant to Section 5.01(b)(i); and
provided, further, that if a Credit Facility is then in effect the Company may
not elect an Interest Rate Mode other than the Daily Rate or the Weekly Rate
without the consent of the Credit Facility Issuer.  Such notice shall
specify (A) the effective date of such Conversion and the information required
by Section 2.02(e)(iii), (B) the proposed Interest Rate Mode, and (C) if such
Conversion is conditional, the interest rate limitations.  If the
Conversion is to the Term Rate, such notice shall specify the information
required pursuant to Section 2.02(d)(iii).  In addition, in the case
of a Conversion to the Term Rate from the Daily Rate, Weekly Rate or Commercial
Paper Rate, as the case may be, or any Conversion to the Daily Rate, Weekly Rate
or Commercial Paper Rate from the Term Rate, the notice must be accompanied by
an opinion of Bond Counsel stating such Conversion  is authorized or
permitted by the Act and is authorized by this Indenture and will not, in and of
itself, adversely affect any exclusion of interest on the Bonds from gross
income for purposes of federal income taxation.  Any Conversion by the
Company of the Interest Rate Mode to the Term Rate may be conditional upon the
establishment of an initial interest rate determined for such Interest Rate Mode
within certain limits chosen by the Company.  The Remarketing Agent
shall establish what would be the interest rate for the proposed Interest Rate
Mode in accordance with Section 2.02(c).  If the interest rate
established by the Remarketing Agent is not within the limits chosen by the
Company, then such Conversion may be cancelled by the Company by telephonic
notice (to be confirmed in writing) to the Trustee, the Credit Facility Issuer,
the Tender Agent and the Remarketing Agent by the close of business on the day
on which the interest rate has been determined, in which case, the Company’s
notice of Conversion shall be of no effect and the Conversion shall not occur,
provided, however, that any mandatory purchase of Bonds on the proposed
conversion date shall remain effective.

       

      (ii)           Limitations.  Any
Conversion of the Interest Rate Mode for the Bonds pursuant to paragraph (i)
above must comply with the following:

       

      (A)           the
Conversion Date must be a date on which the Bonds are subject to optional
redemption pursuant to Section 3.01(a);

       

      
        
          
          

        

        
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      (B)           if
the proposed Conversion Date would not be an Interest Payment Date except for
such Conversion, the Conversion Date must be a Business Day;

       

      (C)           if
the Conversion is from the Commercial Paper Rate, (1) the Conversion Date shall
be no earlier than the latest Interest Payment Date established for the Bonds
prior to the giving of notice to the Remarketing Agent of the proposed
Conversion and (2) no further Interest Payment Date may be established for such
Bonds while the Interest Rate Mode is then the Commercial Paper Rate if such
Interest Payment Date would occur after the effective date of that
Conversion;

       

      (D)           after
a determination is made requiring mandatory redemption of all Bonds pursuant to
Section 3.01(c), no change in the Interest Rate Mode may be made prior to the
redemption of Bonds pursuant to Section 3.01(c); and

       

      (E)           the
Credit Facility, if any, held or to be held by the Trustee after Conversion (1)
must cover the principal of and interest (computed on the basis of a 365 day
year for the Daily Rate, the Weekly Rate and the Commercial Paper Rate, and on
the basis of a 360 day year consisting of twelve 30 day months for the Term
Rate) which will accrue on the Outstanding Bonds for the maximum permitted
period between the Interest Payment Dates for the proposed Interest Rate Mode
plus at least two (2) days and, (2) in the case of the Term Rate, must extend
for the entire length of such Rate Period, plus fifteen (15) days.

       

      (iii)           Notice to Bondholders of
Conversion of Interest Rate.  The Registrar, at the expense of
the Company, shall notify the Remarketing Agent and the Owners of each
Conversion by first class mail, postage prepaid, at least fifteen (15) days but
not more than thirty (30) days before the Conversion Date if the Interest Rate
Mode is the Commercial Paper Rate, the Daily Rate or the Weekly Rate and at
least thirty (30) days but not more than sixty (60) days before the Conversion
Date if the Interest Rate Mode is the Term Rate.  The notice shall
state:

       

      (A)           that
the Interest Rate Mode will be converted and what the new Interest Rate Mode
will be;

       

      (B)           the
Conversion Date; and

       

      (C)           (1)  that
Bonds will be subject to mandatory purchase on the Conversion Date in accordance
with Section 5.01(b) (unless such Conversion is between the Daily Rate Period
and the Weekly Rate Period), (2)   the purchase price, and
(3)   that if any owner of Bonds shall fail to deliver a Bond for
purchase with an appropriate instrument of transfer to the Tender Agent on the
Conversion Date, and if the Tender Agent is in receipt of the purchase price
therefor, such Bond not delivered shall nevertheless be purchased on the
Conversion Date and shall cease to accrue interest on and from such
date.

       

      If the
Conversion is to the Term Rate, the notice will also state the information
required by Section 2.02(d)(iii).

       

      (iv)           Cancellation of Conversion
of Interest Rate Mode.  Notwithstanding any provision of this
Section 2.02, the Interest Rate Mode for Bonds shall not be converted
if:  (A) the Remarketing Agent has not determined the initial
interest rate for the new Interest Rate

       

      
        
          
          

        

        
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      Mode in
accordance with this Section 2.02 or (B) the Conversion is cancelled by the
Company as provided in Section 2.02(e)(i) above or (C) in the case of a
Conversion requiring an opinion of Bond Counsel, the Trustee shall have received
written notice from Bond Counsel prior to the opening of business at the
Designated Office of the Trustee on the effective date of Conversion that the
opinion of such Bond Counsel required under Section 2.02(e)(i) has been
rescinded.  If such Conversion fails to occur, such Bonds shall be
converted automatically to the Weekly Rate and the interest rate shall be equal
to the 100% of the SIFMA Swap Index; provided that if any of the Bonds are then
in a Term Rate Period such Bonds shall bear interest at a Weekly Rate but only
if there is delivered to the Authority, the Trustee, the Tender Agent, the
Credit Facility Issuer, the Company and the Remarketing Agent, an opinion of
Bond Counsel to the effect that determining the interest rate to be borne by
such Bonds at a Weekly Rate by the Remarketing Agent on the failed Conversion
Date is authorized or permitted by the Act and will not, in and of itself,
adversely affect any exclusion of interest on the Bonds from gross income for
purposes of federal income taxation.  If the opinion of Bond Counsel
described in the preceding sentence is not delivered on the failed Conversion
Date, such Bonds shall bear interest for a Term Rate Period of substantially the
same length as the Term Rate Period in effect for such Bonds prior to the failed
Conversion Date (or if shorter, a Rate Period ending on the date before the
Maturity Date) at a rate of interest determined by the Remarketing Agent on the
failed Conversion Date.  If the proposed Conversion of Bonds is
cancelled as provided in this paragraph, any mandatory purchase of Bonds shall
nevertheless be effective and such Bonds shall bear interest as provided in the
two preceding sentences.  Anything in this Section 2.02(e)(iv) to the
contrary notwithstanding, if a Credit Facility is then in effect, the Rate
Period determined upon a failed Conversion shall not extend beyond the remaining
term of such Credit Facility minus fifteen (15) days and if such fifteenth day
is not a Business Day, then the immediately preceding Business Day.

       

      (v)           Additional Requirements for
Conversion to Commercial Paper Rate.  The following additional
conditions must be satisfied before a Conversion to a Commercial Paper Rate
shall become effective:  (A) the Company must engage, at its expense,
a commercial paper issuing and paying agent (the “Issuing Agent”), reasonably
acceptable to the Authority, having access to DTC’s electronic money market
issuing and payment system and otherwise eligible to serve as an issuing and
paying agent under DTC’s policies and procedures for the issuance and payment of
commercial paper; (B) the Remarketing Agent must arrange for the execution and
delivery to DTC of the required DTC letter of representation for the eligibility
of the Bonds in the Commercial Paper Rate in DTC’s book entry system and the
provision of any needed CUSIP numbers; (C) the Authority and the Company shall
take all other action needed to comply with DTC requirements applicable to the
issuance and payment of the Bonds while in the Commercial Paper Rate; and (D)
the Authority and the Company shall enter into any amendment of this Indenture
and the Agreement, as applicable, that is needed to comply with DTC’s
requirements concerning the issuance and payment of the Bonds in the Commercial
Paper Rate.

       

      (f)           Binding Effect of
Determination and Computations.  The determination of each
interest rate in accordance with the terms of this Indenture shall be conclusive
and binding upon the Owners of the Bonds, the Authority, the Company, the
Trustee, each Paying Agent, the Tender Agent, the Remarketing Agent and the
Credit Facility Issuer, if any.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      (g)           Further Restriction on any
Conversion or Change in Term Rate.  Notwithstanding anything
else herein to the contrary, any Conversion, or any change from any Term Rate
Period to another Term Rate Period, which would result in the same Credit
Facility being in effect for only a portion of the Bonds, shall not be
permitted.

       

      Section
2.03.  Form of
Bonds.  Bonds shall be
authenticated and delivered hereunder solely as fully registered bonds without
coupons. Bonds shall be numbered as determined by the Trustee.

       

      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 2.09 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; provided that if the Interest Rate Mode is
the Commercial Paper Rate, the Daily Rate or the Weekly Rate, interest payable
on any Bond shall, at the written request of the registered owner, received by
the Registrar at least one Business Day prior to the applicable Record Date (or
on or one Business Day prior to an Interest Payment Date if the Interest Rate
Mode is the Commercial Paper Rate), be payable to the registered owner in
immediately available funds by wire transfer to a bank account of such
registered owner within the United States or by deposit into a bank account
maintained with a Paying Agent, in either case, to the bank account number of
such owner specified in such written request and entered by the Registrar on the
Bond Register; provided further, however, that if the Interest Rate Mode is the
Commercial Paper Rate, interest on any Bond payable on the Interest Payment Date
following the end of the Commercial Paper Rate Period shall be paid only upon
presentation and surrender of such Bond at the Principal Office of the Paying
Agent.  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.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      Section
2.04.  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
2.05.  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 2.05 is subject to the provisions of Section
11.17 hereof.

       

      Section
2.06.  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, or for
the purchase price of 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
2.07.  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 2.07.

       

      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;

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

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

       

      (c)           the
Letter of Credit;

       

      (d)           a
request and authorization to the Trustee on behalf of the Authority, signed by
its President or a Vice President, to authenticate and deliver the Bonds in the
aggregate principal amount determined by this Indenture to the purchaser or
purchasers therein identified upon payment to the Trustee, but for the account
of the Authority, of a sum specified in such request and authorization;
and

       

      (e)           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
2.08.  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 tenor 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
2.08.

       

      Every
substitute Bond issued pursuant to the provisions of this Section 2.08 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.

       

      Section
2.09.  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

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      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 and in
the same Interest Rate Mode as the surrendered Bond or Bonds.  In
addition, if such Bond bears interest at the Commercial Paper Rate, the
Registrar will make the appropriate insertions on the face of the
Bond.

       

      The
Authority, the Trustee, the Tender Agent, 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 2.03 hereof, interest on, such Bond and for
all other purposes, and neither the Authority, the Trustee, the Tender Agent,
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:

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      (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

       

      (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
2.10.  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
2.11.  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.

       

      
        
          
          

        

        
          28

          
            

          

        

        
          
          

        

      

       

      Section
2.12.  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.

       

      Section
2.13.  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
2.14.  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 the purchase of Bonds in accordance with the
terms hereof and the payment of the purchase price 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.

       

      Section
2.15.  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
III

       

      REDEMPTION
OF BONDS

       

      Section
3.01.  Redemption
Provisions.  (a)(i)  Optional
Redemption.  Whenever the Interest Rate Mode for Bonds is the
Daily Rate or Weekly Rate, such Bonds shall be subject to redemption by the
Authority at the direction of the Company, on any Business Day, in whole or
in part,
at a redemption price of 100% of the principal amount thereof, plus accrued
interest, if any, to the redemption date.

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      (ii)           Whenever
the Interest Rate Mode for a Bond is the Commercial Paper Rate, such Bond shall
be subject to redemption at the option of the Authority, upon the direction of
the Company, in whole or in part, at a redemption price of 100% of the principal
amount thereof on the Interest Payment Date for each Commercial Paper Rate
Period for that Bond.

       

      (iii)           Whenever
the Interest Rate Mode for Bonds is the Term Rate, such Bonds shall be subject
to redemption at the option of the Authority, upon the direction of the Company,
in whole or in part, (A) on the final Interest Payment Date for such Term Rate
Period, at a redemption price equal to 100% of the principal amount thereof and
(B) prior to the end of the then current Term Rate Period at any time during the
redemption periods and at the redemption prices set forth below, plus interest
accrued, if any, to the redemption date:

       

      
        	
                Original
      Length of

                Current
      Term

                Rate Period
      (Years)

              	
                Commencement
      of

                Redemption
      Period

              	
                Redemption
      Price

                as
      Percentage

                of
      Principal

              
	 	 	 
	
                More
      than 5 years

              	
                Fifth
      anniversary of commencement

                of
      Term Rate Period

              	
                100%

              
	 	 	 
	
                Equal
      to or less than 5 years

              	
                Non-callable

              	
                Non-callable

              

      

       

      If the
Company has given notice of a change in the Term Rate Period pursuant to Section
2.02(d) or notice of Conversion of the Interest Rate Mode for the Bonds to the
Term Rate pursuant to Section 2.02(e) and, at least forty (40) days prior to
such change in the Term Rate Period for the Bonds or such Conversion of an
Interest Rate Mode for the Bonds to the Term Rate the Company has provided (i) a
certification of the Remarketing Agent to the Trustee and the Authority that the
foregoing schedule is not consistent with Prevailing Market Conditions and (ii)
an opinion of Bond Counsel that a change in the redemption provisions of the
Bonds will not, in and of itself, adversely affect any exclusion of interest on
the Bonds from gross income for purposes of federal income taxation, the
foregoing redemption periods and redemption prices may be revised, effective as
of the date of such change in the Term Rate Period or the Conversion Date, as
determined by the Remarketing Agent in its judgment, taking into account the
then Prevailing Market Conditions as set forth in such certification, which
shall be appended by the Trustee to its counterpart of this
Indenture.  Any such revision of the redemption periods and redemption
prices shall not be considered an amendment of or a supplement to this Indenture
and shall not require the consent of any Bondholder or any other Person or
entity.

       

      (b)           Extraordinary Optional
Redemption.  Whenever the Interest Rate Mode for Bonds is the
Term Rate, 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, if any, to the redemption date, if:

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

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

       

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

       

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

       

      (c)           Mandatory
Redemption.  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(c) unless the Company
shall have been given timely notice of the proceeding which resulted in such
determination and an opportunity to participate in such proceeding, either
directly or through an owner of a Bond, and until the conclusion of any
appellate review sought by any party to such proceeding or the expiration of the
time for seeking such review. The Bonds shall be redeemed either in whole or in
part in such principal amount that, in the opinion of Bond Counsel, the interest
payable on the Bonds, including 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. The Registrar shall treat any Bond of a
denomination greater than the minimum authorized denomination for the Interest
Rate Mode then applicable to the Bonds as representing that number of separate
Bonds each of that minimum authorized denomination (and, if any Bond is not in a
denomination that is an integral multiple of the minimum authorized denomination
for such Interest Rate Mode, one separate Bond of the remaining principal amount
of the Bond) as can be obtained by dividing the actual principal amount of such
Bond by that minimum authorized denomination; provided that no Bond shall be
redeemed in part if it results in the unredeemed portion of the Bond being in a
principal amount

       

      
        
          
          

        

        
          31

          
            

          

        

        
          
          

        

      

       

      other
than an authorized denomination. If it is determined that one or more, but not
all, of the units of principal amount represented by any such Bond is to be
called for redemption, then, upon notice of intention to redeem such unit or
units, the Owner of such Bond shall forthwith surrender such Bond to the Paying
Agent or any Co Paying Agent for (y) 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 unit or units of principal amount called for
redemption and (z) 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 the portion call for redemption 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 unit or units of principal amount
called for redemption (and to that extent only).

       

      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 fifteen (15) days (thirty (30) days if the Interest Rate Mode for such
Bonds is the Term Rate) prior to the date fixed for redemption to the Owners of
the Bonds to be redeemed; provided, however, that failure duly to give such
Notice by Mail, or any defect therein, shall not affect the validity of any
proceedings for the redemption of Bonds as to which there shall have been no
such failure or defect.  If a notice of redemption shall be
unconditional, or if the conditions of a conditional notice or redemption shall
have been satisfied, then upon presentation and surrender of Bonds so called for
redemption at the place or places of payment, such Bonds shall be
redeemed.  The Trustee shall promptly deliver to the Company a copy of
each such notice of redemption.

       

      (b)           With
respect to any notice of redemption of Bonds in accordance with subsection (a)
or (b) of Section 3.01 hereof, unless, upon the giving of such notice, such
Bonds shall be deemed to have been paid within the meaning of Article IX 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.

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      (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 IX
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), (b) or (c) of the first
paragraph of Section 10.01 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.

       

      Section
3.06.  Purchase in Lieu
of Redemption.  Bonds subject to
optional redemption or extraordinary optional redemption as provided in this
Article may be purchased in lieu of redemption on the applicable redemption date
at a purchase price equal to the redemption price thereof, plus accrued
interest, if any, thereon to, but not including, the date of such purchase, if
the Trustee has received a written request from the Company on or before the
Business Day prior to the date the Bonds would otherwise be subject to
redemption specifying that the moneys provided or to be provided by the Company
shall be used to purchase such Bonds in lieu of redemption.  Moneys
received for such purpose shall be held by the Trustee in the Bond Fund in trust
for the Owner of the Bonds so purchased.  While a Credit Facility is
in place in respect of any Bonds, any such purchase of such Bonds will be made
from moneys received from a drawing on such Credit Facility and applied as
provided herein.  No purchase of Bonds by the Company pursuant to this
subsection or advance or use of any moneys to effectuate any such purpose shall
be deemed to be a payment or redemption of the Bonds or any portion thereof, and
such purchase shall not operate to extinguish or discharge the indebtedness
evidenced by such Bonds.  Bonds purchased under this Section 3.06
shall not be remarketed or otherwise sold unless the Trustee has received an
opinion of Bond Counsel to the effect that such transaction does not and will
not, in and of itself, adversely affect any exclusion of interest on the Bonds
from gross income for purposes of federal income taxation.

       

      ARTICLE
IV

       

      THE BOND
FUND

       

      Section
4.01.  Creation of Bond
Fund.  (a)  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 Industrial Development Revenue Bonds, 2008

       

      
        
          
          

        

        
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      Series B
(Tucson Electric Power Company Project) Bond Fund” to be held for the benefit of
the Owners of the Bonds, the moneys in which, in accordance with Section
4.01(c), the Trustee shall make available to the Paying Agent or Agents, to pay
(i) the principal or redemption price of Bonds as they mature or become due,
upon surrender and (ii) the interest on Bonds as it becomes
payable.  The Bond Fund shall be an Eligible Account.  There
are hereby established with the Trustee within the Bond Fund two separate and
segregated accounts, to be designated “Company Account” and “Credit Facility
Account”.  The Credit Facility Account and the Company Account are
maintained as separate and segregated accounts and any moneys held therein shall
not be commingled with any other moneys or funds.  The Bond Fund, and
all moneys and certificated securities therein, shall be kept in the possession
of the Trustee.  Neither the Authority nor the Company shall have any
interest in the Credit Facility Account.

       

      (b)           There
shall be deposited into the accounts of the Bond Fund from time to time the
following:

       

      (i)           into
the Company Account, (A) all Loan Payments, and (B) all other moneys received by
the Trustee under and pursuant to the provisions of this Indenture or any of the
provisions of the Loan Agreement, when accompanied by directions from the
Company that such moneys are to be paid to the Bond Fund; and

       

      (ii)           into
the Credit Facility Account, all moneys drawn by the Trustee under a Credit
Facility, if any, to pay principal or redemption price of the Bonds and interest
on the Bonds and deposited directly therein, and only such moneys.

       

      (c)           Except
as provided in subsection (e) of this Section, moneys in the Bond Fund shall be
used solely for the payment of the principal or redemption price of the Bonds
and interest on the Bonds from the following source or sources but only in the
following order of priority:

       

      (i)           proceeds
of the Credit Facility, if any, deposited directly into, and held in, the Credit
Facility Account, provided that, in no event shall moneys held in the Credit
Facility Account be used to pay any premium which may be due on the Bonds
pursuant to Section 3.01(a) unless the Credit Facility, if any, then in effect
is available to pay such premium, and provided further, that in no event shall
moneys in the Credit Facility Account be used to pay any amount which may be due
on Bonds held pursuant to Section 5.05 or any other Bonds registered in the name
of the Company; and

       

      (ii)           moneys
held in the Company Account.

       

      (d)           Except
with respect to payments of principal or redemption price of and interest on
Bonds held pursuant to Section 5.05 or any other Bonds registered in the name of
the Company, the Trustee shall draw upon or demand payment under the Credit
Facility, if any, then held by the Trustee in accordance with its terms in an
amount, after taking into account any moneys then on deposit in the Credit
Facility Account, and in a manner so as to provide immediately available funds
for principal or redemption price and interest to the Bondholders when
due.  If such Credit Facility fails, by the time provided in the
Credit Facility on the date such payment is due, to honor a drawing to provide
the immediately available funds for principal

       

      
        
          
          

        

        
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      or
redemption price and interest on the Bonds or the Credit Facility has been
repudiated, the Trustee shall immediately (but in no event later than 2:30 p.m.
on such date) notify the Company in writing or by Electronic Notice and the
Company shall pay amounts sufficient for the principal or redemption price of
and interest on the Bonds when due.

       

      (e)           While
the Credit Facility is in effect and there is no default in the payment of
principal or redemption price of or interest on the Bonds, any amounts in the
Company Account shall be paid to the Credit Facility Issuer to the extent of any
amounts that the Company owes the Credit Facility Issuer pursuant to the
Reimbursement Agreement (as certified in writing by the Credit Facility Issuer
to the Trustee and the Company).  Any amounts remaining in the Bond
Fund (first, from the Credit Facility Account, and second, from the Company
Account) after payment in full of the principal or redemption price of and
interest on the Bonds (or provision for payment thereof) and payment of any
outstanding fees, expenses and indemnities of the Trustee (including its
reasonable attorney fees and expenses) shall be paid, first, to the Credit
Facility Issuer, to the extent of any amounts that the Company owes the Credit
Facility Issuer pursuant to the Reimbursement Agreement (as certified in writing
by the Credit Facility Issuer to the Trustee and the Company) and, second, to
the Company.

       

      (f)           In
the event that the Bond Fund no longer qualifies as an Eligible Account, the
Trustee shall, within 30 calendar days, move the Bond Fund to another financial
institution such that the Eligible Account requirement will again be
satisfied.

       

      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.  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.

       

      Section
4.04.  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

       

      
        
          
          

        

        
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      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 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
4.05.  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, 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 4.04 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 IX hereof.

       

      ARTICLE
V

       

      PURCHASE
AND REMARKETING OF BONDS

       

      Section
5.01.  Purchase of Bonds.

       

      (a)           Purchase of the Bonds on
Demand of Owner.

       

      (i)           During Daily Rate
Period.  If the Interest Rate Mode for Bonds is the Daily Rate,
any such Bond shall be purchased on the demand of the owner thereof, on any
Business Day during a Daily Rate Period at a purchase price equal to the
principal amount thereof plus accrued interest, if any, to the Purchase Date
upon written notice or Electronic Notice to the Remarketing Agent and to the
Tender Agent, at its Principal Office not later than 11:00 a.m. (New York City
time) on such Business Day of such Owner’s demand for purchase pursuant to this
Section 5.01(a)(i), which notice (A) states the principal amount (or portion
thereof in an authorized denomination) of such Bond to be purchased, (B) states
the Purchase Date on which such Bond shall be purchased and (C) irrevocably
requests such purchase and agrees to deliver such Bond, if not in Book-Entry
Form, duly endorsed in blank for transfer, with all signatures guaranteed, to
the Tender Agent at or prior to 11:00 a.m. (New York City time) on such Purchase
Date.

       

      
        
          
          

        

        
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      The
Tender Agent shall promptly, but in no event later than 11:15 a.m. (New York
City time) on such Business Day, provide the Trustee and the Credit Facility
Issuer with Electronic Notice of the receipt of the notice referred to in the
preceding paragraph.

       

      (ii)           During Weekly Rate
Period.  If the Interest Rate Mode for Bonds is the Weekly
Rate, any such Bond shall be purchased on the demand of the owner thereof, on
any Business Day during a Weekly Rate Period at a purchase price equal to the
principal amount thereof plus accrued interest, if any, to the Purchase Date,
upon written notice to the Tender Agent, at its Principal Office at or before
5:00 p.m. (New York City time) on a Business Day not later than the seventh day
prior to the Purchase Date, which notice (A) states the principal amount (or
portion thereof in an authorized denomination) of such Bond to be purchased, (B)
states the Purchase Date on which such Bond shall be purchased and (C)
irrevocably requests such purchase and agrees to deliver such Bond, if not in
Book-Entry Form duly endorsed in blank for transfer, with all signatures
guaranteed, to the Tender Agent at or prior to 12:00 Noon (New York City time)
on such Purchase Date.

       

      The
Tender Agent shall promptly, but in no event later than 4:00 p.m. (New York City
time) on the next succeeding Business Day, provide the Remarketing Agent, the
Trustee and the Credit Facility Issuer with Electronic Notice of the receipt of
the notice referred to in the preceding paragraph.

       

      (iii)           Notwithstanding
any other provision of this Section 5.01(a), the Owner of a Bond may demand
purchase of a portion of such Bond only if the portion to be purchased and the
portion to be retained by such Owner each will be in an authorized
denomination.

       

      (b)           Mandatory Purchases of
Bonds.

       

      (i)           Mandatory Purchase on
Conversion Date or Change by the Company in Term Rate
Period.  Bonds shall be subject to mandatory purchase at a
purchase price equal to the principal amount thereof plus accrued interest, if
any, plus if the Interest Rate Mode for such Bonds is the Term Rate, the
redemption premium, if any, which would be payable under Section 3.01(a) if
those Bonds were redeemed on the Purchase Date (A) on each Conversion Date for
such Bonds for any Conversion except a conversion between the Daily Rate Period
and the Weekly Rate Period and (B) on the effective date of any change in the
Term Rate Period for such Bonds by the Company pursuant to Section
2.02(d)(ii).

       

      (ii)           Mandatory Purchase on
Cancellation, Substitution, Expiration or Termination of Credit
Facility.  The Bonds shall be subject to mandatory purchase at
a purchase price equal to the principal amount thereof, plus accrued interest,
if any, to the Purchase Date, on the Business Day preceding the date of
cancellation, termination or substitution by the Trustee at the written request
of the Company of the then current Credit Facility or the fifteenth day (or if
such day is not a Business Day, the preceding Business Day) preceding the stated
expiration of the term of the then current Credit Facility, if any; provided,
that, if the then current Credit Facility, if any, shall be cancelled,
terminated or substituted by the Trustee at the request of the Company,
including such cancellation in connection with the delivery of an Alternate
Credit Facility, the Purchase Date shall be a Business Day on which the Bonds
are subject to optional redemption and the purchase price in such event shall
also include, if applicable, a premium equal to the redemption premium which
would be payable under Section 3.01(a) if the Bonds were redeemed on the
Purchase Date.

       

      
        
          
          

        

        
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      (iii)           Mandatory Purchase at
Direction of Credit Facility Issuer.  If a Credit Facility is
in effect, the Bonds shall be subject to mandatory purchase at a purchase price
equal to the principal amount thereof, plus accrued interest, if any, to the
Purchase Date, if the Trustee receives written notice from the Credit Facility
Issuer directing such mandatory purchase upon the occurrence and continuance of
an event of default under the Reimbursement Agreement.  Such mandatory
purchase shall occur on the second Business Day after the date of receipt by the
Trustee of the notice sent by the Credit Facility Issuer.  Upon
receipt of such notice, the Trustee shall immediately:  (A) draw on
that Credit Facility in an amount sufficient to pay the principal and interest
which will be due on the Purchase Date and hold such amount uninvested and
without any liability for interest until the Purchase Date when such amount
shall be applied to pay the amounts due to the owners of the Bonds on the
Purchase Date, and (B) notify the Tender Agent, Remarketing Agent and Registrar
and the Registrar shall, as soon as practicable after receipt of such notice
from the Trustee, but in no event less than one Business Day prior to the
Purchase Date, notify Owners of such mandatory purchase by Mail in accordance
with Section 7.05(b).

       

      (iv)           Mandatory Purchase on
Business Day After End of Commercial Paper Rate Period or Term Rate
Period.  Whenever the Interest Rate Mode for a Bond is the
Commercial Paper Rate or the Term Rate, such Bond shall be subject to mandatory
purchase on the Business Day following the end of each Commercial Paper Rate
Period or Term Rate Period, as the case may be, for such Bond at a purchase
price equal to the principal amount thereof plus accrued interest, if any, to
the Purchase Date.

       

      (c)           Payment of Purchase
Price.  The purchase price of any Bond purchased pursuant to
Section 5.01 (and delivery of a replacement Bond in exchange for the portion of
any Bond not purchased if such Bond is purchased in part only) shall be payable
on the Purchase Date upon delivery of such Bond to the Tender Agent on such
Purchase Date; provided that such Bond must be delivered to the Tender Agent at
or prior to 12:00 Noon (New York City time) for payment by the close of business
on the date of such purchase.

       

      Any Bond
delivered for payment of the purchase price shall be accompanied by an
instrument of transfer thereof, in form satisfactory to the Tender Agent
executed in blank by the owner thereof and with all signatures guaranteed by a
member of an Approved Signature Guarantee Medallion Program.  The
Tender Agent may refuse to accept delivery of any Bond for which an instrument
of transfer satisfactory to it has not been provided and shall have no
obligation to pay the purchase price of such Bond until a satisfactory
instrument is delivered.

       

      If the
owner of any Bond (or portion thereof) that is subject to purchase pursuant to
this Article fails to deliver such Bond with an appropriate instrument of
transfer to the Tender Agent for purchase on the Purchase Date, and if the
Tender Agent is in receipt of the purchase price therefor, such Bond (or portion
thereof) shall nevertheless be purchased on the Purchase Date
hereof.  Any owner who so fails to deliver such Bond for purchase on
(or before) the Purchase Date shall have no further rights thereunder, except
the right to receive the purchase price thereof from those moneys deposited with
the Tender Agent in the Purchase Fund pursuant to Section

       

      
        
          
          

        

        
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      5.03 upon
presentation and surrender of such Bond to the Tender Agent properly endorsed
for transfer in blank with all signatures guaranteed.  The Tender
Agent shall, as to any Bonds which have not been delivered to it, promptly
notify the Remarketing Agent and the Registrar of such non
delivery.  Upon such notification, the Registrar shall place a stop
transfer against an appropriate amount of Bonds registered in the name of the
owner(s) on the Register, commencing with the lowest serial number Bond
registered in the name of such owner(s) (until stop transfers have been placed
against an appropriate amount of Bonds) until the appropriate purchased Bonds
are surrendered to the Tender Agent.

       

      The
Tender Agent shall hold all Bonds delivered pursuant to this Section 5.01 in
trust for the benefit of the owners thereof until moneys representing the
purchase price of such Bonds shall have been delivered to or for the account of
or to the order of such Bondholders, and thereafter shall deliver replacement
Bonds, prepared by the Registrar in accordance with the directions of the
Remarketing Agent and authenticated by the Trustee, for any Bonds purchased in
accordance with the directions of the Remarketing Agent, to the Remarketing
Agent for delivery to the purchasers thereof.

       

      Section
5.02.  Remarketing of
Bonds.  (a)  Upon
the receipt by the Remarketing Agent of any notice pursuant to Section 5.01(a),
the Remarketing Agent, subject to the terms of the Remarketing Agreement, shall
use its best efforts to offer for sale and sell the Bonds in respect of which
such notice has been given.  Unless otherwise instructed by the
Company and with the consent of the Credit Facility Issuer, the Remarketing
Agent, subject to the terms of the Remarketing Agreement, shall use its best
efforts to offer for sale and sell any Bonds purchased pursuant to Section
5.01(b)(i), (ii) and (iv).  Any such Bonds shall be
offered:  (i) at a price equal to the principal amount thereof, plus
interest accrued, if any, to the Purchase Date, and (ii) pursuant to terms
calling for payment of the purchase price on such Purchase Date against delivery
of such Bonds; provided, however, in no event shall the Remarketing Agent sell
any Bond if the amount to be received from the sale of such Bond (including
accrued interest, if any) is less than the principal amount thereof, plus
accrued interest to the sale date.  The Remarketing Agent, the
Trustee, the Tender Agent or the Credit Facility Issuer may purchase any Bond
offered pursuant to this Section 5.02 for their respective
accounts.

       

      (b)           The
Remarketing Agent shall, subject to the terms of the Remarketing Agreement, use
its best efforts to offer for sale and sell, on behalf of the Company, Bonds
held pursuant to Section 5.05 other than Bonds purchased pursuant to Section
5.01(b)(iii) and, at the direction of the Company, any Bonds held for the
Company by the Tender Agent pursuant to Section 5.04(a)(iii)(A); provided that
any Bonds held pursuant to Section 5.05 shall only be released as provided in
Section 5.05. Any such Bonds shall be offered at a purchase price equal to the
principal amount thereof plus accrued interest, if any, thereon to the date of
purchase.  If any Bonds to be remarketed have been called for
redemption, the Remarketing Agent shall give notice thereof to prospective
purchasers of Bonds.

       

      Section
5.03.  Purchase Fund;
Purchase of Bonds Delivered to Tender Agent.  (a)  There
is hereby established with the Tender Agent a Purchase Fund, which shall be an
Eligible Account, the moneys in which shall be used solely to pay the purchase
price of Bonds purchased pursuant to Section 5.01.  There are hereby
established with the Tender Agent within the Purchase Fund two separate and
segregated accounts, to be designated “Remarketing Proceeds

       

      
        
          
          

        

        
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      Account”
and “Credit Facility Proceeds Account”.  The Purchase Fund and the
accounts therein shall be maintained as separate and segregated accounts and any
moneys held therein shall not be commingled with moneys in the Company Fund
established by Section 5.07 or in any other account or with any other funds of
the Tender Agent, shall be held on and after any Purchase Date solely for the
benefit of the owners of Bonds purchased on such Purchase Date pursuant to
Section 5.01, shall not secure any other Bonds or be available for any purpose
except as described in this paragraph and shall not be
invested.  Neither the Authority nor the Company shall have any
interest in the Purchase Fund.

       

      (b)           There
shall be deposited into the accounts of the Purchase Fund from time to time the
following:

       

      (i)           into
the Remarketing Proceeds Account, only such moneys representing proceeds from
the resale by the Remarketing Agent of Bonds, as described in Section 5.02(a),
to Persons other than the Company, its Affiliates, the Authority or any
guarantor of the Bonds, delivered by the Remarketing Agent to the Tender Agent
pursuant to Section 5.07 and deposited directly therein; and

       

      (ii)           into
the Credit Facility Proceeds Account, only such moneys drawn by the Trustee
under a Credit Facility, if any, for the purchase of Bonds and immediately
transferred directly to the Tender Agent, or drawn on the order of the Trustee
directly to the account of the Tender Agent and deposited directly
therein.

       

      (c)           On
each date Bonds are to be purchased pursuant to Section 5.01, such Bonds shall
be purchased, but only from the funds listed below, from the owners thereof.
Funds for the payment of such purchase price shall be derived from the following
sources in the order of priority indicated, provided that funds derived from
Section 5.03(c)(iii) shall not be combined with funds derived from Section
5.03(c)(i) or (ii) to purchase any Bonds (or authorized denomination
thereof):

       

      (i)           Proceeds
of the remarketing of such Bonds to Persons other than the Company, its
Affiliates, the Authority or any guarantor of the Bonds pursuant to Section
5.02(a) and furnished to the Tender Agent by the Remarketing Agent and deposited
directly into, and held in, the Remarketing Proceeds Account;

       

      (ii)           Proceeds
of a draw on the Credit Facility, if any, furnished by the Trustee directly to
the Tender Agent and deposited by the Tender Agent directly into, and held in,
the Credit Facility Proceeds Account; and

       

      (iii)           Moneys
paid by the Company (including the proceeds of the remarketing of such Bonds to
the Company, its Affiliates, the Authority or any guarantor of the Bonds) to pay
the purchase price furnished by the Trustee to the Tender Agent.

       

      (d)           In
the event that the Purchase Fund no longer qualifies as an Eligible Account, the
Trustee shall, within 30 calendar days, move the Purchase Fund to another
financial institution such that the Eligible Account requirement will again be
satisfied.

       

      
        
          
          

        

        
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      Anything
herein to the contrary notwithstanding, the Tender Agent shall not be obligated
to use its own funds to purchase any Bonds hereunder.

       

      Section
5.04.  Delivery of
Remarketed or Purchased Bonds.  (a)  Bonds
purchased pursuant to Section 5.03 shall be delivered as follows:

       

      (i)           Bonds
sold by the Remarketing Agent to Persons or entities other than the Company, its
Affiliates, the Authority or any guarantor of the Bonds, shall be delivered by
the Remarketing Agent to the purchasers thereof.

       

      (ii)           Bonds,
the principal and interest portions of the purchase price of which are paid with
moneys described in Section 5.03(c)(ii), shall be delivered to the Tender Agent
to be held pursuant to Section 5.05.

       

      (iii)           Bonds
purchased solely with moneys described in Section 5.03(c)(iii) shall, at written
direction of the Company, be (A) delivered to or held by the Tender Agent for
the account of the Company, (B) delivered to the Trustee for cancellation or (C)
delivered to the Company.

       

      (b)           If,
on any date prior to the release of Bonds held by or for the account of the
Company pursuant to Section 5.04(a)(iii), all Bonds are called for redemption
pursuant to Section 3.01(a) or Section 3.01(b) or an acceleration of the Bonds
pursuant to Section 10.01 occurs, such Bonds shall be deemed to have been paid
and shall thereupon be delivered to and cancelled by the Trustee.

       

      Section
5.05.  Bonds Pledged to
the Credit Facility Issuer.  The Registrar
shall register in the name of the Tender Agent as the Credit Facility Issuer’s
designee or such other party designated by the Credit Facility Issuer any Bonds
delivered to the Tender Agent pursuant to Section 5.04(a)(ii) upon receipt of
notice from the Tender Agent of such delivery. Thereafter, the Tender Agent
shall hold such Bonds pledged for the account of and subject to the security
interest in favor of the Credit Facility Issuer.  Each such Bond shall
constitute a Pledged Bond until released as provided herein, shall be deposited
in a separate custodial account established by the Tender Agent for the Credit
Facility Issuer, and shall be released only (a) in the case of Bonds which were
not purchased pursuant to Section 5.01(b)(ii) or Section 5.01(b)(iii), after the
Tender Agent shall have been notified in writing (either by hand delivery or
facsimile transmission) by the Credit Facility Issuer that the Credit Facility
has been reinstated for the principal and interest portions of the drawing made
to pay the purchase price of such Bond and (b) either upon telephonic notice
(promptly confirmed within one Business Day in writing) to the Tender Agent and
the Trustee from the Remarketing Agent that such Bond has been remarketed at a
purchase price equal to the principal amount thereof plus accrued interest, if
any, thereon to the date of purchase or upon Electronic Notice from the Credit
Facility Issuer which directs the Tender Agent to release such Bond to the
Company.  Upon the remarketing of a Pledged Bond as described in the
preceding sentence, such Bond shall be released and delivered to the purchaser
thereof as identified by the Remarketing Agent against receipt of such purchase
price from the purchaser on such date.  The proceeds received from the
remarketing of any Pledged Bond shall be paid by wire transfer and in
immediately available funds on the Purchase Date to the Credit Facility
Issuer.  Upon receipt of the above described Electronic Notice from
the Credit Facility Issuer, the Tender Agent shall deliver such Bonds to the
Company to be held pursuant to Section 5.04(a)(iii).

       

      
        
          
          

        

        
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      On each
Interest Payment Date prior to the release of Pledged Bonds, the Trustee shall
apply moneys credited to the Company Account of the Bond Fund to the payment of
the principal, redemption price, if any, and interest on such Pledged Bonds in
the manner provided in Section 6.02, but shall not draw on the Credit Facility
or otherwise use moneys credited to the Credit Facility Account of the Bond Fund
for that purpose to any extent whatsoever.

       

      If, on
any date prior to the release of Pledged Bonds, all Bonds are called for
redemption pursuant to Article III hereof or the Trustee declares an
acceleration of the Bonds pursuant to Section 10.01 hereof, then those Pledged
Bonds shall be deemed to have been paid by the Credit Facility Issuer in respect
of principal of the Bonds upon such redemption or acceleration and shall
thereupon be delivered to the Trustee for cancellation.

       

      It is
recognized and agreed by the Tender Agent that such Pledged Bonds are held by
the Tender Agent for the benefit of the Credit Facility Issuer as a secured
creditor.

       

      Notwithstanding
anything to the contrary in this Section 5.05, if and for so long as the Bonds
are to be registered in accordance with Section 2.14, the registration
requirements under this Section shall be deemed satisfied if Pledged Bonds are
(i) registered in the name of the Depository or its nominee in accordance with
Section 2.14, (ii) credited on the books of the Depository to the account of the
Tender Agent (or its nominee) and (iii) further credited on the books of the
Tender Agent (or such nominee) to the account of the Credit Facility Issuer (or
its designee).

       

      Section
5.06.  Drawings on Credit
Facility.  (a)  At
or prior to 11:45 a.m. (New York City time) on each Purchase Date, the Tender
Agent shall, by Electronic Notice, notify the Trustee of the amount of moneys
delivered to it by the Remarketing Agent pursuant to Section 5.07 and which are
held in the Remarketing Proceeds Account in the Purchase Fund.  The
Trustee shall prior to 12:00 noon (New York City time) draw under the Credit
Facility, if any, held by the Trustee in accordance with its terms in a manner
so as to furnish immediately available funds by 2:00 p.m. (New York City time)
on such Purchase Date, in an amount sufficient, together with moneys described
in Section 5.03(c)(i) and available for such purchase, to enable the Tender
Agent to pay the purchase price of such Bonds to be purchased on such Purchase
Date, directly to the Tender Agent which shall deposit those moneys directly
into the Credit Facility Proceeds Account, provided however, that in no event
shall moneys in the Credit Facility Proceeds Account be used to pay any amount
which may be due on Bonds held pursuant to Section 5.05.  If the
Tender Agent is other than the Trustee and the Trustee does not receive the
notice referred to above by the time so indicated, the Trustee shall draw for
the full amount due and payable on the Purchase Date.

       

      (b)           If
any Credit Facility permits any drawings to be made later than is provided
herein, the Trustee shall make any drawing required under this Section 5.06 in
accordance with the terms of the Credit Facility for drawing thereunder in a
manner so as to be reasonably assured that immediately available funds will be
available to the Tender Agent by 2:00 p.m. (New York City time) on a Purchase
Date to pay the purchase price and the Tender Agent shall deposit those moneys
directly into the Credit Facility Proceeds Account.

       

      
        
          
          

        

        
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      (c)           If
the Credit Facility Issuer fails by 2:00 p.m. on each Purchase Date, for any
reason, to provide an amount sufficient, together with moneys described in
Section 5.03(c)(i) and available for such purchase, to enable the Tender Agent
to pay the purchase price of such Bonds to be purchased on such Purchase Date or
the Credit Facility has been repudiated, the Trustee shall immediately notify
the Company of such failure to pay and the Company shall furnish immediately
available funds by 3:00 p.m. (New York City time) on such Purchase Date, in an
amount sufficient, together with moneys described in Section 5.03(c)(i) and
available for such purchase, to enable the Tender Agent to pay the purchase
price of such Bonds to be purchased on such Purchase Date.

       

      Section
5.07.  Delivery of
Proceeds of Sale.  The proceeds of
the remarketing of any Bonds by the Remarketing Agent shall be delivered by the
Remarketing Agent directly to the Tender Agent no later than 11:30 a.m. (New
York City time) on the Purchase Date, and, except as described in the next
sentence, all such remarketing proceeds shall be deposited directly into the
Remarketing Proceeds Account.  The proceeds of any remarketing of
Bonds by the Remarketing Agent to the Company, its affiliates, the Authority or
any guarantor of the Bonds shall be delivered to the Tender Agent in accordance
with the first sentence of this Section, separate and segregated from any other
moneys and identified by the Remarketing Agent as to source, but shall not be
deposited in the Purchase Fund but shall instead be deposited in a fund known as
the “Company Fund” which is hereby established with the Tender Agent and which
shall be maintained as a separate and segregated account and any moneys held
therein shall not be commingled with moneys in the Purchase Fund or any other
account or with any other funds of the Tender Agent.  In the absence
of any of the aforesaid identifications, the Tender Agent may conclusively
assume that no moneys representing the proceeds from the remarketing by the
Remarketing Agent of any Bonds were proceeds from the remarketing of Bonds to
the Company, its affiliates, the Authority or any guarantor of the
Bonds.

       

      If a
Credit Facility is then in effect, the moneys in the Company Fund shall be paid,
to the extent not needed on such date to pay the purchase price of Bonds, first,
to the Credit Facility Issuer, to the extent of any amounts that the Company
owes the Credit Facility Issuer pursuant to the Reimbursement Agreement (as
certified in writing by the Credit Facility Issuer to the Tender Agent and the
Company) and, second, to the Company.  If any Bonds held by the Tender
Agent for the account of the Company pursuant to Section 5.04(a)(iii)(A) are
remarketed by the Remarketing Agent pursuant to Section 5.02(b), then the
proceeds received from such remarketing shall be remitted by the Tender Agent to
the Company.  If any Bonds held by the Tender Agent pursuant to
Section 5.05 are remarketed by the Remarketing Agent pursuant to Section
5.02(b), then the proceeds received from such remarketing shall, on the date of
such remarketing, be delivered by the Remarketing Agent to the Tender Agent, for
the account of the Credit Facility Issuer, with Electronic Notice of the amount
of such proceeds given by the Remarketing Agent to the Credit Facility Issuer,
the Trustee and the  Company, against delivery of such Bonds, subject
to Section 5.05 hereof.

       

      Section
5.08.  Limitations on
Purchase.  Anything in this
Indenture to the contrary notwithstanding, there shall be no purchase of (a)
less than the entire amount of any Bond unless

       

      
        
          
          

        

        
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      the
amount to be purchased and the amount to be retained by the owner are in
authorized denominations or (b) any Bond upon the demand of the Owner if the
Bonds have been declared due and payable pursuant to Section 10.01.

       

      ARTICLE
VI

       

      INVESTMENTS

       

      Section
6.01.  Investments.  The moneys in
the Bond Fund (except moneys in the Credit Facility Account) 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
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 11.05 hereof.  Moneys held in the Credit Facility
Account shall not be invested and the Trustee shall not be liable for the
payment of interest thereon.

       

      ARTICLE
VII

       

      CREDIT
FACILITIES

       

      Section
7.01.  Initial Letter of
Credit.  The Letter of
Credit shall provide for direct payments to or upon the order of the Trustee as
hereinafter set forth and shall be the irrevocable obligation of the Bank to pay
to or upon the order of the Trustee, upon request and in accordance with the
terms thereof (and the Trustee agrees to draw on the Letter of Credit at such
times and in such amounts as may be required to provide the following amounts at
the required times), up to (a) an amount equal to the principal amount of the
Bonds (i) to pay the principal of the Bonds when due whether at stated maturity,
upon redemption or acceleration or (ii) to enable the Tender Agent to pay the
portion of the purchase price equal to the principal amount of Bonds purchased
pursuant to Section 5.01 to the extent remarketing proceeds are not available in
the Remarketing Proceeds Account for such purpose, plus (b) an amount equal to
at least 45 days’ interest accrued on the Bonds computed at the assumed maximum
rate of ten percent (10%) per annum (the “Interest Component”) (i) to pay
interest on the Bonds when due or (ii) to enable the Tender Agent to pay the
portion of the purchase price of the Bonds purchased pursuant to Section 5.01
equal to the interest accrued, if any, on such Bonds to the extent remarketing
proceeds are not available for such purpose in the Remarketing Proceeds
Account.  The Trustee will draw upon the Letter of Credit for the
aforementioned amounts only while the Interest Rate Mode for such Bonds is the
Daily Rate or the Weekly Rate.

       

      
        
          
          

        

        
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      The
Letter of Credit shall provide that if, in accordance with the terms of the
Indenture, the Bonds shall become immediately due and payable pursuant to any
provision of the Indenture, the Trustee shall be entitled to draw on the Letter
of Credit to the extent of the aggregate principal amount of the Bonds then
Outstanding plus, to the extent available under the Credit Facility, an amount
sufficient to pay interest on all Outstanding Bonds, less amounts for which the
Letter of Credit shall not have been reinstated.  In no event will the
Trustee be entitled to make drawings under the Letter of Credit for the payment
of any amount due on any Bond held pursuant to Section 5.05 or otherwise
registered in the name of the Company.

       

      Except as
provided in Section 4.01(e) and Section 10.10 hereof, the Trustee shall have no
responsibility to reimburse the Credit Facility Issuer for any drawings on the
Credit Facility.

       

      Section
7.02.  Termination.  If at any time
there shall cease to be any Bonds Outstanding hereunder or if any then current
Credit Facility is otherwise terminated, the Trustee shall promptly surrender
any such Credit Facility to the Credit Facility Issuer for
cancellation.  The Trustee shall comply with the procedures set forth
in the Credit Facility relating to the termination thereof.

       

      At any
time the Bonds are subject to optional redemption pursuant to Section 3.01(a),
the Trustee shall, at the written direction of the Company, but subject to the
conditions contained in this paragraph, deliver any Credit Facility for
cancellation in accordance with the terms thereof which cancellation may be
without substitution therefor or replacement thereof; provided, that the Company
shall not be entitled to give any such direction if the purchase price of any
Bonds to be purchased pursuant to Section 5.01(b)(ii) in connection with such
cancellation, determined under such Section 5.01(b)(ii), includes any premium
unless the Trustee has received written confirmation from the Credit Facility
Issuer that the Trustee can draw under the Credit Facility on the Purchase Date
related to such purchase of Bonds in an aggregate amount sufficient to pay the
premium due upon such purchase of Bonds on such Purchase Date.  If the
Interest Rate Mode for Bonds is the Commercial Paper Rate, in addition to the
written confirmation to the Trustee the Company shall notify the Remarketing
Agent to establish a Commercial Paper Rate Period for each such Bond in
accordance with Section 2.02(c)(i)(C)(1).  Any such cancellation shall
not become effective, surrender of such Credit Facility shall not take place and
that Credit Facility shall not terminate, in any event, until payment by the
issuer of that Credit Facility shall have been made for any and all drawings by
the Trustee effected on or before such cancellation date (including, if
applicable, any drawings for payment of the purchase price of Bonds to be
purchased pursuant to Section 5.01(b)(ii) in connection with such
cancellation).  Notice of any proposed cancellation of the Credit
Facility shall be given by the Company in writing to the Trustee at least twenty
five (25) days (forty (40) days if the Interest Rate Mode is the Term Rate)
prior to the effective date of such cancellation.  Upon such
cancellation, the Trustee shall surrender such Credit Facility to the Credit
Facility Issuer in accordance with its terms.

       

      Section
7.03.  Alternate Credit
Facilities.  Subject to the
conditions of this Section 7.03, the Company may, at its option, provide for the
delivery to the Trustee of an Alternate Credit Facility having administrative
terms acceptable to the Trustee.  At least twenty five (25) days
(forty (40) days if the Interest Rate Mode is the Term Rate) prior to the
proposed effective date of the proposed Alternate Credit Facility, the Company
shall give notice, which notice, if the Interest Rate Mode is the Commercial
Paper Rate, shall also contain a certification with respect

       

      
        
          
          

        

        
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      to the
length of each Commercial Paper Rate Period permitted hereunder after delivery
of such Alternate Credit Facility, of such replacement to the Trustee, the
Remarketing Agent, the Paying Agent, the Tender Agent and the then current
Credit Facility Issuer, together with an opinion of Bond Counsel stating that
the delivery of such Alternate Credit Facility to the Trustee is authorized
under this Indenture and that the delivery of such Alternate Credit Facility
will not adversely affect the exclusion from gross income of the interest on the
Bonds for federal income tax purposes.  If (x) all of the Bonds are
then subject to optional redemption pursuant to Section 3.01(a) and (y) if the
purchase price of any Bonds to be purchased pursuant to Section 5.01(b)(ii) in
connection with cancellation, termination or substitution of the existing Credit
Facility, determined under such Section 5.01(b)(ii), includes any premium and
the Trustee has received written confirmation from the Credit Facility Issuer
that the Trustee can draw under the Credit Facility (other than the Alternate
Credit Facility being delivered in connection with such cancellation) on the
Purchase Date related to such purchase of Bonds in an aggregate amount
sufficient to pay the premium due upon such purchase of Bonds on such Purchase
Date, then the Trustee shall (i) accept such Alternate Credit Facility and
surrender the previously held Credit Facility, if any, to the previous Credit
Facility Issuer for cancellation promptly on the day the Alternate Credit
Facility becomes effective and (ii) give the notice provided for in Section
7.05; provided, further, however, that such Credit Facility shall not be
surrendered for cancellation until payment by the issuer of the Credit Facility
to be surrendered shall have been made for any and all drawings by the Trustee
effected on or before the date of such surrender for cancellation (including any
drawings for payment of the  purchase price of Bonds to be purchased
pursuant to Section 5.01(b)(ii) in connection with such cancellation,
termination or substitution).  If the Interest Rate Mode for Bonds is
the Commercial Paper Rate, and if the preceding sentence is applicable, the
notices required under this Section 7.03 shall be delivered in sufficient time
to permit the Remarketing Agent to establish a Commercial Paper Rate Period for
each such Bond in accordance with Section 2.02(c)(i)(C)(1).

       

      Any
Alternate Credit Facility delivered to the Trustee must be accompanied by an
opinion of Counsel to the issuer or provider of such Credit Facility stating
that such Credit Facility is a legal, valid, binding and enforceable obligation
of such issuer or obligor in accordance with its terms.  In addition,
if the Company grants a security interest in any cash, securities or investment
property to the issuer or provider of such Alternate Credit Facility, the
Company must furnish the Trustee with an opinion of Bond Counsel stating that
such grant will not, in and of itself, adversely affect any exclusion of
interest on the Bonds from gross income for purposes of federal income taxation
nor adversely affect any security interest created under the Indenture in favor
of the holders of the Bonds.

       

      Section
7.04.  Mandatory Purchase
of Bonds.

       

      (a)           Prior to Expiration of
Credit Facility.  On the fifteenth day (or if such day is not a
Business Day, the preceding Business Day) preceding the stated expiration of the
term of the then current Credit Facility if such Credit Facility is not
extended, the Bonds shall become subject to mandatory purchase in accordance
with Section 5.01(b)(ii) and the Trustee shall give notice thereof in accordance
with Section 7.05(a).

       

      (b)           Prior to Cancellation,
Substitution or Termination of Credit Facility.  Upon notice
delivered by the Company pursuant to Section 7.02 or Section 7.03, the Bonds
shall become subject to mandatory purchase pursuant to Section 5.01(b)(ii) and
the Trustee shall give notice thereof in accordance with Section
7.05(a).

       

      
        
          
          

        

        
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      (c)           At Direction of Credit
Facility Issuer.  Upon receipt of written notice delivered to
the Trustee by the Credit Facility Issuer that states that an event of default
has occurred and is continuing under the Reimbursement Agreement, the Bonds
shall become subject to mandatory purchase pursuant to Section 5.01(b)(iii) and
the Registrar shall give notice thereof in accordance with Section 7.05(b) and
Section 5.01(b)(iii).

       

      Section
7.05.  Notices.  (a)  At
the expense of the Company, the Trustee shall notify the Registrar and the
Registrar shall notify the Owners by Mail of the expiration, termination, a
substitution or cancellation of the Credit Facility which will subject the Bonds
to mandatory purchase in accordance with Section 5.01(b)(ii) at least fifteen
(15), but not more than twenty five (25), days (thirty (30), but not more than
forty (40), days if the Interest Rate Mode is the Term Rate) before any Purchase
Date resulting from such expiration, termination, substitution  or
cancellation.  The notice will state:

       

      (i)           that
the Credit Facility is expiring or being cancelled, substituted or
terminated;

       

      (ii)           the
Purchase Date; and

       

      (iii)           that
the Bonds will be subject to mandatory purchase (and the purchase therefor) on
the Purchase Date in accordance with Section 5.01(b)(ii) and that if any owner
shall fail to deliver a Bond for purchase with an appropriate instrument of
transfer to the Tender Agent on the Purchase Date, and if the Tender Agent is in
receipt of the purchase price therefor, such Bond not delivered shall
nevertheless be purchased on the Purchase Date and shall cease to accrue
interest on and from such date.

       

      (b)           The
Trustee shall promptly notify the Registrar and the Registrar shall, as soon as
practicable, but in no event later than one Business Day prior to the Purchase
Date, notify the Owners by Mail, of a mandatory purchase of Bonds at the
direction of the Credit Facility Issuer as a result of the receipt by the
Trustee of a notice from the Credit Facility Issuer stating that an event of
default has occurred and is continuing under the Reimbursement
Agreement.  The notice will state:

       

      (i)           that
the Bonds are subject to mandatory purchase at the direction of the Credit
Facility Issuer as a result of an event of default occurring and continuing
under the Reimbursement Agreement;

       

      (ii)           the
Purchase Date, which shall occur on the second Business Day after the date of
receipt by the Trustee of the notice from the Credit Facility Issuer;
and

       

      (iii)           that
the Bonds will be subject to mandatory purchase (and the purchase price
therefor) on the Purchase Date in accordance with Section 5.01(b)(iii) and that
if any owner shall fail to deliver a Bond for purchase with an appropriate
instrument of transfer to the Tender Agent on the Purchase Date, and if the
Tender Agent or the Trustee is in receipt of the purchase price therefor, such
Bond not delivered shall nonetheless be purchased on the Purchase Date and cease
to accrue interest on and from such date; and

       

      
        
          
          

        

        
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      (c)           Copies
of any notices required by this Section 7.05 shall also be sent to the
Authority, the Tender Agent, the Remarketing Agent and the Paying
Agent.

       

      Section
7.06.  Other Credit
Enhancement; No Credit Facility.  Anything else to the contrary
in this Article VII or in this Indenture notwithstanding, upon a mandatory
purchase of the Bonds as set forth in Section 5.01(b)(ii) or Section
5.01(b)(iii), the Company shall not be required to provide a Credit Facility or
other credit enhancement or the Company may provide credit or liquidity
enhancement other than a Credit Facility providing for (i) the payment of the
principal, interest and redemption payment on the Bonds or a portion thereof or
(ii) payment of the purchase price of the Bonds; provided, however, such credit
or liquidity enhancement shall have administrative provisions reasonably
satisfactory to the Trustee, the Tender Agent and the Remarketing Agent, and the
Company shall provide the Trustee with an opinion of Bond Counsel stating that
the other credit or liquidity enhancement or the delivery of such other credit
or liquidity enhancement, or both, will not, in and of itself, adversely affect
any exclusion of interest on the Bonds from gross income for purposes of federal
income taxation.

       

      ARTICLE
VIII

       

      GENERAL
COVENANTS

       

      Section
8.01.  No General
Obligations.  Each and every
covenant herein made, including all covenants made in the various sections of
this Article VIII, 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, and the purchase price 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 and the purchase
price of 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.

       

      Section
8.02.  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.

       

      
        
          
          

        

        
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      Section
8.03.  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
8.04.  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 14.06 and 14.07 of this Indenture (a
revision to Exhibit A to the Loan Agreement not being deemed an amendment for
purposes of this Section).

       

      Section
8.05.  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
8.06.  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
8.07.  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.

       

      Section
8.08.  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 1986 Code or otherwise subject
to federal income

       

      
        
          
          

        

        
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      taxation
by reason of Title XIII of the Tax Reform Act of 1986 and Section 103 of the
1954 Code, 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 Industrial Development Revenue Bonds, 2008
Series B (Tucson Electric Power Company 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 8.08, 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 8.08, 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
8.09.  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
IX

       

      DEFEASANCE

       

      Section
9.01.  Defeasance.  (a)  When
the principal or redemption price, as the case may be, of, and interest on, all
Bonds issued hereunder have been paid, or provision has been made for payment of
the same, together with all amounts due to the Trustee and all other sums
payable hereunder by the Authority, and all obligations owed to the Credit
Facility Issuer have been paid and the Credit Facility has been returned to the
Credit Facility Issuer for cancellation, the right, title and interest of the
Trustee in the Loan Agreement and the moneys payable thereunder shall thereupon
cease and the Trustee, on demand of the Authority, shall release this Indenture
and shall execute such documents to evidence such release as may be reasonably
required by the Authority and shall turn over to the Company all balances then
held by it hereunder; provided, however, that notwithstanding any other
provision in this Indenture, any money in the Credit Facility Account shall be
paid solely to the Credit Facility Issuer and not to the Company.  If
payment or provision therefor is made with respect to less than all of the
Bonds, the particular Bonds (or portion thereof) for which provision for payment
shall have been considered made shall be selected by lot by the Trustee, and
thereupon the Trustee shall take similar action for the release of this
Indenture with respect to such Bonds.

       

      (b)           Provision
for the payment of Bonds shall be deemed to have been made when the Trustee
holds in the Bond Fund, in trust and irrevocably set aside exclusively for such
payment, (i) moneys sufficient to make such payment and any payment of the
purchase price of Bonds pursuant to Section 5.01 and/or (ii) Government
Obligations maturing as to principal and interest in such amounts and at such
times as will provide sufficient moneys (without consideration of any investment
earnings thereof) to make such payment and any payment of the purchase price of
Bonds pursuant to Section 5.01, and which are not subject to prepayment,
redemption or call prior to their stated maturity; provided that if a Credit
Facility is then held by the Trustee, (1) such payment and any payment of the
purchase price of Bonds pursuant to Section 5.01 shall be made only from
proceeds of the Credit Facility deposited directly into the Credit Facility
Account or the Credit Facility Proceeds Account, as applicable, or (2) the
Company shall have caused to be delivered to the Trustee both a certification as
to whether the Bonds are then rated and an opinion of Bankruptcy Counsel which
opinion, if the Bonds are then rated, shall be satisfactory to the Rating
Agency, that any such payment and the payment of the purchase price of any Bonds
pursuant to Section 5.01 will not be considered an avoidable “preferential
transfer” by the Company or the Authority under Section 547 of the United States
Bankruptcy Code or any other applicable state or federal bankruptcy law, in the
event of the occurrence of an Event of Bankruptcy.

       

      No Bonds
in respect of which a deposit under clause (i) or (ii) above has been made shall
be deemed paid within the meaning of this Article unless (A) the Bonds mature on
the last day of the current Rate Period and no Bonds are required to be
purchased upon demand of the owners pursuant to Section 5.01(a) or subject to
mandatory purchase pursuant to Section 5.01(b) between the date of such deposit
and the maturity date of the Bonds, or (B) the Bonds may be redeemed on or
before the last day of the then current Rate Period and provision has been
irrevocably made for such redemption on or before such date and no Bonds are
required to be purchased upon demand of the owners pursuant to Section 5.01(a)
or subject to mandatory

       

      
        
          
          

        

        
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      purchase
pursuant to Section 5.01(b) between the date of such deposit and the redemption
date of the Bonds, and (C) in the case of a deposit of Government Obligations or
a deposit consisting of a combination of cash and Government Obligations, the
Trustee has received (i) a certificate from a firm of independent certified
public accountants to the effect that the amounts deposited are sufficient,
without the need to reinvest any principal or interest, to make all payments
that might become due on the Bonds (a copy of such certificate to be forwarded
by the Company to the Rating Agency) and (ii) the Trustee shall thereafter have
received a written confirmation from the Rating Agency that such action would
not result in (x) a permanent withdrawal of its rating on the Bonds or (y) a
reduction in the then current rating on the Bonds; provided that notwithstanding
any other provision of this Indenture, any Bonds purchased pursuant to Section
5.01 after such a deposit shall be surrendered to the Trustee for cancellation
and shall not be remarketed.  Notwithstanding the foregoing, no
delivery to the Trustee under this subsection (b) shall be deemed a payment of
any Bonds which are to be redeemed prior to their stated maturity until such
Bonds shall have been irrevocably called or designated for redemption on a date
thereafter on which such Bonds may be redeemed in accordance with the provisions
of this Indenture and proper notice of such redemption shall have been given in
accordance with Article III or the Authority shall have given the Trustee, in
form satisfactory to the Trustee, irrevocable instructions to give, in the
manner and at the times prescribed by Article III, notice of
redemption.  Neither the obligations nor moneys deposited with the
Trustee pursuant to this Section shall be withdrawn or used for any purpose
other than, and shall be segregated and held in trust for, the payment of the
principal, purchase price or redemption price of and interest on the Bonds with
respect to which such deposit has been made.   In the event that
such moneys or obligations are to be applied to the payment of principal,
purchase price or redemption price of any Bonds more than sixty (60) days
following the deposit thereof with the Trustee, the Trustee shall mail a notice
to all owners of Bonds for the payment of which such moneys or obligations are
being held, to their registered addresses, stating that moneys or obligations
have been deposited with the Trustee and identifying the Bonds for the payment
of which such moneys or obligations are being held and shall also mail a copy of
that notice to the Rating Agency; provided, however, that the Trustee shall have
no liability or obligation to the Rating Agency if it shall fail to give such
organization such notice.

       

      (c)           Anything
in Article IX to the contrary notwithstanding, if moneys or Government
Obligations have been deposited or set aside with the Trustee pursuant to this
Article for the payment of  the principal or redemption price of the
Bonds and the interest thereon and the principal or redemption price of such
Bonds and the interest thereon shall not have in fact been actually paid in
full, no amendment to the provisions of this Article shall be made without the
consent of the owner of each of the Bonds affected thereby.

       

      Notwithstanding
the foregoing, those provisions relating to the purchase of Bonds, the maturity
of Bonds, the Depository and the interest payments and dates thereof, drawings
upon the Credit Facility, if any, and the Trustee’s remedies with respect
thereto, and provisions relating to exchange, transfer and registration of
Bonds, replacement of mutilated, destroyed, lost or stolen Bonds, the
safekeeping and cancellation of Bonds, non presentment of Bonds, the Rebate Fund
and arbitrage matters under Section 148(f) of the Code, the holding of moneys in
trust, and repayments to the Credit Facility Issuer or the Company from the Bond
Fund and the duties of the Trustee in connection with all of the foregoing and
the fees, expenses, right and indemnities of the Trustee, shall remain in effect
and shall be binding upon the Trustee, the Authority, the Company and the Owners
notwithstanding the release and discharge of the lien of this
Indenture.

       

      
        
          
          

        

        
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      ARTICLE
X

       

      DEFAULTS
AND REMEDIES

       

      Section
10.01.  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 five (5) days (thirty
(30) days if the Interest Rate Mode for such Bonds is the Term
Rate);

       

      (c)           a
failure to pay the purchase price of any Bond required to be purchased pursuant
to Section 5.01 hereof for a period of five (5) days after such payment becomes
due and payable; or

       

      (d)           a
failure by the Authority to observe and perform any covenant, condition,
agreement or provision (other than as specified in clauses (a), (b) and (c) of
this Section 10.01) 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.

       

      Upon the
occurrence and continuance of any Event of Default described in clause (a), (b)
or (c) 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, the Trustee 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

       

      
        
          
          

        

        
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      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.  The Trustee shall not annul any declaration resulting from
any  Event of Default which has resulted in a drawing under the Credit
Facility unless the Trustee has received written confirmation from the Credit
Facility Issuer that the notice that resulted in such Event of Default has been
rescinded and Credit Facility has been fully reinstated.

       

      No Event
of Default described in Section 10.01(a), (b) or (c) shall be deemed to have
occurred solely by reason of such failure to make such payment if and to the
extent that payments have nonetheless been made by a Credit Facility Issuer to
the Trustee pursuant to the Credit Facility for deposit in the Bond Fund at such
time and in such manner as to prevent an Event of Default described under such
Section 10.01(a), (b) or (c).

       

      Section
10.02.  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.

       

      Section
10.03.  Restoration to
Former Position.  In the event that any proceeding taken by the
Trustee to enforce any right under this Indenture shall have been discontinued
or abandoned for any reason, or shall have been determined adversely to the
Trustee, then 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.

       

      
        
          
          

        

        
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      Section
10.04.  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
10.05.  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
10.06.  No Impairment of
Right to Enforce Payment.  Notwithstanding any other provision
in this Indenture, the right of any Owner of a Bond to receive payment of the
principal of and premium, if any, and interest on such Bond, on or after the
respective due dates expressed therein, or to institute suit for the enforcement
of any such payment on or after such respective dates, shall not be impaired or
affected without the consent of such Owner.

       

      Section
10.07.  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.

       

      
        
          
          

        

        
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      Section
10.08.  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
10.09.  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 X 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
10.10.  Application of
Moneys.  Any moneys received by the Trustee under this Article
X or otherwise held by the Trustee under this Indenture shall be applied in the
following order; provided that any moneys received by the Trustee from a drawing
on the Credit Facility shall be applied to the extent permitted by the terms
thereof only as provided in paragraph (b) below with respect to the principal
of, and interest accrued on, Bonds other than Bonds held of record by or, to the
actual knowledge of the Trustee, for the account of the Company after purchase
thereof pursuant to Section 5.04(a)(iii) and other than Bonds held pursuant to
Section 5.05 or otherwise registered in the name of the Company; and provided,
further, that moneys held in the Purchase Fund shall only be applied as set
forth in Section 5.03:

       

      (a)           to
the payment of the fees and expenses of the Trustee incurred or anticipated to
be incurred, including reasonable counsel fees and expenses, any disbursements
of the Trustee with interest thereon and its reasonable compensation and all
other amounts owing to the Trustee under Section 11.04 or under Section 5.04 of
the Loan Agreement;

       

      (b)           to
the payment of principal or redemption price (as the case may be) and interest
then owing on the Bonds, including any interest on overdue interest (to the
extent permitted by law) at the rate borne by such Bond on the day before the
default or Event of Default occurred, provided that if the Interest Rate Mode
was then the Commercial Paper Rate, the default rate for all of the Bonds shall
be equal to the highest interest rate then in effect for any Bond, and in case
such moneys shall be insufficient to pay the same in full, then to the payment
of principal or redemption price and interest ratably, without preference or
priority of one over another or of any installment of interest over any other
installment of interest; and

       

      (c)           to
the payment of any unpaid expenses of the Authority, including reasonable
counsel fees and expenses, incurred in connection with the Event of
Default.

       

      The
surplus, if any, shall be paid first to the Credit Facility Issuer to the extent
of any amounts that the Company owes the Credit Facility Issuer pursuant to the
Reimbursement Agreement (as certified in writing by the Credit Facility Issuer
to the Trustee) and second (other than any moneys received by the Trustee from a
drawing on a Credit Facility, if any) to the Company or the Person lawfully
entitled to receive the same as a court of competent jurisdiction may
direct.

       

      
        
          
          

        

        
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      Section
10.11.  Severability of
Remedies.  It is the purpose and intention of this Article X 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
XI

       

      TRUSTEE;
PAYING AGENT AND CO PAYING AGENTS; REGISTRAR

       

      Section
11.01.  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 XI, to all of which the Authority agrees and the respective Owners agree
by their acceptance of delivery of any of the Bonds.

       

      Section
11.02.  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
11.03.  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.

       

      Section
11.04.  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 IX

       

      
        
          
          

        

        
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      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 11.04, 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 IX hereof; and provided further that funds in the
Purchase Fund and funds in the Credit Facility Account shall not be used to
compensate the Trustee, the Paying Agent, any Co Paying Agent or the
Registrar.

       

      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
11.05.  Notice of Events
of Default.  The Trustee shall not be required to take notice,
or be deemed to have notice, of any default or Event of Default under this
Indenture other than an Event of Default under clause (a), (b) or (d) of the
first paragraph of Section 10.01 hereof and other than any event of default
under clause (c) of the first paragraph of Section 10.01 at a  time
when the Trustee is the Tender Agent hereunder, 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.

       

      Section
11.06.  Action by
Trustee.  The Trustee shall be under no obligation to take any
action in respect of any default or Event of Default hereunder 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

       

      
        
          
          

        

        
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      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
11.07.  Good Faith
Reliance.  The Trustee shall be protected and shall incur no
liability in acting or proceeding in good faith upon any resolution, notice,
telegram, 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 13.01
hereof.

       

      Section
11.08.  Dealings in Bonds
and with the Authority and the Company.  The Trustee, the
Paying Agent, the Credit Facility Issuer, any Co Paying Agent, the Registrar,
the Tender Agent, or the Remarketing Agent, 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, the Credit Facility Issuer,
any Co Paying Agent, the Registrar, the Tender Agent or the Remarketing
Agent,  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
11.09.  Allowance of
Interest.  The Trustee may, but shall not be obligated to,
allow and credit interest upon any moneys which it may at any time receive under
any of the provisions of this Indenture, at such rate, if any, as it customarily
allows upon similar funds of similar size and under similar
conditions.  All interest allowed on any such moneys shall be credited
as provided in Article IV with respect to interest on investments.

       

      Section
11.10.  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
11.11.  Resignation of
Trustee.  The Trustee may resign and be discharged of the
trusts created by this Indenture by executing an instrument in writing resigning
such trust and specifying the date when such resignation shall take effect, and
filing the same with the President

       

      
        
          
          

        

        
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      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 11.16, 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 11.13 and such
appointment shall be deemed to have been accepted as contemplated in Section
11.16, all as of such date, and all other provisions of this Article XI 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
11.12.  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
11.13.  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.

       

      (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.

       

      
        
          
          

        

        
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      (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
11.14.  Qualifications of
Successor Trustee.  Every successor Trustee (a) shall be a bank
with trust powers or a 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
11.15.  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 XI prior to the date
specified in the notice of resignation as the date when such resignation is to
take effect, the retiring Trustee may forthwith apply to a court of competent
jurisdiction for the appointment of a successor Trustee.  If no
appointment of a successor Trustee shall be made pursuant to the foregoing
provisions of this Article XI within six (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
11.16.  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
11.04 hereof, such predecessor Trustee shall pay over to the successor Trustee
all moneys and other assets at the time held by it hereunder.

       

      Section
11.17.  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 the corporate trust business of the Trustee, shall
be the successor Trustee under this Indenture, without the execution or filing
of any paper or any further act on the part of the parties hereto, anything in
this Indenture to the contrary notwithstanding.

       

      If, at
the time any such successor to the Trustee shall succeed to the trusts created
by this Indenture, any of the Bonds shall have been authenticated but not
delivered, such successor Trustee may adopt the certificate of authentication of
any predecessor Trustee and deliver such Bonds so authenticated; and if at that
time, any of the Bonds shall not have been authenticated, such successor Trustee
may authenticate such Bonds either in the name of any such
predecessor

       

      
        
          
          

        

        
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      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
11.18.  Standard of
Care.  Notwithstanding any other provisions of this Article XI,
the Trustee shall, during the existence of an Event of Default of which the
Trustee 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
11.19.  Notice to Owners
of Bonds of Event of Default.  If an Event of Default occurs of
which the Trustee by Section 11.05 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 11.05 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 10.01 hereof, the Trustee shall give Notice
by Mail to all Owners of Outstanding Bonds.

       

      Section
11.20.  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
11.21.  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 11.22
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;

       

      (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

       

      
        
          
          

        

        
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      (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 Section 4.01 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
11.22.  Qualifications of
Paying Agent and Co Paying Agents; Resignation; Removal.  The
Paying Agent and any Co Paying Agent shall be a bank with trust powers or a
trust company 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
11.23.  Registrar.  The
Authority shall, with the approval of the Company, appoint the Registrar for the
Bonds, subject to the conditions set forth in Section 11.24
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.

       

      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

       

      
        
          
          

        

        
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      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
11.24.  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
11.25.  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, the Tender Agent and the Registrar and in any combination of such
capacities to the extent permitted by law.

       

      Section
11.26.  Fiduciary for
Bondholders.  In making draws under the Credit Facility and
disbursing the proceeds thereof, the Trustee is acting on behalf of the
Bondholders and not as an agent of the Company or the Authority.

       

      ARTICLE
XII

       

      THE
REMARKETING AGENT AND THE TENDER AGENT

       

      Section
12.01.  The Remarketing
Agent.  (a)  Morgan Stanley & Co. Incorporated
has been appointed by the Company to act as Remarketing Agent under this
Indenture.  The Company may appoint additional Remarketing
Agents.  If, at any time, there is more than one Remarketing Agent
(which term, as used hereinafter in this Section 12.01, means any one entity
serving in the capacity of Remarketing Agent) hereunder, each such Remarketing
Agent shall

       

      
        
          
          

        

        
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      perform
such of the duties of the Remarketing Agent hereunder as are set forth in the
Remarketing Agreement and each such Remarketing Agent shall deliver to the
Trustee and the Tender Agent a written instrument specifying, in the event of
conflicting directions given by those Remarketing Agents to the Trustee or
Tender Agent, which set of directions shall be controlling for all purposes
hereunder.  Each Remarketing Agent, by written instrument delivered to
the Authority, the Trustee and the Company (which written instrument may be the
Remarketing Agreement), shall accept the duties and obligations imposed on it
under this Indenture, subject to the terms and provisions of the Remarketing
Agreement, and shall become a party to the Remarketing Agreement.

       

      (b)           In
addition to the other obligations imposed on the Remarketing Agent hereunder,
the Remarketing Agent shall keep such books and records with respect to its
duties as Remarketing Agent as shall be consistent with prudent industry
practice and shall make such books and records available for inspection by the
Authority, the Trustee, the Credit Facility Issuer and the Company at all
reasonable times.

       

      (c)           At
any time a Remarketing Agent may resign in accordance with the Remarketing
Agreement.  Any Remarketing Agent may be removed at any time in
accordance with the Remarketing Agreement.  Upon resignation or
removal of a Remarketing Agent, the Company, and if the Remarketing Agent was
not the same as the Credit Facility Issuer or under common control with the
Credit Facility Issuer, with the consent of the Credit Facility Issuer, such
consent not to be unreasonably withheld, shall either appoint a successor
Remarketing Agent or authorize the remaining Remarketing Agent or Agents to act
alone in such capacity, in which case all references in this Indenture to the
Remarketing Agent shall mean the remaining Remarketing Agent or
Agents.  If the last remaining Remarketing Agent resigns or is
removed, the Company shall appoint a successor Remarketing Agent.  Any
successor Remarketing Agent shall have combined capital, surplus and undivided
profits of at least $50,000,000.

       

      (d)           The
Remarketing Agent may in good faith buy, sell, own, hold and deal in any of the
Bonds and may join in any action which any Owners may be entitled to take with
like effect as if the Remarketing Agent were not appointed to act in such
capacity under this Indenture.

       

      Section
12.02.  The Tender
Agent.  (a)  The Tender Agent shall be U.S. Bank
Trust National Association.  The Company shall appoint any successor
Tender Agent for the Bonds, subject to the conditions set forth in Section
12.02(b).  The Tender Agent shall designate its Principal Office and
Delivery Office and signify its acceptance of the duties and obligations imposed
upon it hereunder by a written instrument of acceptance delivered to the
Authority, the Trustee, the Company, the Remarketing Agent and the Credit
Facility Issuer in which the Tender Agent will agree, particularly:

       

      (i)           to
hold all Bonds delivered to it pursuant to Section 5.01, as agent and bailee of,
and in escrow for the benefit of, the respective owners thereof until moneys
representing the purchase price of such Bonds shall have been delivered to or
for the account of or to the order of such owners;

       

      (ii)           to
hold all moneys (without investment thereof or responsibility for interest
thereon) delivered to it hereunder for the purchase of Bonds pursuant to Section
5.01 as

       

      
        
          
          

        

        
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      agent and
bailee of, and in escrow for the benefit of, the Person or entity which shall
have so delivered such moneys until the Bonds purchased with such moneys shall
have been delivered to or for the account of such Person or entity and
thereafter to hold such moneys (without investment thereof) as agent and bailee
of, and in escrow for the benefit of, the Person or entity which shall be
entitled thereto on the Purchase Date;

       

      (iii)           to
hold Bonds for the account of the Company as contemplated by Section
5.04(a)(iii);

       

      (iv)           to
hold for the Credit Facility Issuer Bonds purchased pursuant to Section 5.01
with moneys representing the proceeds of a drawing under the Credit Facility by
the Trustee as contemplated by Section 5.05; and

       

      (v)           to
keep such books and records as shall be consistent with prudent corporate trust
industry practice and to make such books and records available for inspection by
the Authority, the Trustee and the Company at all reasonable times upon prior
written notice.

       

      (b)           The
Tender Agent shall be a Paying Agent for the Bonds duly qualified under Section
11.01 and authorized by law to perform all the duties imposed upon it by this
Indenture.  The Tender Agent may at any time resign and be discharged
of the duties and obligations created by this Indenture by giving at least
thirty (30) days’ notice to the Authority, the Trustee, the Company, the Credit
Facility Issuer and the Remarketing Agent.  In the event that the
Company shall fail to appoint a successor Tender Agent, upon the resignation or
removal of the Tender Agent, the Trustee, unless it is also acting as Tender
Agent, shall at the expense of the Company either appoint a Tender Agent or
itself act as Tender Agent until the appointment of a successor Tender
Agent.  Any removal or resignation of the Tender Agent and appointment
of a successor Tender Agent shall become effective upon acceptance of such
appointment by the successor Tender Agent.  Any successor Tender Agent
appointed hereunder shall also be appointed a Paying Agent
hereunder.  Any successor Tender Agent appointed hereunder shall be
acceptable to the Credit Facility Issuer and the Remarketing
Agent.  The Tender Agent may be removed at any time with the consent
of the Credit Facility Issuer by an instrument signed by the Company, filed with
the Authority, the Trustee, the Remarketing Agent and the Credit Facility
Issuer.

       

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

       

      Section
12.03.  Notices.  The
Registrar shall, within twenty-five (25) days of the resignation or removal of
the Remarketing Agent or the Tender Agent or the appointment of a successor
Remarketing Agent or Tender Agent of which it has received written notice, give
notice thereof by Mail to the Owners of the Bonds.

       

      Section
12.04.  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, the Registrar, the Tender Agent and the Remarketing Agent and
in any combination of such capacities to the extent permitted by
law.  Any such entity may in good faith buy, sell, own, hold and deal
in any of the Bonds and may join in any action which any Owners may be entitled
to take with like effect as if such entity were not appointed to act in such
capacity under this Indenture.

       

      
        
          
          

        

        
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      ARTICLE
XIII

       

      EXECUTION
OF INSTRUMENTS BY OWNERS OF BONDS AND

      PROOF OF
OWNERSHIP OF BONDS

       

      Section
13.01.  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 2.09 hereof.

       

      Nothing
contained in this Article XIII 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
XIV

       

      MODIFICATION
OF THIS INDENTURE AND THE LOAN AGREEMENT

       

      Section
14.01.  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 XIV and
Section 8.04 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
14.02.  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:

       

      
        
          
          

        

        
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      (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 or  any Credit Facility Issuer 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;

       

      (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
make any amendments appropriate or necessary to provide for any Credit Facility
or any bond insurance policy, letter of credit, guaranty, surety bond, line of
credit, revolving credit agreement, standby bond purchase agreement or other
agreement or security device delivered to the Trustee and providing for (i)
payment of the principal, interest and redemption premium on the Bonds or a
portion thereof, (ii) payment of the purchase price of the Bonds or (iii) both
(i) and (ii);

       

      (i)           to
make any changes required by a Rating Agency in order to obtain or maintain a
rating for the Bonds;

       

      (j)           to
make any changes in connection with a Conversion, including a Conversion to the
Commercial Paper Rate;

       

      
        
          
          

        

        
          68

          
            

          

        

        
          
          

        

      

       

      (k)           in
connection with any mandatory purchase of all of the Bonds or purchase of all
the Bonds pursuant to Section 3.06, to modify this Indenture in any respect
(even such modification is adverse to the interests of the Bondholders) provided
that such amendment shall not be effective until after such mandatory purchase
or purchase in lieu of redemption and the payment of the purchase price in
connection therewith and provided that arrangements are made to cause notice of
such changes to be given to all owners of Bonds who purchase such Bonds on or
after such mandatory purchase or purchase in lieu of redemption;

       

      (l)           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 14.03(a) hereof;
and

       

      (m)           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 14.02, 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
14.03.  Supplemental
Indentures with Consent of Owners.  (a)  Except for
any Supplemental Indenture entered into pursuant to Section 14.02 hereof,
subject to the terms and provisions contained in this Section 14.03 and Section
14.05 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 or
purchase price of (without the consent of the Owner of the affected Bond) 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 the purchase
provisions of any Outstanding Bond (without the consent of the Owner of the
affected Bond) or any impairment of the right of any Owner to institute suit for
the payment of any Bond owned by it; provided, however, that revision of the
redemption periods and redemption prices in accordance with the last paragraph
of Section 3.01(a)(iii) when the Interest Rate Mode for Bonds is the Term Rate
shall not be considered  an amendment of or a supplement to this
Indenture, 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 11.04 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
14.07 hereof, for any modification, alteration, amendment or supplement to the
Loan Agreement.

       

      
        
          
          

        

        
          69

          
            

          

        

        
          
          

        

      

       

      (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 14.03, 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 14.03
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
14.04.  Effect of
Supplemental Indenture.  Upon the execution and delivery of any
Supplemental Indenture pursuant to the provisions of this Article XIV, 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
14.05.  Consent of the
Company or Credit
Facility Issuer.  (a) Anything herein to the contrary
notwithstanding, any Supplemental Indenture under this Article XIV 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.

       

      (b)
Anything herein to the contrary notwithstanding, any Supplemental Indenture
under this Article XIV which affects any rights, powers, agreements or
obligations of the Credit Facility Issuer under the Loan Agreement or this
Indenture, or requires a revision of the Loan Agreement or this Indenture, shall
not become effective unless and until the Credit Facility Issuer shall have
consented to such Supplemental Indenture.

       

      
        
          
          

        

        
          70

          
            

          

        

        
          
          

        

      

       

      Section
14.06.  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; provided, however, that notwithstanding the foregoing, in
connection with any mandatory purchase pursuant to Section 5.01(b) of all of the
Bonds or any purchase in lieu of redemption pursuant to Section 3.06 of all of
the Bonds, no consent of the Owners of the Bonds shall be required for any
amendment to the Loan Agreement in any respect (even if such amendment is
adverse to the interests of the Owners) provided that such amendment shall not
be effective until after such mandatory purchase or purchase in lieu of
redemption and the payment of the purchase price in connection therewith;
provided, however, that notwithstanding the foregoing, the Authority and the
Company may amend the Loan Agreement to make any changes without the consent of
the Owners of the Bonds which may be required by a Rating Agency in order to
obtain or maintain a rating for the Bonds.  A revision of Exhibit A to
the Loan Agreement 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 14.06, 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
14.07.  Amendment of Loan
Agreement with Consent of Owners.  Except in the case of
Supplemental Loan Agreements referred to in Section 14.06 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 14.03 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 14.03 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 14.03 hereof with respect to Supplemental Indentures.

       

      
        
          
          

        

        
          71

          
            

          

        

        
          
          

        

         

      

      ARTICLE
XV

       

      MISCELLANEOUS

       

      Section
15.01.  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.

       

      Section
15.02.  Parties in
Interest.  Except as herein otherwise specifically provided,
nothing in this Indenture expressed or implied is intended or shall be construed
to confer upon any person, firm or corporation other than the Authority, the
Company, the Credit Facility Issuer 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, the Credit Facility Issuer and
the Trustee and their successors and assigns and the Owners of the
Bonds.

       

      Section
15.03.  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
15.04.  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
15.05.  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 15.05) 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; provided
that Bonds delivered to the Tender Agent pursuant to Section 5.04(a)(ii) shall
not 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

       

      
        
          
          

        

        
          72

          
            

          

        

        
          
          

        

      

       

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

       

      Section
15.07.  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
15.09 hereof and the computation of any period of grace provided
herein.

       

      Section
15.08.  Notices.  Except as
otherwise provided in this Indenture, all notices, certificates, requests,
requisitions or other communications by or to the Authority, the Company, the
Trustee, the Paying Agent, the Tender Agent, the Remarketing Agent, any Co
Paying Agent, the Credit Facility Issuer, the Registrar or the Rating Agencies
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 or the Tender Agent, at 100 Wall Street, Suite 1600, New York,
New York 10005, Attention: Vice President; if to the Credit Facility Issuer,
JPMorgan Chase Bank, N.A., 300 South Riverside Plaza, Mail Code IL1-0236,
Chicago, Il 60606-0236, Attention: Standby Letter of Credit Unit; if to Moody’s,
7 World Trade Center, 250 Greenwich Street, New York, New York 10007
Attn:  Public Finance-MSPG Surveillance Team; if to S&P, 55 Water
Street, New York, New York 10041 0003, Attention:  LOC Surveillance,
and if to the Paying Agent, any Co Paying Agent, the Registrar or the
Remarketing Agent, 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
15.09.  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.

       

      
        
          
          

        

        
          73

          
            

          

        

        
          
          

        

      

       

      Section
15.10.  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.

       

      Section
15.11.  Notice of
Change.   The Trustee
shall give notice to each Rating Agency, at the address or addresses set forth
in Section 15.08 hereof, of any of the following events of which it has actual
knowledge or has received written notice:

       

      (a)           a
change in the Trustee;

       

      (b)           a
change in the Remarketing Agent;

       

      (c)           a
change in the Tender Agent;

       

      (d)           a
change in the Paying Agent;

       

      (e)           the
expiration, cancellation, renewal or substitution of the term of the Credit
Facility;

       

      (f)           the
delivery of an Alternate Credit Facility;

       

      (g)           any
material amendment or supplement to the Indenture, the Loan Agreement, the
Reimbursement Agreement or the Credit Facility;

       

      (h)           any
declaration of acceleration of the Bonds pursuant to Section 10.01;

       

      (i)           payment
or provision therefor of all the Bonds;

       

      (j)           any
Conversion of the Interest Rate Mode applicable to the Bonds or any change in
the length of the Long Term Rate Period; and

       

      (k)           any
other information that either Rating Agency may reasonably request in order to
maintain the rating on the Bonds.

       

      
        
          
          

        

        
          74

          
            

          

        

        
          
          

        

      

       

      The
Trustee shall have no liability to the Rating Agency or to any other Person if
it shall fail to give such notice.

       

      
        
          
          

        

        
          75

          
            

          

        

        
          
          

        

      

       

      IN
WITNESS WHEREOF, The Industrial Development Authority of the County of Pima has
caused this Indenture to be executed by its Authorized Officers 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/
      Cecilia Cruz
	 
      	 
      	
                  Name: 
      Cecilia Cruz

                  Title:   
      President

                
	 
      	 
      	
                   
      

                   

                
	 
      	
                  By:

                	/s/
      Stanley Lehman
	 
      	 
      	
                  Name: 
      Stanley Lehman

                  Title:   
      Vice President

                
	 
      	 
      	
                   
      

                   

                
	 
      	
                  U.S.
      BANK TRUST NATIONAL ASSOCIATION

                   

                
	 
      	
                  By:

                	/s/
      Beverly A. Freeney
	 
      	 
      	
                  Name: 
      Beverly A. Freeney

                  Title:    Vice
      President

                

        

      

       

      
        
          
          

        

        
          76

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
A

       

      (FORM OF
BOND)

       

      Unless
this certificate is presented by an authorized representative of The Depository
Trust Company, a New York corporation (“DTC”) or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the
name of Cede & Co. or in  such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or
to such other entity as is requested by an authorized representative of DTC, ANY
TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL, inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.

      No.

       

      THE
INDUSTRIAL DEVELOPMENT AUTHORITY

      OF THE
COUNTY OF PIMA

      INDUSTRIAL
DEVELOPMENT REVENUE BOND,

      2008
SERIES B

      (TUCSON
ELECTRIC POWER COMPANY PROJECT)

       

      
        	
                MATURITY
      DATE

              	
                INTEREST RATE
      MODE

              	
                DATE OF THE
      BONDS

              	
                CUSIP

              
	 	 	 	 
	
                September
      1, 2029

              	 
      	
                DATE
      OF ORIGINAL ISSUANCE

              	
                _________

              

      

      

      [TO BE
FILLED IN ONLY IF INTEREST RATE MODE IDENTIFIED ABOVE IS THE COMMERCIAL PAPER
RATE AND CEDE & CO. IS NOT THE REGISTERED OWNER:

       

      
        	
                Purchase

                Date

              	
                Commercial

                Paper
      Rate

                Period

              	
                Commercial

                Paper

                Rate

              	
                Interest

                Payable

              
	 
      	 
      	 
      	      
	 	 	 	 

      

       

      Registered
Owner:

       

      Principal
Sum:

       

      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

       

      
        
          
          

        

        
          A-1

          
            

          

        

        
          
          

        

      

       

      interest
rate determined from time to time for the permitted Interest Rate Modes in the
manner described herein and in the Indenture (as hereinafter defined) and
payable on the dates set forth herein and in the Indenture, commencing on the
first such Interest Payment Date thereafter, and interest on overdue principal,
and to the extent permitted by law, on overdue interest, as provided in the
Indenture.

       

      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, 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 provided that if
this Bond is registered in the name of other than a Depository and the Interest
Rate Mode for this Bond is the Commercial Paper Rate, the Daily Rate or the
Weekly Rate, interest payable on this Bond shall, at the written request of the
registered owner received by the Registrar at least one Business Day prior to
the applicable Record Date (or on or prior to an Interest Payment Date if the
Interest Rate Mode is the Commercial Paper Rate), be payable to the registered
owner in immediately available funds by wire transfer to a bank account of such
registered owner within the United States or by deposit into a bank account
maintained by the Paying Agent; provided further however that, if the Interest
Rate Mode is the Commercial Paper Rate and this Bond is registered in the name
of other than a Depository, interest on this Bond payable on the Interest
Payment Date following the end of the Commercial Paper Rate Period shall be paid
only upon presentation and surrender of this Bond at the Designated Office of
the Paying Agent.  When this Bond is registered in the name of a
Depository or its nominee, interest is payable in same day funds delivered or
transmitted to the Depository.  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.

       

      This Bond
is one of the duly authorized Industrial Development Revenue Bonds, 2008 Series
B (Tucson Electric Power Company Project) (the “Bonds”) of the Authority,
aggregating One Hundred Thirty Million Dollars ($130,000,000) 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 June 1, 2008 (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 Industrial Development Authority of the County of Pima
Industrial Development Revenue Bonds, 1997 Series B (Tucson Electric Power
Company Project), or provision therefor, a portion of the costs of the
acquisition, construction, improvement and equipping of certain facilities for
the furnishing of electric energy (the “Facilities”).  Pursuant to the
Loan Agreement, dated as of June 1, 2008 (the “Loan Agreement”), between the
Authority and Tucson Electric Power Company, a corporation organized and
existing under the laws of the State of Arizona (the “Company”), the proceeds of
the Bonds will be loaned to the Company.

       

      
        
          
          

        

        
          A-2

          
            

          

        

        
          
          

        

      

       

      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 Company
has elected to cause and is causing to be delivered to the Trustee an
irrevocable direct pay letter of credit issued by JPMorgan Chase Bank, N.A. (the
“Letter of Credit”).

       

      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.

       

      This Bond
shall bear interest at the interest rate or rates determined for the “Interest
Rate Mode” (as described more fully in Section 2.02 of the Indenture) selected
from time to time by the Company.  Until a Conversion to a different
Interest Rate Mode is specified by the Company or until the Maturity Date stated
above, the Interest Rate Mode for this Bond is as specified
above.  The Company may from time to time change the Interest Rate
Mode for the Bonds, in whole, to any other permitted Interest Rate Mode in
accordance with the terms of the Indenture.  The “Interest Rate Modes”
which may be selected are as follows:  (i) a Daily Rate in which the
interest rate is determined each Business Day; (ii) a Weekly Rate in which the
interest rate is determined no later than the first day of each Weekly Rate
Period or, if such day is not a Business Day, on the next succeeding Business
Day; (iii) a Term Rate for a period selected by the Company of more than one
year ending on the day preceding an Interest Payment Date, in which the interest
rate is determined not later than the Business Day preceding such Term Rate
Period; and (iv) a Commercial Paper Rate for Commercial Paper Rate Periods of
one (1) day to not more than two hundred seventy (270) days (or such lower
maximum number as is then permitted under the Indenture) ending on a day
preceding a Business Day selected by the Remarketing Agent in which the interest
rate is determined on the first day of such Commercial Paper Rate
Period.

       

      
        
          
          

        

        
          A-3

          
            

          

        

        
          
          

        

      

       

      Interest
on this Bond for the Daily Rate and the Weekly Rate is payable on the first
Business Day of each month; for the Term Rate on any day in the sixth calendar
month following the Conversion to a Term Rate and in each sixth calendar month
thereafter, as designated by the Company at the time of such Conversion, and in
all cases, on the day after the last day of the Term Rate Period (whether or not
a Business Day); for the Commercial Paper Rate on the day following the last day
of each Commercial Paper Rate Period for such Bond; and, for each Interest Rate
Mode, on the Conversion Date to another Interest Rate Mode or on the effective
date of a change in the Term Rate Period.  In any case, the final
Interest Payment Date shall be the Maturity Date.  Interest on this
Bond shall be computed on the basis of a year of 365 or 366 days, as appropriate
for the actual number of days elapsed, unless the Interest Rate Mode is the Term
Rate, in which case interest shall be computed on the basis of a 360 day year
consisting of twelve 30 day months.  The interest rate or rates for
each Interest Rate Mode (and, if the Interest Rate Mode is the Commercial Paper
Rate, the Commercial Paper Rate Periods) for this Bond shall be determined by
the Remarketing Agent on the dates and at such times as specified in Section
2.02 of the Indenture.  Each interest rate determined by the
Remarketing Agent shall be the minimum rate of interest necessary, in the
judgment of the Remarketing Agent taking into account Prevailing Market
Conditions, to enable the Remarketing Agent to sell this Bond at a price equal
to the principal amount hereof, plus accrued interest, if
any.  Notwithstanding the foregoing, the interest rate borne by this
Bond shall not exceed the lesser of ten percent (10%) per annum or the maximum
interest rate permitted by the Credit Facility.

       

      In the
event that the interest rate or rates for an Interest Rate Mode (other than the
Daily Rate or the Commercial Paper Rate) are not or cannot be determined for
whatever reason, or if there is no Remarketing Agent in place, the Interest Rate
Mode on this Bonds shall be converted automatically to the Weekly Rate (without
the necessity of complying with the requirements in the Indenture relating to
conversions, including, but not limited to, the requirement of mandatory
purchase) and the interest rate shall be equal to the 100% of the SIFMA Swap
Index; provided that if this Bond is then in a Term Rate Period, it shall bear
interest at a Weekly Rate, but only if there is delivered to the Authority, the
Trustee, the Tender Agent, the Credit Facility Issuer, if any, the Company and
the Remarketing Agent an opinion of Bond Counsel to the effect that so
determining the interest rate to be borne by this Bond at a Weekly Rate is
authorized or permitted by the Act and will not, in and of itself, adversely
affect any exclusion of interest on this Bond from gross income for purposes of
federal income taxation.  If such opinion is not delivered, this Bond
will bear interest for a Rate Period of the same length as the immediately
preceding Rate Period (or, if shorter, a Rate Period ending on the day before
the Maturity Date) at the interest rate which was in effect for the preceding
Rate Period.  Any mandatory purchase of this Bond will remain
effective.

       

      If the
Interest Rate Mode for this Bond is the Daily Rate, for any day which is not a
Business Day or in the event that the interest rate on this Bond is not or
cannot be determined by the Remarketing Agent for whatever reason, or if there
is no Remarketing Agent in place, the interest rate on this Bond shall be the
interest rate in effect for the preceding Business Day.   If the
Remarketing Agent fails to set the length of a Commercial Paper Rate Period for
this Bond, or if there is no Remarketing Agent in place, a new Commercial Paper
Rate Period lasting through the next day immediately preceding a Business Day
(or until stated Maturity Date, if earlier) will be established automatically
and, if in that instance the Remarketing Agent fails for whatever reason to
determine the interest for this Bond, or if there is no Remarketing Agent in
place, then the interest rate for this Bond for that Commercial Paper Rate
Period shall be the interest rate in effect for this Bond for the preceding
Commercial Paper Rate Period.

       

      
        
          
          

        

        
          A-4

          
            

          

        

        
          
          

        

      

       

      Subject
to the provisions of the Indenture, the Company may, but is not required to,
provide another Credit Facility upon the cancellation, termination, expiration
or substitution of the Letter of Credit or the then current Credit
Facility.  As described below, this Bond will become subject to
mandatory purchase upon the cancellation, termination, expiration or
substitution of any Credit Facility.

       

      REDEMPTION
OF BONDS

       

      Whenever
the Interest Rate Mode for this Bond is the Daily Rate or the Weekly Rate, this
Bond shall be subject to optional redemption on any Business Day, in whole or in
part, at a redemption price of 100% of the principal amount hereof plus accrued
interest, if any, to the redemption date.  Whenever the Interest Rate
Mode for this Bond is the Commercial Paper Rate, this Bond shall be subject to
optional redemption, in whole or in part, at a redemption price of 100% of the
principal amount hereof on the Interest Payment Date for such Commercial Paper
Rate Period.  Whenever the Interest Rate Mode for this Bond is the
Term Rate, this Bond shall be subject to optional redemption, in whole or in
part (i) on the final Interest Payment Date for such Term Rate Period, at a
redemption price equal to the principal amount hereof and (ii) during the then
current Term Rate Period at any time with accrued interest, if any, during the
redemption periods and at the redemption prices set forth below.

       

      
        	
                
                  Original
      Length of Current

                  Term
      Rate Period (Years)

                

              	
                
                  Commencement
      of

                  Redemption
      Period

                

              	
                
                  Redemption
      Price as

                  Percentage
      of Principal

                

              
	 	 	 
	
                More
      than 5 years

              	
                Fifth
      anniversary of commencement of Term Rate Period

              	
                100%

              
	 	 	 
	
                Equal
      to or less than 5
      years

              	
                Non
      callable

              	
                Non
      callable

              

      

      

      If the
Company has given notice of a change in the Term Rate Period or notice of
Conversion of the Interest Rate Mode for the Bonds to the Term Rate and, at
least forty (40) days prior to such change in the Term Rate Period or such
Conversion of an Interest Rate Mode for the Bonds to the Term Rate, the Company
has provided (i) a certification of the Remarketing Agent to the Trustee and the
Authority that the foregoing schedule is not consistent with Prevailing Market
Conditions and (ii) an opinion of Bond Counsel that a change in the redemption
provisions will not, in and of itself, adversely affect any exclusion of
interest on the Bonds from gross income for purposes of federal income taxation,
the foregoing redemption periods and redemption prices may be revised, effective
as of the date of such change in the Term Rate Period or the Conversion Date, as
determined by the Remarketing Agent in its judgment, taking into account the
then Prevailing Market Conditions, as set forth in such
certification.

       

      
        
          
          

        

        
          A-5

          
            

          

        

        
          
          

        

      

       

      Whenever
the Interest Rate Mode for the Bonds is the Term Rate, 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, if any,
to the redemption date, if:

       

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

       

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

       

      (iii) the
operation of the Facilities 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.

       

      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 (c) unless the Company shall have been given timely notice of the
proceeding which resulted in such determination and an opportunity to
participate in such proceeding, either directly or through an owner of a Bond,
and until the conclusion of any appellate review sought by any party to such
proceeding or the expiration of the time for seeking such review. The Bonds
shall be redeemed either in whole or in part in such principal amount that, in
the opinion of Bond Counsel, the interest payable on the Bonds, including 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 fifteen (15) days (thirty (30) days when the Interest Rate Mode
for the Bonds is the Term Rate) 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-6

          
            

          

        

        
          
          

        

      

       

      With
respect to any notice of redemption of Bonds in accordance with the redemption
provisions lettered (a) or (b) above, unless, upon the giving of such notice,
such Bonds shall be deemed to have been paid within the meaning of the
Indenture, such notice shall state that such redemption, shall be conditional
upon the receipt, by the Trustee on or prior to the opening of business on the
date fixed for such redemption of moneys sufficient to pay the principal of and
premium, if any, and interest on such Bonds to be redeemed, and that if such
moneys shall not have been so received said notice shall be of no force and
effect and the 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.

       

      Bonds
subject to optional redemption or extraordinary optional redemption as provided
above may be purchased in lieu of redemption on the applicable redemption date
at a purchase price equal to 100% of the redemption price thereof, plus accrued
interest thereon to, but not including, the date of such purchase, if the
Trustee has received a written request from the Company on or before the
Business Day prior to the date the Bonds would otherwise be subject to
redemption specifying that the moneys provided or to be provided by the Company
shall be used to purchase such Bonds in lieu of redemption.  Moneys
received for such purpose shall be held by the Trustee in trust for the
registered owner of the Bonds so purchased.  While a Credit Facility
is in place, any such purchase will be made from moneys received from a drawing
on such Credit Facility and applied as provided in the Indenture.  No
purchase of Bonds by the Company pursuant to this paragraph or advance or use of
any moneys to effectuate any such purpose shall be deemed to be a payment or
redemption of the Bonds or any portion thereof, and such purchase shall not
operate to extinguish or discharge the indebtedness evidenced by such
Bonds.  Bonds purchased under the above shall not be remarketed or
otherwise sold unless the Trustee has received an opinion of Bond Counsel to the
effect that such transaction does not and will not, in and of itself, adversely
affect any exclusion of interest on the Bonds from gross income for purposes of
federal income taxation.

       

      PURCHASE
OF BONDS

       

      This Bond
shall be subject to mandatory purchase (i) on the effective date of (a) the
Conversion of the Interest Rate Mode for this Bond (except conversions between
Daily Rate and Weekly Rate) or (b) a change by the Company in the length of the
Term Rate Period for this Bond, (ii) on the Business Day following the end of
each Commercial Paper Rate Period and

       

      
        
          
          

        

        
          A-7

          
            

          

        

        
          
          

        

      

       

      Term Rate
Period, (iii) on the Business Day preceding the date of the cancellation,
termination or substitution by the Trustee at the request of the Company of the
then current Credit Facility, if any, or the 15th day (or if such day is not a
Business Day, the preceding Business Day) preceding the stated expiration of the
then current Credit Facility, if any, and (iv) at the direction of the Credit
Facility Issuer on the second Business Day after notice from the Credit Facility
Issuer to the Trustee stating that an event of default has occurred and is
continuing under the Reimbursement Agreement (as defined in the Indenture);
provided that no premium shall be paid as part of the purchase price upon a
mandatory purchase described in either clause (iii) above resulting from the
stated expiration of the term of the then current Credit Facility, if any, or
clause (iv) above resulting from the direction of the Credit Facility Issuer of
the then current Credit Facility, if any, that an event of default has occurred
and is continuing under the Reimbursement Agreement for any such Credit
Facility.

       

      This
Bond, or a portion hereof in an authorized denomination (provided that the
portion of this Bond to be retained by the registered owner shall also be in an
authorized denomination), shall be purchased on the demand of the owner hereof
at the times and the prices set forth below for the applicable Interest Rate
Mode.  If the Interest Rate Mode for this Bond is the Daily Rate, this
Bond shall be purchased on the demand of the registered owner hereof, on any
Business Day at a purchase price equal to the principal amount hereof plus
accrued interest, if any, to the Purchase Date upon written notice or Electronic
Notice to the Tender Agent not later than 11:00 a.m. (New York City time) on
such Business Day.  If the Interest Rate Mode for this Bond is the
Weekly Rate, this Bond shall be purchased on the demand of the registered owner
hereof, on any Business Day at a purchase price equal to the principal amount
hereof, plus accrued interest, if any, to the Purchase Date, upon written notice
to the Tender Agent at or before 5:00 p.m. (New York City time) on a Business
Day not later than the seventh day prior to the Purchase Date.

       

      Any
notice in connection with a demand for purchase of this Bond as set forth in the
preceding paragraph hereof shall be given at the address of the Tender Agent
designated to the Trustee and shall (A) state the number and principal amount
(or portion hereof in an authorized denomination) of this Bond to be purchased;
(B) state the Purchase Date on which this Bond shall be purchased; and (C)
irrevocably request such purchase and agree to deliver this Bond to the Tender
Agent on the Purchase Date.  ANY SUCH NOTICE SHALL BE IRREVOCABLE WITH
RESPECT TO THE PURCHASE FOR WHICH SUCH DIRECTION WAS DELIVERED AND, UNTIL
SURRENDERED TO THE TENDER AGENT, THIS BOND OR ANY PORTION HEREOF WITH RESPECT TO
WHICH SUCH DIRECTION WAS DELIVERED SHALL NOT BE TRANSFERABLE.  This
Bond must be delivered (together with an appropriate instrument of transfer
executed in blank with all signatures guaranteed and in form satisfactory to the
Tender Agent) at the Designated Office of the Tender Agent at or prior to 12:00
noon New York City time on the date specified in the aforesaid notice in order
for the owner hereof to receive payment of the purchase price due on such
Purchase Date.  NO REGISTERED OWNER SHALL BE ENTITLED TO PAYMENT OF
THE PURCHASE PRICE DUE ON SUCH PURCHASE DATE EXCEPT UPON SURRENDER OF THIS BOND
AS SET FORTH HEREIN.  NOTWITHSTANDING THE FOREGOING, THIS BOND SHALL
NOT BE PURCHASED IF THE BONDS HAVE BEEN DECLARED DUE AND PAYABLE PURSUANT TO THE
INDENTURE.  No purchase of Bonds pursuant to Section 5.01 of the
Indenture shall be deemed to be a payment or redemption of such Bonds or any
portion thereof within the meaning of the Indenture.

       

      
        
          
          

        

        
          A-8

          
            

          

        

        
          
          

        

      

       

      BY
ACCEPTANCE OF THIS BOND, THE REGISTERED OWNER HEREOF AGREES THAT THIS BOND WILL
BE PURCHASED, WHETHER OR NOT SURRENDERED, (A) ON THE APPLICABLE PURCHASE DATE IN
CONNECTION WITH THE EXPIRATION OF EACH COMMERCIAL PAPER RATE PERIOD OR TERM RATE
PERIOD FOR THIS BOND OR ON A CHANGE OF THE TERM RATE PERIOD OR ON CONVERSION OF
THE INTEREST RATE MODE OF THIS BOND (EXCEPT BETWEEN DAILY AND WEEKLY MODES) OR
ANY CANCELLATION OR EXPIRATION OF ANY CREDIT FACILITY WHICH MAY THEN BE IN
EFFECT OR AT THE DIRECTION OF ANY SUCH CREDIT FACILITY ISSUER AS DESCRIBED ABOVE
OR (B) ON ANY PURCHASE DATE SPECIFIED BY THE REGISTERED OWNER HEREOF IN THE
EXERCISE OF THE RIGHT TO DEMAND PURCHASE OF THIS BOND AS DESCRIBED
ABOVE.  IN SUCH EVENT, THE REGISTERED OWNER OF THIS BOND SHALL NOT BE
ENTITLED TO RECEIVE ANY FURTHER INTEREST HEREON AND SHALL HAVE NO FURTHER RIGHTS
UNDER THIS BOND OR THE INDENTURE EXCEPT TO PAYMENT OF THE PURCHASE PRICE HELD
THEREFOR.

       

      The Bonds
are issuable only as fully registered Bonds in the denominations of $100,000 and
any integral multiple of $5,000 in excess thereof except that Bonds
authenticated when the Interest Rate Mode is the Commercial Paper Rate shall be
in denominations of $100,000 and any larger denomination constituting an
integral multiple of $1,000 and except that Bonds authenticated when the
Interest Rate Mode is the Term Rate shall be in denominations of $5,000 and any
integral multiple thereof.  Subject to the limitations provided in the
Indenture and upon payment of any tax or government charge, if any, Bonds may be
exchanged for a like aggregate principal amount of Bonds of other authorized
denominations and in the same Interest Rate Mode.

       

      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.

       

      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

       

      
        
          
          

        

        
          A-9

          
            

          

        

        
          
          

        

      

       

      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-10

          
            

          

        

        
          
          

        

      

       

      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-11

          
            

          

        

        
          
          

        

      

      

      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-1loan-agreement.htm

    Exhibit
4(d)

     

    
      

      
        	 
      
	 
      
	
                LOAN
      AGREEMENT

              
	
                (2008
      SERIES B)

              
	 
      
	 
      
	
                BETWEEN

              
	 
      
	 
      
	
                THE
      INDUSTRIAL DEVELOPMENT AUTHORITY

              
	
                OF
      THE COUNTY OF PIMA

              
	 
      
	 
      
	
                AND

              
	 
      
	 
      
	
                TUCSON
      ELECTRIC POWER COMPANY

              
	 
      
	 
      
	
                --------

              
	 
      
	 
      
	
                DATED
      AS OF JUNE 1, 2008

              
	
                ________

              
	 
      
	 
      
	
                RELATING
      TO

              
	 
      
	
                INDUSTRIAL
      DEVELOPMENT REVENUE BONDS,

              
	
                2008
      SERIES B

              
	
                (TUCSON
      ELECTRIC POWER COMPANY PROJECT)

              
	 
	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      TABLE
OF CONTENTS*

       

      Page

       

      
        
          	 
      	
                  ARTICLE
      I

                   

                  DEFINITIONS

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      1.01.

                	
                  Definitions

                	
                  2

                
	
                  SECTION
      1.02.

                	
                  Incorporation
      of Certain Definitions by Reference

                	
                  6

                
	 
      	 
      	 
      
	 
      	
                  ARTICLE
      II

                   

                  REPRESENTATIONS
      AND WARRANTIES

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      2.01.

                	
                  Representations
      and Warranties of the Authority

                	
                  6

                
	
                  SECTION
      2.02.

                	
                  Representations
      and Warranties of the Company

                	
                  6

                
	 
      	 
      	 
      
	 
      	
                  ARTICLE
      III

                   

                  THE
      FACILITIES

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      3.01.

                	
                  Facilities;
      Property of the Company

                	
                  7

                
	
                  SECTION
      3.02.

                	
                  Maintenance
      of Facilities; Remodeling

                	
                  7

                
	
                  SECTION
      3.03.

                	
                  Insurance

                	
                  7

                
	
                  SECTION
      3.04.

                	
                  Condemnation

                	
                  8

                
	 
      	 
      	 
      
	 
      	
                  ARTICLE
      IV

                   

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

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      4.01.

                	
                  Issuance
      of the Bonds

                	
                  8

                
	
                  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; PURCHASE PAYMENTS; OTHER OBLIGATIONS

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      5.01.

                	
                  Loan
      Payments

                	
                  8

                
	
                  SECTION
      5.02.

                	
                  Purchase
      Payments

                	
                  9

                
	
                  SECTION
      5.03.

                	
                  Loan
      Payments Assigned; Obligation Absolute

                	
                  9

                
	
                  SECTION
      5.04.

                	
                  Payment
      of Expenses

                	
                  10

                
	
                  SECTION
      5.05.

                	
                  Indemnification

                	
                  10

                
	
                  SECTION
      5.06.

                	
                  Payment
      of Taxes; Discharge of Liens

                	
                  10

                

        

         

        
          

        

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

        

         

        
          
            
            

          

          
            i

            
              

            

          

          
            
            

          

        

         

        
          	 
      	
                  ARTICLE
      VI

                   

                  SPECIAL
      COVENANTS

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      6.01.

                	
                  Maintenance
      of Legal Existence

                	
                  11

                
	
                  SECTION
      6.02.

                	
                  Permits
      or Licenses

                	
                  12

                
	
                  SECTION
      6.03.

                	
                  Authority’s
      Access to Facilities

                	
                  12

                
	
                  SECTION
      6.04.

                	
                  Tax-Exempt
      Status of Interest on Bonds

                	
                  12

                
	
                  SECTION
      6.05.

                	
                  Use
      of Facilities

                	
                  13

                
	
                  SECTION
      6.06.

                	
                  Financing
      Statements

                	
                  13

                
	 
      	 
      	 
      
	 
      	
                  ARTICLE
      VII

                   

                  ASSIGNMENT,
      LEASING AND SELLING

                	 
      
	
                  SECTION
      7.01.

                	
                  Conditions

                	
                  14

                
	
                  SECTION
      7.02.

                	
                  Instrument
      Furnished to the Authority and Trustee

                	
                  16

                
	
                  SECTION
      7.03.

                	
                  Limitation

                	
                  16

                
	 
      	 
      	 
      
	 
      	
                  ARTICLE
      VIII

                   

                  EVENTS
      OF DEFAULT AND REMEDIES

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      8.01.

                	
                  Events
      of Default

                	
                  16

                
	
                  SECTION
      8.02.

                	
                  Force
      Majeure

                	
                  17

                
	
                  SECTION
      8.03.

                	
                  Remedies

                	
                  17

                
	
                  SECTION
      8.04.

                	
                  No
      Remedy Exclusive

                	
                  18

                
	
                  SECTION
      8.05.

                	
                  Reimbursement
      of Attorneys’ and Agents’ Fees

                	
                  18

                
	
                  SECTION
      8.06.

                	
                  Waiver
      of Breach

                	
                  18

                
	 
      	 
      	 
      
	 
      	
                  ARTICLE
      IX

                   

                  REDEMPTION
      OF BONDS

                	 
      
	
                  SECTION
      9.01.

                	
                  Redemption
      of Bonds

                	
                  18

                
	
                  SECTION
      9.02.

                	
                  Compliance
      with the Indenture

                	
                  19

                
	 
      	 
      	 
      
	 
      	
                  ARTICLE
      X

                   

                  MISCELLANEOUS

                	 
      
	 
      	 
      	 
      
	
                  SECTION
      10.01.

                	
                  Term
      of Agreement

                	
                  19

                
	
                  SECTION
      10.02.

                	
                  Notices

                	
                  19

                
	
                  SECTION
      10.03.

                	
                  Parties
      in Interest

                	
                  19

                
	
                  SECTION
      10.04.

                	
                  Amendments

                	
                  20

                
	
                  SECTION
      10.05.

                	
                  Counterparts

                	
                  20

                
	
                  SECTION
      10.06.

                	
                  Severability

                	
                  20

                
	
                  SECTION
      10.07.

                	
                  Governing
      Law

                	
                  20

                
	
                  SECTION
      10.08.

                	
                  Notice
      Regarding Cancellation of Contracts

                	
                  20

                

        

      

      

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      

      
        	
                Signatures

              	 
      
	
                Exhibit
      A - Description of the Facilities

              	
                A-1

              

      

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

         

      

      LOAN
AGREEMENT

       

      THIS LOAN
AGREEMENT (2008 Series B), dated as of June 1, 2008 (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,
the Authority has heretofore issued and sold $150,000,000 aggregate principal
amount of The Industrial Development Authority of the County of Pima Industrial
Development Revenue Bonds, 1997 Series B (Tucson Electric Power Company
Project), of which $130,000,000 remain outstanding (the “1997 Bonds”), the
proceeds of which were loaned to the Company to refinance, by the payment or
redemption of The Industrial Development Authority of the County of Pima
Industrial Development Revenue Bonds, 1982 Series A (Tucson Electric Power
Company General Project) (the “1982 Bonds due June 15, 2022”), and The
Industrial Development Authority of the County of Pima Industrial Development
Revenue Bonds, 1982 Series A (Tucson Electric Power Company General Project)
(the “1982 Bonds due July 1, 2022” and, together with the 1982 Bonds due June
15, 2022, the “1982 Bonds”) or provision therefor, the portion of the costs of
the acquisition, construction, improvement and equipping of certain of its
facilities for the furnishing of electric energy described in Exhibit A hereto
(“Facilities”) paid from the proceeds of the 1982 Bonds;

       

      WHEREAS,
the Authority proposes to issue and sell its revenue bonds for the purpose of
refinancing, by the payment or redemption of the 1997 Bonds, or provision
therefor, the portion of the costs of the Facilities previously refinanced from
the proceeds of the 1997 Bonds;

       

      WHEREAS,  the
Company has elected to cause and is causing to be delivered to the Trustee an
irrevocable direct pay letter of credit issued by JPMorgan Chase Bank, N.A.,
however, nothing herein shall require the Company to maintain the Letter of
Credit or any other credit facility;

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      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, the Tender Agent,
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, as more fully described in the Tax
Agreement.

       

      Agreement:

       

      “Agreement”
shall mean this Loan Agreement, dated as of June 1,  2008, 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

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      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 of the Indenture.

       

      Bonds:

       

      “Bond” or
“Bonds” shall mean The Industrial Development Authority of the County of Pima
Industrial Development Revenue Bonds, 2008 Series B (Tucson Electric Power
Company Project).

       

      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.

       

      Credit
Facility:

       

      “Credit
Facility” shall have the meaning set forth in the Indenture.

       

      Credit
Facility Issuer:

       

      “Credit
Facility Issuer” shall have the meaning set forth in the Indenture.

       

      Facilities:

       

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

       

      Indenture:

       

      “Indenture”
shall mean the Indenture of Trust, dated as of June 1, 2008, 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.  Each
reference to a section of the 1954 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, as well as future amendments to the 1954
Code.

       

      1986 Code:

      

      “1986 Code” shall mean the Internal
Revenue Code of 1986, as amended from time to time.  Each reference to a
section of the 1986 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 1986 Code section shall, in the
event of a successor to the 1986 Code, be deemed to be a reference to the
successor to such 1986 Code section.

       

      1997
Bonds:

       

      “1997
Bonds” shall mean the $130,000,000 aggregate principal amount of The Industrial
Development Authority of the County of Pima Industrial Development Revenue
Bonds, 1997 Series B (Tucson Electric Power Company Project).

       

      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)           on
or after any Purchase Date for Bonds pursuant to Article V of the Indenture, all
Bonds (or portions of Bonds) which have been purchased on such date, but which
have not been delivered to the Tender Agent, provided that funds sufficient for
such purchase are on deposit with the Tender Agent in accordance with the
provisions hereof;

       

      (c)           those
deemed to be paid in accordance with Article IX 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.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      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.

       

      Purchase
Fund:

       

      “Purchase
Fund” shall have the meaning set forth in the Indenture.

       

      Purchase
Payments:

       

      “Purchase
Payments” shall mean the amounts required to be paid by the Company pursuant to
Section 5.02 hereof.

       

      Remarketing
Agent:

       

      “Remarketing
Agent” shall have the meaning set forth in the Indenture.

       

      Remarketing
Agreement:

       

      “Remarketing
Agreement” shall mean the Remarketing Agreement between the Company and the
Remarketing Agent relating to the Bonds, as the same may be amended,
supplemented or replaced from time to time.

       

      Remarketing
Proceeds Account:

       

      “Remarketing
Proceeds Account” shall have the meaning set forth in the
Indenture.

       

      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 Tax Reform Act of 1986 and the 1954
Code, and any and all modifications, alterations, amendments and supplements
thereto.

       

      Tender
Agent:

       

      “Tender
Agent” shall have the meaning set forth in the Indenture.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      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.

       

      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;

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      (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 by laws 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 are to be used solely for purposes contemplated by the Act and are
located within the State of Arizona and the State of New Mexico;
and

       

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

       

      ARTICLE
III

       

      THE
FACILITIES

       

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

       

      SECTION
3.02.  Maintenance of Facilities;
Remodeling.  The Company shall at all times 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 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 keep the Facilities insured against fire and other risks to the
extent usually insured against by companies owning and operating

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      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.

       

      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; PURCHASE 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,

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      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.

       

      Notwithstanding
the foregoing, while any Credit Facility is in effect with respect to the Bonds,
the Company’s obligation to make Loan Payments hereunder in respect of the
principal of, and premium, if any, and accrued interest on the Bonds shall be
deemed to have been satisfied to the extent that moneys shall have been paid by
a Credit Facility Issuer to the Trustee for such payment in respect of the
Bonds, and no Event of Default shall occur hereunder by reason of any failure of
the Company to make any such Loan Payment to the Trustee under the preceding
paragraph.

       

      SECTION
5.02.  Purchase Payments. To the
extent that moneys on deposit in the Remarketing Proceeds Account of the
Purchase Fund established under the Indenture are insufficient to pay the full
purchase price of Bonds payable pursuant to Section 5.03 of the Indenture on the
applicable Purchase Date, the Company shall promptly pay to the Trustee as
Purchase Payments for deposit in the Company Fund established under Section 5.07
of the Indenture amounts sufficient to cover such shortfalls in sufficient time
to enable the Trustee to deliver to the Tender Agent the purchase price of Bonds
payable pursuant to Section 5.03 of the Indenture; provided, however, that the
obligation of the Company to make any Purchase Payment hereunder shall be deemed
to have been satisfied to the extent that moneys shall have been paid by a
Credit Facility Issuer to the Trustee for such payment in respect of the
Bonds.

       

      SECTION
5.03.  Loan 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 5.04, 5.05, 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 and the Purchase
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 Purchase 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.

       

      
        
          
          

        

        
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      SECTION
5.04.  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 IX of the Indenture.  The payment of the compensation and the
reimbursement of expenses and advances of the Trustee and the Tender Agent and
of the paying agent, any co paying agent and the registrar under the Indenture
shall be made directly to such entities.

       

      SECTION
5.05.  Indemnification.  The
Company releases the Authority, the Trustee, the County of Pima, Arizona, the
Tender Agent and their directors, officers, employees and agents from, agrees
that the Authority, the Trustee and the County of Pima, Arizona shall not be
liable for, and agrees to indemnify and hold the Authority, the Trustee, the
County of Pima, Arizona, the Tender Agent 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 and the Tender Agent, as a result of the negligence or
bad faith or willful misconduct of the Trustee or the Tender Agent, as the case
may be, or its directors, officers, employees and agents; and (ii) in the case
of the Authority or 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
respective directors, officers, employees and agents.

       

      The
Company will indemnify and hold the Authority, the Trustee, the County of Pima,
Arizona and the Tender Agent, 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 and the Tender
Agent, as a result of the negligence or bad faith or willful misconduct of the
Trustee or the Tender Agent, as the case may be; and (ii) in the case of the
Authority or the County of Pima, Arizona, as a result of the 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 respective 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.

       

      SECTION
5.06.  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

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      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 and Purchase 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 Purchase 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 Sections 5.01 and 5.02
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 Sections 5.01 and 5.02 hereof,
and the transferee shall not be required to assume any obligations hereunder
other than the obligations under Sections 5.01 and 5.02 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, in and of itself, adversely affect any exclusion of
interest on the Bonds from gross income for purposes of federal income
taxation.

       

      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.

       

      
        
          
          

        

        
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      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 1986 Code or otherwise subject to federal income taxation by reason of
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.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      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 pursuant to Section 103 of the 1954 Code and Title XIII of
the Tax Reform Act of 1986, as applicable; 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
8.08 of the Indenture and agrees to perform all duties imposed on it by such
Section 8.08, by this Section and by the Tax Agreement.  Insofar as
Section 8.08 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 8.08 of the Indenture, 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 8.08 of the Indenture 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
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 8.07 of the Indenture.

       

      
        
          
          

        

        
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      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
Sections 5.01 and 5.02 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 Sections 5.01 and 5.02 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.

       

      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

       

      
        
          
          

        

        
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      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, in and of itself, adversely affect any exclusion
of interest on the Bonds from gross income for purposes of federal income
taxation.

       

      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

       

      
        
          
          

        

        
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      (x) Fair
Value shall be determined without deduction for any mortgage, deed of trust,
pledge, security interest, encumbrance, lease, reservation, restriction,
servitude, charge or similar right or any other lien of any kind and (y) the
Fair Value to the transferee of any property shall not reflect any reduction
relating to the fact that such property may be of less value to a Person which
is not the owner, lessee or operator of the property or any portion thereof than
to a Person which is such owner, lessee or operator.  Fair Value may
be determined, without physical inspection, by the use of accounting and
engineering records and other data maintained by the Company or the transferee
or otherwise available to the Independent Expert certifying the
same.

       

      SECTION
7.02.  Instrument Furnished to the
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 or Purchase Payment, which
failure shall have resulted in an “Event of Default” under clause (a), (b) or
(c) of Section 10.01 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

       

      
        
          
          

        

        
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      reorganization
under the provisions of any bankruptcy act or under any similar act which may be
hereafter enacted, or an assignment by the Company for the benefit of its
creditors, or the entry by the Company into an agreement of composition with its
creditors (the term “dissolution or liquidation of the Company,” as used in this
clause, shall not be construed to include the cessation of the corporate
existence of the Company resulting either from a merger or consolidation of the
Company into or with another entity or a dissolution or liquidation of the
Company following a transfer of all or substantially all its assets as an
entirety, under the conditions permitting such actions contained in Section 6.01
hereof).

       

      SECTION
8.02.  Force Majeure.  The
provisions of Section 8.01 hereof are subject to the following limitations: if
by reason of acts of God; strikes, lockouts or other industrial disturbances;
acts of public enemies; orders of any kind of the government of the United
States or of the State of Arizona, or any department, agency, political
subdivision, court or official of any of them, or any civil or military
authority; insurrections; riots; epidemics; landslides; lightning; earthquakes;
volcanoes; fires; hurricanes; tornadoes; storms; floods; washouts; droughts;
arrests; restraint of government and people; civil disturbances; explosions;
breakage or accident to machinery; partial or entire failure of utilities; or
any cause or event not reasonably within the control of the Company, the Company
is unable in whole or in part to carry out any one or more of its agreements or
obligations contained herein, other than its obligations under Sections 5.01,
5.02, 5.04, 5.06, 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.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

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

       

      SECTION
8.04.  No Remedy
Exclusive.  No remedy conferred upon or reserved to the
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 thirty (30) days (forty-five (45) days if the Interest Rate Mode for such
Bonds is the Term Rate (as such terms are defined in the Indenture)) 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 IX of the
Indenture.  The

       

      
        
          
          

        

        
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      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.

       

      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 IX of the Indenture and
until all payments required under this Agreement shall have been
made.  Notwithstanding the foregoing, the covenants contained in
Sections 5.04, 5.05, 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.

       

      
        
          
          

        

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

       

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

       

      SECTION
10.06.  Severability.  If
any clause, provision or section of this Agreement shall, for any reason, be
held illegal or invalid by any court, the illegality or invalidity of such
clause, provision or section shall not affect any of the remaining clauses,
provisions or sections hereof, and this Agreement shall be construed and
enforced as if such illegal or invalid clause, provision or section had not been
contained herein.  In case any agreement or obligation contained in
this Agreement be held to be in violation of law, then such agreement or
obligation shall be deemed to be the agreement or obligation of the 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 15.09 of the Indenture,
construed as provided in Section 15.07 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]

      

      
        
          
          

        

        
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      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/
      Cecilia Cruz
	 
      	 
      	
                Name: 
      Cecilia Cruz

                Title:   
      President

              
	 
      	 
      	
                 
      

                 

              
	 
      	
                By:

              	/s/
      Stanley Lehman
	 
      	 
      	
                Name: 
      Stanley Lehman

                Title:   
      Vice President

              
	 
      	 
      	
                 
      

                 

              
	 
      	
                TUCSON
      ELECTRIC POWER COMPANY

                 

              
	 
      	
                By:

              	/s/
      Kevin P. Larson
	 
      	 
      	
                Name: 
      Kevin P. Larson

                Title:   
      Senior Vice President

              

      

      

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

      

      
        	
                EXHIBIT
      A

              

      

      

      A portion
of the costs of the construction, improvement or equipping of the following
Facilities will be refinanced with the proceeds of the Industrial Development
Revenue Bonds, 2008 Series B (Tucson Electric Power Company Project) issued by
The Industrial Development Authority of the County of Pima and referred to in
the foregoing Loan Agreement.

       

      --------------------

       

      Certain
additions and improvements to the Company’s low-voltage transmission and
distribution facilities in the City of Tucson and environs in Pima County,
Arizona and providing service to Fort Huachuca in Cochise County, Arizona;
certain additions and improvements to the Sundt Generating Station located in
the City of Tucson, and certain additions and improvements to Unit 2 of the
Springerville Generating Station and related facilities located in Apache
County, Arizona.

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