form8-k.htm

0000950120-08-000329.txt : 20080701 0000950120-08-000329.hdr.sgml : 20080701 20080701152227 ACCESSION NUMBER: 0000950120-08-000329 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080625 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20080701 DATE AS OF CHANGE: 20080701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TUCSON ELECTRIC POWER CO CENTRAL INDEX KEY: 0000100122 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 860062700 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05924 FILM NUMBER: 08929375 BUSINESS ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE STREET 2: SUITE 100 CITY: TUCSON STATE: AZ ZIP: 85701 BUSINESS PHONE: 520-571-4000 MAIL ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE, SUITE 100 STREET 2: P.O. BOX 711 CITY: TUCSON STATE: AZ ZIP: 85702 FORMER COMPANY: FORMER CONFORMED NAME: TUCSON GAS & ELECTRIC CO /AZ/ DATE OF NAME CHANGE: 19790528 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNISOURCE ENERGY CORP CENTRAL INDEX KEY: 0000941138 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 860786732 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13739 FILM NUMBER: 08929374 BUSINESS ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE STREET 2: SUITE 100 CITY: TUCSON STATE: AZ ZIP: 85701 BUSINESS PHONE: 520-571-4000 MAIL ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE, SUITE 100 STREET 2: P.O. BOX 711 CITY: TUCSON STATE: AZ ZIP: 85702 8-K 1 form8-k.htm CURRENT REPORT form8-k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT

(DATE OF EARLIEST EVENT REPORTED): June 25, 2008

Commission File Number	Registrant; State of Incorporation; Address; and Telephone Number	IRS Employer Identification Number

1-13739	UNISOURCE ENERGY CORPORATION	86-0786732
	(An Arizona Corporation) One South Church Avenue, Suite 100 Tucson, AZ 85701 (520) 571-4000

1-5924	TUCSON ELECTRIC POWER COMPANY	86-0062700
	(An Arizona Corporation) One South Church Avenue, Suite 100 Tucson, AZ 85701 (520) 571-4000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

See Item 2.03.

Item 2.03 – Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

On June 25, 2008, The Industrial Development Authority of the County of Pima (Pima Authority) issued and sold in a public offering for the benefit of Tucson Electric Power Company (TEP) $130,000,000 aggregate principal amount of tax-exempt industrial development revenue bonds (IDBs). The IDBs were issued under the Indenture of Trust, dated as of June 1, 2008 (Indenture), between the Pima Authority and U.S. Bank Trust National Association, as Trustee (Trustee). The Pima Authority has loaned the proceeds of the IDBs to TEP pursuant to a Loan Agreement, dated as of June 1, 2008 (Loan Agreement), between TEP and the Pima Authority. Pursuant to the Loan Agreement, TEP is obligated to make payments in such amounts and at such times as will be sufficient to pay, when due, the principal of and interest on the IDBs to the extent such payments are not made pursuant to the Letter of Credit (as defined below).

The proceeds of the sale of the IDBs were applied to redeem a corresponding principal amount of bonds previously issued by the Pima Authority for TEP’s benefit which TEP had repurchased in 2005. The repurchased bonds had remained outstanding under their indenture but were not reflected as debt on the balance sheets of TEP or UniSource Energy Corporation. As holder of the repurchased bonds being redeemed, TEP received the payment of the redemption price and has deposited such amount in trust with The Bank of New York, as trustee, to be applied to the payment at maturity on August 1, 2008 of $128.3 million aggregate principal amount of TEP’s collateral trust bonds.

Concurrently with, and as a condition to, the issuance of the IDBs, TEP caused to be delivered to the Trustee a direct-pay irrevocable letter of credit issued by JPMorgan Chase Bank, National Association, in the amount of $131,602,739.73 (Letter of Credit). The Letter of Credit was issued pursuant to a Letter of Credit and Reimbursement Agreement (Reimbursement Agreement), dated as of April 30, 2008, among TEP, as Borrower, JPMorgan Chase Bank, N.A., as 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-Documentation Agents, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto.

The Trustee is entitled to draw upon the Letter of Credit, subject to the terms and conditions thereof, up to (a) an amount equal to the principal of the outstanding IDBs to (i) pay the principal of the IDBs when due at maturity or upon redemption or acceleration or (ii) enable U.S. Bank Trust National Association, as Tender Agent under the Indenture, to pay a portion of the purchase price corresponding to the principal amount of the IDBs purchased upon optional or mandatory purchase, plus (b) an amount equal to 45 days’ interest accrued on the outstanding IDBs computed at a maximum rate of 10% per annum calculated on the basis of a 365-day year to (i) pay accrued and unpaid interest on the IDBs or (ii) enable the Tender Agent to pay the portion of the purchase price corresponding to accrued and unpaid interest on the IDBs. The Letter of Credit will expire on April 30, 2011, unless terminated earlier or extended in accordance with its terms. TEP’s obligations under the Reimbursement Agreement are secured by $132 million of mortgage bonds issued pursuant to the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992, as amended and supplemented, between TEP and The Bank of New York, as successor trustee.

The IDBs accrue interest at the Weekly Rate from the date of original issuance unless and until the interest rate mode is converted to another permitted interest rate mode. While accruing interest at the Weekly Rate, the IDBs are subject to optional and mandatory purchase, as described in the Indenture. IDBs converted to a different interest rate mode will be subject to mandatory purchase upon conversion. The method of determining the interest rate on the IDBs may be converted from time to time in accordance with the Indenture to a Daily Rate, a Commercial Paper Rate, another Weekly Rate or a Term Rate. Each interest rate for an interest rate mode for the IDBs will be determined by the Remarketing Agent, provided that the interest rate borne by the IDBs may not exceed 10% per annum as set forth in the Indenture. The IDBs will be subject to optional, extraordinary optional and mandatory redemption prior to maturity, and to optional and mandatory tender for purchase and remarketing in certain circumstances, all as described in the Indenture.

The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the complete text of the Reimbursement Agreement, Indenture and Loan Agreement.

Item 9.01 - Financial Statements and Exhibits.

(d) Exhibits

4(a)

Letter of Credit and Reimbursement Agreement, dated as of April 30, 2008, among TEP, as Borrower, JPMorgan Chase Bank, N.A., as 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-Documentation Agents, JPMorgan Chase Bank, N.A., as Administrative Agent, and the Lenders party thereto.

4(b)

Supplemental Indenture No. 8, dated as of June 1, 2008, between TEP and The Bank of New York, creating a series of bonds designated as First Mortgage Bonds, Collateral Series G.

4(c)

Indenture of Trust, dated as of June 1, 2008, between The Industrial Development Authority of the County of Pima and U.S. Bank Trust National Association authorizing Industrial Development Revenue Bonds, 2008 Series B (Tucson Electric Power Company Project).

4(d)

Loan Agreement, dated as of June 1, 2008, between The Industrial Development Authority of the County of Pima and TEP relating to Industrial Development Revenue Bonds, 2008 Series B (Tucson Electric Power Company Project).

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: July 1, 2008		UNISOURCE ENERGY CORPORATION —————————————————— (Registrant) / s / Kevin P. Larson
		—————————————————— Senior Vice President and Chief Financial Officer

Date: July 1, 2008		TUCSON ELECTRIC POWER COMPANY —————————————————— (Registrant) / s / Kevin P. Larson
		—————————————————— Senior Vice President and Chief Financial Officer

EX-4.(A) 2 loc-agreement.htm LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT loc-agreement.htm

Exhibit 4(a)

[EXECUTION COPY]

LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT

dated as of

April 30, 2008

among

TUCSON ELECTRIC POWER COMPANY,

as Borrower,

THE LENDERS PARTY HERETO,

JPMORGAN CHASE BANK, N.A.,

as 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-Documentation Agents,

and

JPMORGAN CHASE BANK, N.A.

as Administrative Agent

J.P. MORGAN SECURITIES INC.

and

UNION BANK OF CALIFORNIA, N.A.,

as Co-Lead Arrangers and Joint Book Runners

TABLE OF CONTENTS

Page

ARTICLE I Definitions		1

SECTION 1.01.	Defined Terms	1
SECTION 1.02.	Classification of Loans and Borrowings	17
SECTION 1.03.	Terms Generally	17
SECTION 1.04.	Accounting Terms; GAAP	17
SECTION 1.05.	Pro Forma Calculations	17

ARTICLE II The Credits		18

SECTION 2.01.	Loans and Borrowings.	18
SECTION 2.02.	Letters of Credit.	18
SECTION 2.03.	Funding of Borrowings.	24
SECTION 2.04.	Interest Elections.	24
SECTION 2.05.	Termination and Reduction of Commitments.	25
SECTION 2.06.	Repayment of Loans; Evidence of Debt.	26
SECTION 2.07.	Prepayment of Loans.	27
SECTION 2.08.	Fees.	28
SECTION 2.09.	Interest.	29
SECTION 2.10.	Alternate Rate of Interest	29
SECTION 2.11.	Increased Costs.	30
SECTION 2.12.	Break Funding Payments	31
SECTION 2.13.	Taxes.	31
SECTION 2.14.	Payments Generally; Pro Rata Treatment; Sharing of Set-offs.	32
SECTION 2.15.	Mitigation Obligations; Replacement of Lenders.	34

ARTICLE III Representations and Warranties		35

SECTION 3.01.	Organization; Powers	35
SECTION 3.02.	Authorization; Enforceability	35
SECTION 3.03.	Governmental Approvals; No Conflicts	35
SECTION 3.04.	Financial Condition; No Material Adverse Change; Secured Indebtedness.	35
SECTION 3.05.	Properties.	36
SECTION 3.06.	Litigation and Environmental Matters.	36
SECTION 3.07.	Compliance with Laws and Agreements	37
SECTION 3.08.	Federal Regulations	37
SECTION 3.09.	Investment Company Status.	37
SECTION 3.10.	Taxes	37
SECTION 3.11.	ERISA	38
SECTION 3.12.	Security Documents.	38
SECTION 3.13.	Disclosure	38

Page

SECTION 3.14.	Solvency	39
SECTION 3.15.	Labor Matters	39
SECTION 3.16.	Anti-Terrorism Laws.	39

ARTICLE IV Conditions		40

SECTION 4.01.	Effective Date	40
SECTION 4.02.	Each Credit Event	41

ARTICLE V Affirmative Covenants		43

SECTION 5.01.	Financial Statements and Other Information	43
SECTION 5.02.	Notices of Material Events	45
SECTION 5.03.	Existence; Conduct of Business	46
SECTION 5.04.	Payment of Obligations	46
SECTION 5.05.	Maintenance of Properties; Insurance	46
SECTION 5.06.	Books and Records; Inspection Rights	47
SECTION 5.07.	Compliance with Laws and Agreements	47
SECTION 5.08.	Use of Letters of Credit	47
SECTION 5.09.	Environmental Laws.	47
SECTION 5.10.	Further Assurances	47

ARTICLE VI Negative Covenants		48

SECTION 6.01.	Indebtedness	48
SECTION 6.02.	Liens	48
SECTION 6.03.	Fundamental Changes.	49
SECTION 6.04.	Sale of Assets.	50
SECTION 6.05.	Restricted Payments.	50
SECTION 6.06.	Cash Coverage Ratio	51
SECTION 6.07.	Leverage Test	51
SECTION 6.08.	Amendments to Documents	51
SECTION 6.09.	Sale Leaseback Transactions	52
SECTION 6.10.	Release of Collateral under the Mortgage Indenture	52
SECTION 6.11.	Transactions with Affiliates	52
SECTION 6.12.	Limitation on Hedge Agreements	52
SECTION 6.13.	Restrictive Agreements	52

ARTICLE VII Events of Default		53

ARTICLE VIII The Administrative Agent		55

ARTICLE IX Miscellaneous		58

SECTION 9.01.	Notices.	58
SECTION 9.02.	Waivers; Amendments.	59

Page

SECTION 9.03.	Expenses; Indemnity; Damage Waiver.	60
SECTION 9.04.	Successors and Assigns.	61
SECTION 9.05.	Survival	64
SECTION 9.06.	Counterparts; Integration; Effectiveness	65
SECTION 9.07.	Severability	65
SECTION 9.08.	Right of Setoff	65
SECTION 9.09.	Governing Law; Jurisdiction; Consent to Service of Process.	65
SECTION 9.10.	Waiver of Jury Trial	66
SECTION 9.11.	Headings	66
SECTION 9.12.	Confidentiality	66
SECTION 9.13.	Interest Rate Limitation	67
SECTION 9.14.	Patriot Act Notice	67

SCHEDULES:

Schedule 1.01	--	Pricing Schedule
Schedule 2.01	--	Revenue Bond Commitments
Schedule 4.01(g)	--	Existing Indebtedness

EXHIBITS:

Exhibit A	--	Form of Assignment and Assumption
Exhibit B	--	Form of Bond Delivery Agreement
Exhibit C	--	Form of Revenue Bond Pledge Agreement
Exhibit D	--	Form of Supplemental Indenture
Exhibit E-1	--	Form of Opinion of Raymond S. Heyman, Esq., General Counsel for the Borrower
Exhibit E-2	--	Form of Opinion of Thelen Reid Brown Raysman & Steiner LLP, New York counsel for the Borrower
Exhibit E-3	--	Form of Opinion of Rodey, Dickason, Sloan, Akin & Robb, PA, special New Mexico counsel for the Borrower
Exhibit F	--	Form of Revenue Bond Letter of Credit
Exhibit G	--	Form of Letter of Credit Application

iii

This LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT, dated as of April 30, 2008, is entered into by and among TUCSON ELECTRIC POWER COMPANY, an Arizona corporation, the LENDERS from time to time party hereto, JPMORGAN CHASE BANK, N.A., as 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-Documentation Agents, and JPMORGAN CHASE BANK, N.A., as Administrative Agent.

RECITALS

The Borrower has requested the Issuing Bank and the Lenders to provide the letter of credit facility hereinafter described in the amount and on the terms and conditions set forth herein. The Issuing Bank and the Lenders have so agreed on the terms and conditions set forth herein, and the Administrative Agent has agreed to act as agent for the Issuing Bank and the Lenders on such terms and conditions.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“ACC” means the Arizona Corporation Commission.

“ACC Order” means the Opinion and Order (Decision No. 69946) of the ACC issued on October 30, 2007 in Docket No. E-01933A-07-0080.

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Issuing Bank and the Lenders.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agents” means the Co-Documentation Agents, the Syndication Agent and the Administrative Agent.

“Aggregate Commitments” means the total of the Lenders’ Revenue Bond Commitments hereunder. The Aggregate Commitments shall in no event exceed $132,528,000.00.

“Agreement” means this Letter of Credit and Reimbursement Agreement, dated as of April 30, 2008, by and among the Borrower, the Lenders from time to time party hereto, the Issuing Bank, the Co-Documentation Agents, the Syndication Agent and the Administrative Agent.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

“Anti-Terrorism Laws” has the meaning provided in Section 3.16(a).

“Applicable Margin” means, for any day, with respect to any Eurodollar Loan or ABR Loan, as the case may be, the applicable percentage per annum determined in accordance with the Pricing Schedule attached hereto as Schedule 1.01.

“Applicable Percentage” means, for any Lender on any date of determination, the percentage obtained by dividing such Lender’s Revenue Bond Commitment on such date by the total of the Revenue Bond Commitments on such date, and multiplying the quotient so obtained by 100%; provided, that in the event that the Revenue Bond Commitments have been terminated, each Lender’s Applicable Percentage shall be calculated on the basis of the Revenue Bond Commitments in effect immediately prior to such termination, after giving effect to any assignments.

“Applicable Rate” means:

(i) in the case of each ABR Loan, a rate per annum equal at all times to the sum of the Alternate Base Rate in effect from time to time plus the Applicable Margin in effect from time to time; and

(ii) in the case of each Eurodollar Loan, a rate per annum during each Interest Period equal at all times to the sum of the Adjusted LIBO Rate for such Interest Period plus the Applicable Margin in effect from time to time during such Interest Period.

“Approved Fund” means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

“Arrangers” means J.P. Morgan Securities Inc. and Union Bank of California, N.A., as co-lead arrangers and joint book runners for the credit facility established by this Agreement.

“Assignment and Assumption” means an Assignment and Assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Bond Delivery Agreement” means, collectively, each Bond Delivery Agreement between the Borrower and the Administrative Agent, substantially in the form of Exhibit B, executed and delivered pursuant to the terms of this Agreement in connection with any issuance of Collateral Mortgage Bonds.

“Bond Purchase Agreement” means, with respect to any Revenue Bond Letter of Credit, the Bond Purchase Agreement in respect of the Revenue Bonds that are supported by, and referenced in, such Revenue Bond Letter of Credit.

“Borrower” means Tucson Electric Power Company, an Arizona corporation.

“Borrowing” means Revenue Bond Loans of the same Type, made (or deemed made), converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

“Business Day” means any day that is not (i) a Saturday, Sunday or other day on which commercial banks in New York City or Chicago, Illinois are authorized or required by law to remain closed or (ii) a day that the New York Stock Exchange is closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Capital Lease Investment” of any Person means the aggregate outstanding capitalized amount of Capital Lease Obligations of the Borrower and the Consolidated Subsidiaries that are owned by such Person and in respect of which such Person has the right to receive all future payments to be made.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

“Change in Law” means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender or the Issuing Bank (or, for purposes of Section 2.11(b), by any lending office of such Lender or by such Lender’s or the Issuing Bank’s holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement.

“Change in Control” means the failure of UniSource Energy to own and control, of record and beneficially, directly or indirectly, Capital Stock of the Borrower representing 100% of the aggregate ordinary voting power of the Borrower, free and clear of all Liens.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Co-Documentation Agents” means ABN AMRO Bank N.V., SunTrust Bank and Wells Fargo Bank, National Association, in their capacity as co-documentation agents for the Lenders.

“Collateral” means the Collateral Mortgage Bonds and any and all “Collateral”, as defined in any applicable Security Document.

“Collateral Mortgage Bonds” means one or more new series of Mortgage Bonds, substantially in the form attached to a Supplemental Indenture, issued by the Borrower after the Effective Date pursuant to the terms of this Agreement and such Supplemental Indenture and delivered to the Administrative Agent pursuant to a Bond Delivery Agreement.

“Commitment Fee Rate” means, for any day, the applicable percentage per annum determined in accordance with the Pricing Schedule attached hereto as Schedule 1.01.

“Consolidated EBITDA” means, for any fiscal period, with respect to the Borrower and the Consolidated Subsidiaries, Consolidated Net Income for such period plus, to the extent deducted in computing such Consolidated Net Income, without duplication, the sum of (a) income tax expense, (b) interest expense, (c) depreciation and amortization expense, (d) any extraordinary or non-recurring losses and (e) other noncash items reducing Consolidated Net Income, minus, to the extent added in computing such Consolidated Net Income, without duplication, the sum of (i) interest income, (ii) any extraordinary or non-recurring gains and (iii) other noncash items increasing Consolidated Net Income, all as determined on a consolidated basis in accordance with GAAP; provided, however, that if (and only if) the definition of “Consolidated EBITDA” contained in the Existing Credit Agreement is amended pursuant to Section 9.02(b) thereof to provide that up to $69,000,000 of any refund of the Borrower’s fixed “competition transition charges” collected in 2008 will not be subtracted from Consolidated EBITDA (as defined in the Existing Credit Agreement), the definition of Consolidated EBITDA contained herein shall be automatically amended (without further action by any of the parties

hereto), effective as of the date of such amendment to the Existing Credit Agreement, to provide that such refunds, in an aggregate amount not to exceed $69,000,000, will not be subtracted from Consolidated EBITDA (provided, that such amendment to the definition of Consolidated EBITDA contained herein shall be subject to the same conditions, limitations and exceptions, if any, as are contained in the amendment to the Existing Credit Agreement).

“Consolidated Interest Expense” means, for any fiscal period, the aggregate of all payments by the Borrower and the Consolidated Subsidiaries for such period that, in accordance with GAAP, are or should be included in “interest paid, net of amounts capitalized” and “capital lease interest paid” reflected in the statement of cash flows for the Borrower and the Consolidated Subsidiaries, less the amount of capital lease interest income paid to the Borrower or any Consolidated Subsidiary for such period that is not reflected in Consolidated EBITDA for such period, all as determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Income” means, for any fiscal period, net income of the Borrower and the Consolidated Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP.

“Consolidated Subsidiary” means, at any date, each Subsidiary the accounts of which would be consolidated with those of the Borrower in the Borrower’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date.

“Consolidated Total Indebtedness” means, as of the last day of any fiscal quarter, (a) the sum (without duplication) for the Borrower and the Consolidated Subsidiaries as of such day of (i) the aggregate outstanding principal amount of the Loans and LC Disbursements, (ii) the aggregate outstanding principal amount of other Indebtedness for borrowed money (including Guarantees thereof), (iii) the principal amount of all obligations in respect of Hedging Agreements of the Borrower and the Consolidated Subsidiaries (computed as set forth in the penultimate sentence of the definition of “Material Indebtedness”) and (iv) the aggregate outstanding capitalized amount of Capital Lease Obligations, minus (b) the sum (without duplication) as of such day of (i) the aggregate outstanding capitalized amount of the Capital Lease Investments of the Borrower and the Consolidated Subsidiaries as of such day and (ii) to the extent included in clause (a)(ii) above, any Treasury Indebtedness of the Borrower and the Consolidated Subsidiaries as of such day, all as determined on a consolidated basis in accordance with GAAP.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Credit Exposure” means, with respect to any Lender at any time, such Lender’s Revenue Bond Credit Exposure at such time.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“Disclosure Documents” means (i) the Borrower’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as filed with the Securities and Exchange Commission, and (ii) the Current Reports on Form 8-K of the Borrower as filed with, or furnished to, the Securities and Exchange Commission on February 21, 2008, February 29, 2008, March 5, 2008, March 24, 2008, April 21, 2008 and April 24, 2008.

“dollars” or “$” refers to lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC of any notice of its intent to institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan under Section 4042 of ERISA

or the providing of notice by a plan administrator of the intent to terminate any Plan under Section 4041 of ERISA; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender, the Issuing Bank or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which such recipient is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.15(b)), any withholding tax that is imposed by the United States of America on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender’s failure to comply with Section 2.13(d).

“Executive Order” has the meaning provided in Section 3.16(a).

“Existing Credit Agreement” means the Amended and Restated Credit Agreement, dated as of August 11, 2006, among the Borrower, the lenders named therein and from time to time party thereto, the issuing banks party thereto, The Bank of New York and JPMorgan Chase, as co-syndication agents, Wells Fargo Bank, National Association and ABN AMRO Bank N.V., as co-documentation agents, and Union Bank of California, N.A., as administrative agent.

“Fair Value” means, with respect to any assets or property owned by the Borrower or any of the Consolidated Subsidiaries, the fair market value thereof as determined from time to time by the Board of Directors (or a duly constituted committee thereof) of the Borrower or such Consolidated Subsidiary in good faith.

“Federal Funds Effective Rate” means, for any day, the rate determined by the Administrative Agent to be the average (rounded upwards, if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to the Administrative Agent at approximately 10:00 a.m. (Chicago, Illinois time) (or as soon thereafter as is practicable) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) by two or more Federal funds brokers selected by the Administrative Agent for the sale to the Administrative Agent at face value of Federal funds in an amount equal or comparable to the principal amount for which such rate is being determined.

“Fee Letter” means that certain letter agreement, dated the date hereof, among the Borrower, the Administrative Agent, the Issuing Bank and the Arrangers.

“Final Termination Date” means April 30, 2011.

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower.

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than the United States of America.

“GAAP” means generally accepted accounting principles in the United States of America.

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedging Agreement” means any interest rate protection agreement, foreign currency exchange agreement or other interest or currency exchange rate hedging arrangement.

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Index Debt” means (a) with respect to the determination of the Commitment Fee Rate during the period from the Effective Date through and including the first date on which Collateral Mortgage Bonds are delivered to the Administrative Agent pursuant to the terms of this Agreement, the long-term, senior unsecured Indebtedness of the Borrower that is not guaranteed by any other Person or subject to any other credit enhancement, and (b) otherwise, the long-term, senior secured Indebtedness of the Borrower issued under the Mortgage Indenture that is not guaranteed by any other Person or subject to any other credit enhancement.

“Interest Election Request” means a request by the Borrower to convert or continue a Loan in accordance with Section 2.04.

“Interest Payment Date” means (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December, commencing with June 30, 2008, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

“Interest Period” means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing (which initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing) and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next

succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.

“Issuing Bank” means JPMorgan Chase, in its capacity as the issuer of Letters of Credit hereunder, and each of its successors in such capacity as provided in Section 2.02(j).

“JPMorgan Chase” means JPMorgan Chase Bank, N.A., a national banking association.

“LC Disbursement” means a payment made by the Issuing Bank pursuant to a Revenue Bond Letter of Credit.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“Letter of Credit” means any Revenue Bond Letter of Credit issued pursuant to this Agreement.

“Letter of Credit Final Issuance Date” means the earlier to occur of (a) September 30, 2008 and (b) the date of the termination of the Revenue Bond Commitments.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars (as set forth by the Bloomberg Information Service or any successor thereto or any other service selected by the Administrative Agent which has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate per annum at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period would be offered to the Administrative Agent in the London interbank market at approximately 12:00 noon, London time, on the date that is two Business Days prior to the beginning of such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“Lien of the Mortgage Indenture” has the meaning assigned to the phrases “Lien of this Indenture” and “lien hereof” in the Mortgage Indenture.

“Loan Documents” means (a) this Agreement, (b) any promissory notes delivered pursuant to Section 2.06(e), (c) the Fee Letter and (d) upon the execution and delivery thereof pursuant to the terms of this Agreement, each Bond Delivery Agreement, each Supplemental Indenture, the Collateral Mortgage Bonds, the Revenue Bond Pledge Agreements and the other Security Documents.

“Loans” means the Revenue Bond Loans made (or deemed made) by the Lenders to the Borrower pursuant to this Agreement.

“Material Adverse Effect” means a material adverse effect on (a) the financial condition, results of operations, business or prospects of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under any Loan Document or the Mortgage Indenture or (c) the rights of or benefits available to the Lenders under any Loan Document or the Mortgage Indenture.

“Material Indebtedness” means Indebtedness (other than the Loans, LC Disbursements and Letters of Credit), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the Significant Subsidiaries in an aggregate principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. “Material Indebtedness” shall not include at any time any Indebtedness that is non-recourse to the Borrower and its Significant Subsidiaries.

“Moody’s” means Moody’s Investors Service, Inc., and its successors.

“Mortgage Bonds” means the Borrower’s Mortgage Bonds issued under the Mortgage Indenture.

“Mortgage Indenture” means the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992, between the Borrower and The Bank of New York (as successor in trust to Bank of Montreal Trust Company), as trustee, as amended, supplemented or otherwise modified from time to time.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Obligations” means (a)(i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans and LC Disbursements, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each other payment required to be made by the Borrower under this Agreement in respect of any Letter of Credit, when and as due, and (iii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary,

secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrower under this Agreement and the other Loan Documents; and (b) the due and punctual performance of all other covenants, agreements, obligations and liabilities of the Borrower under or pursuant to this Agreement and the other Loan Documents.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

“Participant” has the meaning assigned to such term in Section 9.04(e).

“Patriot Act” has the meaning assigned to such term in Section 9.14.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“PPD Repayment Date” has the meaning assigned to such term in Section 2.02(f)(ii).

“Prime Rate” means the rate of interest announced by JPMorgan Chase from time to time as its prime commercial rate for U.S. dollar loans, or equivalent, as in effect on such day, with any change in the Prime Rate resulting from a change in said prime commercial rate to be effective as of the date of the relevant change in said prime commercial rate. Such prime commercial rate is set by JPMorgan Chase as a general reference rate of interest, taking into account such factors as JPMorgan Chase may deem appropriate, it being understood that many of JPMorgan Chase’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that JPMorgan Chase may make various commercial or other loans at rates of interest having no relationship to such rate.

“Purchase Price Disbursement” has the meaning assigned to such term in Section 2.02(f)(ii).

“Rating Agencies” means each of Moody’s and S&P.

“Register” has the meaning set forth in Section 9.04(c).

“Regulation D” means Regulation D of the Board as in effect from time to time.

“Regulation U” means Regulation U of the Board as in effect from time to time.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Remarketing Agreement” means, with respect to any Revenue Bond Letter of Credit, the Remarketing Agreement in respect of the Revenue Bonds that are supported by, and referenced in, such Revenue Bond Letter of Credit.

“Required Lenders” means, at any time, Lenders having Credit Exposures and unused Aggregate Commitments representing a majority of the sum of the total Credit Exposures and the total unused Aggregate Commitments at such time.

“Requirement of Law” means, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or assets or to which such Person or any of its property or assets is subject.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any shares of any class of Capital Stock of the Borrower, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shares of Capital Stock of the Borrower or any option, warrant or other right to acquire any such shares of Capital Stock of the Borrower.

“Revenue Bond Commitment” means, with respect to each Lender, the commitment of such Lender to participate in the Revenue Bond Letters of Credit and all LC Disbursements and to make Revenue Bond Loans hereunder, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s Revenue Bond Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.05 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender’s Revenue Bond Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Revenue Bond Commitment, as applicable. The initial aggregate amount of the Revenue Bond Commitments is $132,528,000.00.

“Revenue Bond Credit Exposure” means, at any time, the sum of (a) the aggregate outstanding principal amount of Revenue Bond Loans at such time plus (b) the Revenue Bond LC Exposure at such time. The Revenue Bond Credit Exposure of any Lender at any time shall be its Applicable Percentage of the total Revenue Bond Credit Exposure at such time.

“Revenue Bond Documents” has the meaning set forth in Section 4.02(c) hereof.

“Revenue Bond Indenture” means, with respect to any Revenue Bond Letter of Credit, the Revenue Bond Indenture, as amended and supplemented from time to time, in respect of the Revenue Bonds that are supported by, and referenced in, such Revenue Bond Letter of Credit.

“Revenue Bond LC Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Revenue Bond Letters of Credit at such time plus (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower at such time. The Revenue Bond LC Exposure of any Lender at any time shall be its Applicable Percentage of the total Revenue Bond LC Exposure at such time.

“Revenue Bond Letters of Credit” means the letters of credit issued pursuant to Section 2.02(a).

“Revenue Bond Loan” has the meaning set forth in Section 2.02(f)(iii) hereof.

“Revenue Bond Loan Agreement” means, with respect to any Revenue Bond Letter of Credit, the Revenue Bond Loan Agreement in respect of the Revenue Bonds that are supported by, and referenced in, such Revenue Bond Letter of Credit.

“Revenue Bond Pledge Agreement” means, individually, any pledge agreement in substantially the form of Exhibit C and otherwise satisfactory to the Issuing Bank and the Administrative Agent. “Revenue Bond Pledge Agreements” means, collectively, all Revenue Bond Pledge Agreements.

“Revenue Bonds” means, with respect to any Revenue Bond Letter of Credit, the industrial development revenue bonds issued for the benefit of the Borrower that are supported by, and referenced in, such Revenue Bond Letter of Credit.

“Revenue Bond Trustee” means, with respect to any Revenue Bond Letter of Credit, the trustee and/or agent, as applicable, named in such Revenue Bond Letter of Credit’s Revenue Bond Indenture, and any successor or assign thereof.

“Sale Leaseback” means any transaction or series of related transactions pursuant to which the Borrower or any of its Subsidiaries sells, transfers or otherwise disposes of any property, real or personal, whether now owned or hereafter acquired, and thereafter rents or leases such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold, transferred or disposed of.

“San Carlos” means San Carlos Resources Inc., an Arizona corporation.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and its successors.

“Security Documents” means (a) the Mortgage Indenture, (b) upon the execution and delivery thereof pursuant to the terms of this Agreement, each Supplemental Indenture, the Collateral Mortgage Bonds, each Bond Delivery Agreement and each Revenue Bond Pledge Agreement, and (c) each other security agreement or other instrument or document executed and delivered pursuant to Section 4.02(c) or 5.10 or pursuant to any of the foregoing documents to secure any of the Obligations.

“Significant Subsidiary” means (a) San Carlos, (b) any Subsidiary that directly or indirectly owns or Controls any other Significant Subsidiary and (c) any other Subsidiary of the Borrower whose direct or indirect proportionate share of consolidated total assets as of the end of the most recent fiscal quarter for which financial statements have been delivered pursuant to Section 5.01 was greater than or equal to 15% of the consolidated total assets as of such date of the Borrower and the Consolidated Subsidiaries, taken as a whole. For purposes of making the determinations required by this definition, revenues and assets of foreign Subsidiaries shall be converted into dollars at the rates used in preparing the consolidated balance sheet of the Borrower included in the applicable financial statements.

“Solvent” means, with respect to any Person, as of any date of determination, that (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D). Such reserve percentages shall include those imposed pursuant to Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the

equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent.

“Subsidiary” means any subsidiary of the Borrower.

“Supplemental Indenture” means each Supplemental Indenture under the Mortgage Indenture, substantially in the form of Exhibit D, executed and delivered by the Borrower and The Bank of New York (as successor in trust to Bank of Montreal Trust Company), as trustee, in connection with the issuance of any Collateral Mortgage Bonds pursuant to the terms of this Agreement.

“Syndication Agent” means Union Bank of California, N.A., in its capacity as syndication agent for the Lenders.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority.

“Transactions” means the execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the issuance of Collateral Mortgage Bonds to the Administrative Agent under any Supplemental Indenture and the corresponding Bond Delivery Agreement, the borrowing of Revenue Bond Loans and the use of the proceeds thereof.

“Treasury Indebtedness” means, with respect to any Person, the aggregate outstanding principal amount of Indebtedness of such Person and its subsidiaries that is owned by such Person or its subsidiaries and in respect of which such Person or one or more of its subsidiaries has the right to receive, pursuant to the terms of such Indebtedness, all future principal, interest and other payments to be made with respect thereto.

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“UniSource Energy” means UniSource Energy Corporation, an Arizona corporation.

“Utility Business” means the business of producing, developing, generating, transmitting, distributing, selling or supplying electrical energy for any purpose, or any business incidental thereto or necessary in connection therewith, or any business reasonably desirable in connection therewith which the ACC or other utility regulatory body shall have authorized the Borrower to enter.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans and Borrowings may be classified and referred to by Type (e.g., a “Eurodollar Loan” or a “Eurodollar Borrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof (including the effects of the application or discontinuance of the application of accounting for the effects of regulation to all or any portion of the Borrower’s operations) to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

SECTION 1.05. Pro Forma Calculations. All pro forma calculations permitted or required to be made by the Borrower or any Subsidiary pursuant to this Agreement shall (a) include only those adjustments that would be permitted or required by Regulation S-X under the Securities Act of 1933, as amended, and (b) be certified to by a Financial Officer as having been prepared in good faith based upon assumptions believed to be reasonable.

ARTICLE II

The Credits

SECTION 2.01. Loans and Borrowings.

(a) Subject to Section 2.10, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith; provided, however, that notwithstanding the foregoing or any other provision contained herein, each Revenue Bond Loan shall initially bear interest at the Applicable Rate for ABR Loans, and thereafter, subject to Section 2.10, may be converted or continued pursuant to Section 2.04. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(b) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of three (3) Eurodollar Borrowings outstanding.

(c) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Eurodollar Borrowing if the Interest Period requested with respect thereto would end after the Final Termination Date.

SECTION 2.02. Letters of Credit.

(a) General. Subject to the terms and conditions set forth herein, the Borrower may request the issuance of Revenue Bond Letters of Credit, for its own account, during the period from the Effective Date through and including the Letter of Credit Final Issuance Date, substantially in the form of Exhibit F or such other form reasonably acceptable to the Administrative Agent and the Issuing Bank. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, the Issuing Bank relating to any Revenue Bond Letter of Credit, the terms and conditions of this Agreement shall control.

(b) Issuance and Amendment. i) To request the issuance of a Revenue Bond Letter of Credit, the Borrower shall hand deliver or telecopy (or transmit by electronic communication, if arrangements for doing so have been approved by the Issuing Bank) to the Issuing Bank and the Administrative Agent (no less than five (5) Business Days in advance of the requested date of issuance) a notice requesting the issuance of a Revenue Bond Letter of Credit and specifying the date of issuance (which shall be a Business Day), the date on which such Revenue Bond Letter of Credit is to expire (which shall comply with paragraph (d) of this Section), the amount of such Revenue Bond Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare such Revenue Bond Letter of Credit. The Administrative Agent shall, promptly after its receipt thereof,

distribute a copy of each such notice to the Lenders. The Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form attached hereto as Exhibit G in connection with any request for a Revenue Bond Letter of Credit. Upon the issuance of any Revenue Bond Letter of Credit, the Issuing Bank shall provide notice and a copy thereof to the Administrative Agent, which shall promptly furnish copies thereof to the Lenders.

(ii) Any Revenue Bond Letter of Credit may be amended by the Issuing Bank, or replaced with a new Revenue Bond Letter of Credit issued by the Issuing Bank, at the request of the Borrower and with the consent of the Administrative Agent; provided, that no such amendment or replacement shall increase the stated amount of a Revenue Bond Letter of Credit or extend the expiration date thereof beyond the last permissible date referred to in paragraph (d) below. To request an amendment to or replacement of an outstanding Revenue Bond Letter of Credit, the Borrower shall hand deliver or telecopy to the Issuing Bank and the Administrative Agent (no less than five (5) Business Days in advance of the requested date of amendment or replacement, as the case may be) a notice identifying the Revenue Bond Letter of Credit to be amended or replaced (as the case may be) and specifying the number of such Revenue Bond Letter of Credit, the date of amendment or replacement (which shall be a Business Day), the amount of such Revenue Bond Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to amend or replace (as the case may be) such Revenue Bond Letter of Credit. The Administrative Agent shall, promptly after its receipt thereof, distribute a copy of each such notice to the Lenders. The Borrower also shall submit a letter of credit application on the Issuing Bank’s standard form attached hereto as Exhibit G in connection with any request for the replacement of a Revenue Bond Letter of Credit. Upon the amendment or replacement of any Revenue Bond Letter of Credit, the Issuing Bank shall provide notice and a copy thereof to the Administrative Agent, which shall promptly furnish copies thereof to the Lenders.

(c) Limitation of Amount. A Letter of Credit shall be issued, amended or extended only if (and upon issuance, amendment or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment or extension, the Revenue Bond Credit Exposure shall not exceed the aggregate amount of the Revenue Bond Commitments. In addition, the aggregate stated amount of all Revenue Bond Letters of Credit issued pursuant to this Agreement shall not exceed the Aggregate Commitments (it being understood and agreed that, upon the issuance of any Revenue Bond Letter of Credit, the aggregate stated amount of all Revenue Bond Letters of Credit that may thereafter be issued pursuant to this Agreement shall not exceed the excess of (i) the Aggregate Commitments over (ii) the aggregate stated amount of all Revenue Bond Letters of Credit issued pursuant to this Agreement).

(d) Expiration Date. Each Revenue Bond Letter of Credit shall expire not later than the close of business on the Final Termination Date.

(e) Participations of Lenders. On the date of issuance of each Revenue Bond Letter of Credit, without any further action on the part of the Issuing Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from the Issuing Bank, a participation in such Revenue Bond Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Revenue Bond Letter of

Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower on the date due as provided in paragraph (f)(i) of this Section (without giving effect to paragraph (f)(ii) of this Section), or of any reimbursement payment in respect of an LC Disbursement required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire and fund participations in respect of Revenue Bond Letters of Credit pursuant to this paragraph (e) is absolute, unconditional and irrevocable and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Revenue Bond Letter of Credit or the occurrence and continuance of a Default or the reduction or termination of the Revenue Bond Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. For the avoidance of doubt, the parties hereto acknowledge and agree that the funding by a Lender of its participation interest in any LC Disbursement shall not constitute a reimbursement by the Borrower of such LC Disbursement.

(f) Reimbursement. ii) If the Issuing Bank shall make any LC Disbursement, the Borrower shall, except as provided in paragraph (ii) below, reimburse such LC Disbursement by paying to the Administrative Agent (for the account of the Issuing Bank) an amount equal to such LC Disbursement not later than 1:00 p.m., Chicago, Illinois time, on the date that such LC Disbursement is made, if the Borrower shall have received notice of such LC Disbursement prior to 11:00 a.m., Chicago, Illinois time, on such date, or, if such notice has not been received by the Borrower prior to such time on such date, then not later than 1:00 p.m., Chicago, Illinois time, on the Business Day immediately following the day that the Borrower receives such notice.

(ii) In the case of any LC Disbursement to fund the payment of the purchase price (to the extent such purchase price is attributable to the principal of a Revenue Bond) of any Revenue Bond that the Borrower is unable to remarket prior to the day on which payment of the purchase price of such Revenue Bond is due to the holder or owner thereof (a “Purchase Price Disbursement”), the Borrower shall reimburse such Purchase Price Disbursement (to the extent not reimbursed by a Revenue Bond Loan pursuant to paragraph (iii) below) on or prior to the earliest to occur of (A) the Final Termination Date, (B) the date on which such Revenue Bond is redeemed or cancelled pursuant to the applicable Revenue Bond Indenture, (C) the date on which such Revenue Bond is remarketed pursuant to the applicable Revenue Bond Indenture, and (D) the date on which the applicable Revenue Bond Letter of Credit is delivered to the Issuing Bank for cancellation in accordance with the terms of the applicable Revenue Bond Indenture (such earliest date being referred to herein as the “PPD Repayment Date”); provided that (x) such Revenue Bond shall be promptly delivered to the Issuing Bank (or to its bailee or custodian, if applicable) and pledged to the Issuing Bank under a Revenue Bond Pledge Agreement, (y) any portion of such Purchase Price Disbursement may be reimbursed at any time by or on behalf of the Borrower on one Business Day’s notice stating the amount to be reimbursed (which shall be $100,000 or a whole multiple thereof) and directing the Issuing Bank to deliver Revenue Bonds held by or for the account of the Issuing Bank to or upon the order of the Borrower against repayment of the portion of such Purchase Price Disbursement attributable to such Revenue Bonds with the proceeds of the remarketing of such Revenue Bonds and specifying the principal amount of Revenue Bonds to be so delivered (provided, however, that if all or any portion of such Purchase Price Disbursement was reimbursed with the proceeds

of a Revenue Bond Loan pursuant to paragraph (iii) below, the Issuing Bank shall deliver such Revenue Bonds pursuant to this clause (y) only if and to the extent that such Revenue Bond Loan has been repaid or prepaid by the Borrower in accordance with the terms of this Agreement (including, without limitation, Section 2.07(c)) with the proceeds of such remarketing), and (z) upon payment to the Administrative Agent for the account of the Issuing Bank of the amount of any such repayment, together with accrued interest to the date of such repayment on the amount of the Purchase Price Disbursement to be reimbursed, the outstanding obligations of the Borrower in respect of such Purchase Price Disbursement shall be reduced by the amount of such reimbursement, interest shall cease to accrue on the amount so reimbursed and the Issuing Bank shall release to or upon the order of the Borrower from the pledge and security interest created by the applicable Revenue Bond Pledge Agreement a principal amount of Revenue Bonds held under such Revenue Bond Pledge Agreement equal to the amount of such repayment; provided that, prior to the release of such Revenue Bonds, (1) the Borrower shall have paid to the Administrative Agent the amount of any LC Disbursement made in connection with the purchase of such Revenue Bonds to pay the interest portion of the purchase price thereof and (2) the Borrower shall have repaid or prepaid, in accordance with the terms of this Agreement (including, without limitation, Section 2.07(c)), all Revenue Bond Loans the proceeds of which were used to reimburse such Purchase Price Disbursement, together with accrued interest thereon to the date of such repayment or prepayment and any amounts required to be paid pursuant to Section 2.12 in connection with such repayment or prepayment. The provisions of Section 2.02(f)(i) shall apply with respect to any portion of any such LC Disbursement made on the Final Termination Date, as if it were an LC Disbursement in respect of which the Borrower received notice prior to 11:00 a.m., Chicago, Illinois time, on the Final Termination Date. Whenever the Issuing Bank is holding Revenue Bonds pursuant to a Revenue Bond Pledge Agreement in respect of a Revenue Bond Letter of Credit and accordingly receives a payment of interest on such pledged Revenue Bonds, the Issuing Bank shall promptly deliver such interest so received to the Administrative Agent for application to (I) the payment of accrued and unpaid interest on all outstanding Purchase Price Disbursements of the Issuing Bank in respect of such Revenue Bond Letter of Credit or (II) to the extent the Lenders have reimbursed the Issuing Bank for such Purchase Price Disbursements pursuant to paragraph (iii) below, the payment of accrued and unpaid interest on all outstanding Revenue Bond Loans made by the Lenders in respect of such Purchase Price Disbursements. If the amount of interest so received exceeds the amount of accrued and unpaid interest on such Purchase Price Disbursements or Revenue Bond Loans (as the case may be) on the date of receipt, the Issuing Bank shall promptly deliver all such interest received to the Administrative Agent and the Administrative Agent shall hold the unused balance of such interest and apply it on a daily basis to interest accrued on such Purchase Price Disbursements or Revenue Bond Loans (as the case may be).

(iii) If the Borrower fails to reimburse the Administrative Agent (for the account of the Issuing Bank) for any LC Disbursement (including any Purchase Price Disbursement) at or prior to 1:00 p.m., Chicago, Illinois time, on the Business Day immediately following the date of such LC Disbursement, the Administrative Agent shall notify each Lender of the applicable LC Disbursement and such Lender’s Applicable Percentage thereof. Upon receipt of such notice, each Lender shall make available to the Administrative Agent such Lender’s Applicable Percentage of the payment then due from the Borrower, in immediately available funds, by 12:00 noon, Chicago, Illinois time, on the next succeeding Business Day after the date of such notice, in the same manner as provided in Section 2.03, and the Administrative

Agent shall promptly pay to the Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment pursuant to paragraph (i) or (ii) above in respect of any LC Disbursement, the Administrative Agent shall distribute such payment to the Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse the Issuing Bank in connection with an unreimbursed LC Disbursement, then to such Lenders as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse the Issuing Bank for any LC Disbursement shall not constitute a Loan and shall not relieve the Borrower of its obligation, if any, to reimburse such LC Disbursement; provided, however, that on the date that the Lenders reimburse the Issuing Bank for a Purchase Price Disbursement, that portion of such reimbursement payment equal to the principal amount of the Revenue Bonds purchased with the proceeds of such Purchase Price Disbursement shall be deemed to constitute a loan made by the Lenders to the Borrower on such date in the amount of such principal amount (each such loan being a “Revenue Bond Loan”), and the Borrower’s obligation to reimburse such Purchase Price Disbursement shall be discharged and replaced by such Revenue Bond Loan (it being understood and agreed that any Purchase Price Disbursement so discharged and replaced shall no longer constitute an unreimbursed LC Disbursement hereunder).

(g) Obligations Absolute. The Borrower’s obligation to reimburse LC Disbursements as provided in paragraph (f) above shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit, this Agreement or any other Loan Document, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. None of the Administrative Agent, the Lenders, the Issuing Bank or any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of the Issuing Bank; provided that the foregoing shall not be construed to excuse the Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by the Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of the Issuing Bank (as finally determined by a court of competent jurisdiction), the Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in

substantial compliance with the terms of a Letter of Credit, the Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(h) Disbursement Procedures. The Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. The Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by telecopy or electronic mail to such parties at their respective telecopy number or e-mail address set forth in Section 9.01) of such demand for payment and whether the Issuing Bank has made or will make an LC Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse the Issuing Bank and the Lenders with respect to any such LC Disbursement.

(i) Interim Interest. If the Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement (or such reimbursement obligation of the Borrower has been discharged pursuant to the terms of Section 2.02(f)(i) or (iii)), at a fluctuating interest rate per annum equal to the Applicable Rate for ABR Loans; provided, that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to paragraph (f) of this Section, then Section 2.09(b) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the Issuing Bank, except that interest accrued on and after the date of payment by any Lender to reimburse the Issuing Bank shall be for the account of such Lender to the extent of such payment.

(j) Replacement of the Issuing Bank. The Issuing Bank may be replaced at any time by written agreement among the Borrower and the Administrative Agent; provided, however, that (i) the Issuing Bank shall be (A) a Lender or (B) another commercial bank or other financial institution satisfactory to the Administrative Agent, and (ii) the Administrative Agent shall review any such proposed agreement for form only and not with respect to the identity of any successor Issuing Bank or the identity of the Issuing Bank to be replaced. The Administrative Agent shall notify the Lenders of any such replacement of the Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees and charges accrued for the account of the replaced Issuing Bank pursuant to Section 2.08(b) and the Fee Letter and shall return to the Issuing Bank for cancellation each Letter of Credit issued by the Issuing Bank. From and after the effective date of any such replacement, (1) the successor Issuing Bank shall have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit to be issued by it on such effective date or thereafter and (2) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of the Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

(k) Mandatory Purchase of Revenue Bonds. If any Event of Default shall occur and be continuing, the Administrative Agent may, and at the request of the Required Lenders shall, direct the Issuing Bank to take such steps as are required and available to it under any Revenue Bond Indenture to cause the Revenue Bond Trustee thereunder to cause all Revenue Bonds then outstanding thereunder to be mandatorily purchased and, to the extent necessary to make all payments then due and payable on the Revenue Bonds, require all necessary drawings under the applicable Letter of Credit to be made in respect thereof, whereupon the Issuing Bank shall pay from its general funds the amounts so drawn and such amounts, all interest thereon and all other amounts payable by the Borrower hereunder in respect thereof shall automatically be forthwith due and payable.

(l) Electronic Transmissions. The Issuing Bank is authorized to accept and process any amendments, instructions, consents, waivers and all documents relating to any Letter of Credit that are sent to the Issuing Bank by electronic transmission, including SWIFT, electronic mail, telex, telecopy, telefax, courier, mail or other computer generated telecommunications and such electronic communication shall have the same legal effect as if written and shall be binding upon and enforceable against the Borrower. The Issuing Bank may, but shall not be obligated to, require authentication of such electronic transmission or require that the Issuing Bank receives original documents prior to acting on such electronic transmission.

SECTION 2.03. Funding of Borrowings. Each Lender shall fund each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 noon, Chicago, Illinois time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.02(f) shall be remitted by the Administrative Agent directly to the Issuing Bank.

SECTION 2.04. Interest Elections.

(a) Each Borrowing of Revenue Bond Loans initially shall be an ABR Borrowing. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

(b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone (a) in the case of any conversion or continuation that will result in a Eurodollar Borrowing, not later than 1:00 p.m., Chicago, Illinois time, three Business Days before the date of the proposed conversion or continuation (as the case may be), or (b) in the case of any conversion that will result in an ABR Borrowing, not later than 1:00 p.m., Chicago, Illinois time, one Business Day before the date of the proposed conversion. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.01:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, (i) if an Event of Default has occurred and is continuing (A) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.05. Termination and Reduction of Commitments.

(a) Unless previously terminated, each of the Revenue Bond Commitments shall terminate on the Final Termination Date. In addition, any remaining unused Revenue Bond Commitments shall terminate automatically on the Letter of Credit Final Issuance Date (after giving effect to the issuance of any Letters of Credit on such date). If any Letter of Credit remains outstanding on the Final Termination Date, the Borrower will deposit with the Administrative Agent an amount in cash equal to 105% of the aggregate undrawn amount of such Letter of Credit to secure the Borrower’s reimbursement obligations with respect to any drawings that may occur thereunder.

(b) The Borrower may at any time terminate, or from time to time reduce, the remaining unused Revenue Bond Commitments; provided that (i) each reduction of the Revenue Bond Commitments shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000 and (ii) the Borrower shall not terminate or reduce any Revenue Bond Commitments if, after giving effect to such termination or reduction and any concurrent prepayment of the Revenue Bond Loans in accordance with Section 2.07, the aggregate Revenue Bond Credit Exposure would exceed the aggregate Revenue Bond Commitments.

(c) In the event that any Revenue Bonds shall be redeemed, repaid or otherwise retired, the Borrower shall, to the extent permitted under the documentation for such Revenue Bonds, and after reimbursement of any LC Disbursement made in connection with such redemption, repayment or retirement, permanently reduce the stated amount of the applicable Revenue Bond Letter of Credit and the Revenue Bond Commitments hereunder shall be automatically and permanently ratably reduced by an aggregate amount equal to the amount of such reduction as of the date such reduction becomes effective.

(d) The Borrower shall notify the Administrative Agent of any election or requirement to terminate or reduce the Revenue Bond Commitments under paragraph (b) or (c) of this Section at least three Business Days prior to the effective date of such termination or reduction (or as soon as practicable but in any event no later than such effective date, in the case of a reduction under paragraph (c)), specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revenue Bond Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Revenue Bond Commitments shall be permanent. Each reduction of the Revenue Bond Commitments shall be made ratably among the Lenders in accordance with their Applicable Percentages.

SECTION 2.06. Repayment of Loans; Evidence of Debt.

(a) The Borrower hereby unconditionally promises to pay to the Administrative Agent (i) for the account of each Lender the unpaid principal amount of each Revenue Bond Loan on the applicable PPD Repayment Date and (ii) for the account of the Administrative Agent, the Issuing Bank and each Lender, as applicable, all accrued and unpaid interest on the Loans and all other Obligations on the Final Termination Date.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. The Issuing Bank shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to the Issuing Bank resulting from each LC Disbursement made by the Issuing Bank, including the amounts of principal and interest payable and paid to the Issuing Bank from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender, the Issuing Bank or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans and LC Disbursements in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans made (or to be made) by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.07. Prepayment of Loans.

(a) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, without premium or penalty (subject, in the case of any prepayment of a Eurodollar Borrowing, to Section 2.12), subject to prior notice in accordance with paragraph (c) of this Section.

(b) Prior to any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (c) of this Section.

(c) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 1:00 p.m., Chicago, Illinois time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 1:00 p.m., Chicago, Illinois time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided, that if a notice of prepayment is given in connection with a conditional notice of termination of the Revenue Bond Commitments as contemplated by Section 2.05, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.05. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000. Each prepayment of a Borrowing shall be applied

ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.09 and by any amounts required to be paid pursuant to Section 2.12 in connection with such prepayment.

SECTION 2.08. Fees.

(a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at a rate per annum equal to the Commitment Fee Rate in effect from time to time on the average daily unused amount of the Revenue Bond Commitment of such Lender during the period from and including the Effective Date to but excluding the Letter of Credit Final Issuance Date. Accrued commitment fees shall be payable in arrears on the last Business Day of March, June, September and December of each year, commencing with June 30, 2008, and on the Letter of Credit Final Issuance Date. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender a participation fee with respect to its participations in Letters of Credit, which participation fee shall accrue at a rate per annum equal to the Applicable Margin in effect from time to time for Eurodollar Loans, on the average daily aggregate amount of such Lender’s Revenue Bond LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements), during the period from and including the Effective Date to but excluding the Final Termination Date, and (ii) to the Administrative Agent for the account of the Issuing Bank a fronting fee payable in the amounts and at the times separately agreed upon by the Borrower and the Issuing Bank, as well as the Issuing Bank’s standard fees and charges with respect to the issuance, amendment, transfer, renewal or extension of any Letter of Credit or processing of drawings thereunder. Accrued participation fees in respect of Letters of Credit shall be due and payable on the last Business Day of March, June, September and December of each year, commencing with June 30, 2008; provided that all such fees shall be payable on the date on which the Revenue Bond Commitments terminate, and any such fees accruing after the date on which the Revenue Bond Commitments terminate shall be payable on demand; provided, further, that upon the occurrence and during the continuance of an Event of Default, the participation fees payable pursuant to clause (i) above shall be increased by 200 basis points per annum. Any other fees payable to the Administrative Agent for the account of the Issuing Bank pursuant to this paragraph shall be payable within ten (10) days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

(c) The Borrower agrees to pay to the Administrative Agent, for its own account and for the account of the Arrangers and the Issuing Bank, fees payable in the amounts and at the times set forth in the Fee Letter (or as otherwise separately agreed upon by the Borrower, the Administrative Agent, the Arrangers and/or the Issuing Bank, as applicable).

(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to the Issuing Bank) for distribution, in the case of commitment fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

SECTION 2.09. Interest.

(a) The Borrower shall pay interest on the unpaid principal amount of each Loan owing to each Lender from the date of such Loan until such principal amount shall be paid in full, at the Applicable Rate for such Loan.

(b) Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, (i) each ABR Loan shall bear interest at a rate of 2.0% per annum in excess of the rate set forth in paragraph (a) of this Section and (ii) each Eurodollar Loan shall bear interest at a rate of 2.0% per annum in excess of the rate set forth in paragraph (a) of this Section until the Interest Period applicable thereto shall have expired and thereafter at a per annum rate equal to the Applicable Rate for ABR Loans plus 2.0%. In addition, if any principal of or interest on any Loan or LC Disbursement or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (A) in the case of overdue principal of any Loan, 2.0% plus the rate otherwise applicable to such Loan as provided in paragraph (a) of this Section or (B) in the case of any other amount, 2.0% plus the Applicable Rate for ABR Loans.

(c) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Revenue Bond Commitments, and accrued interest on each LC Disbursement that bears interest at the Applicable Rate for ABR Loans shall be payable in arrears on each Interest Payment Date applicable to ABR Loans; provided that (A) interest accrued pursuant to paragraph (b) of this Section shall be payable on demand, (B) in the event of any repayment or prepayment of any Loan or LC Disbursement, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(d) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate or Adjusted LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.10. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective.

SECTION 2.11. Increased Costs.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or the Administrative Agent (except any such reserve requirement reflected in the Adjusted LIBO Rate, where applicable) or the Issuing Bank; or

(ii) impose on any Lender, the Issuing Bank, the Administrative Agent or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender, the Issuing Bank or the Administrative Agent of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender, the Issuing Bank or the Administrative Agent hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender, the Issuing Bank or the Administrative Agent, as the case may be, such additional amount or amounts as will compensate such Lender, the Issuing Bank or the Administrative Agent, as the case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or the Issuing Bank determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by the Issuing Bank, to a level below that which such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or the Issuing Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or the Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or the Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or the Issuing Bank or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the

Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or the Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten (10) days after receipt thereof.

(d) Failure or delay on the part of any Lender or the Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or the Issuing Bank pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender or the Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or the Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.12. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to convert, continue or prepay any Loan or LC Disbursement on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.07(b) and is revoked in accordance therewith), (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.15, or (e) the revocation of any notice of prepayment pursuant to Sections 2.05 and 2.07, then, in any such event, the Borrower shall compensate each applicable Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any applicable Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.

SECTION 2.13. Taxes.

(a) Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including

deductions applicable to additional sums payable under this Section) the Administrative Agent, each Lender or the Issuing Bank (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) The Borrower shall indemnify the Administrative Agent, each Lender and the Issuing Bank, within ten (10) days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender or the Issuing Bank, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender or the Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or the Issuing Bank, shall be conclusive absent manifest error.

(c) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(d) Any Foreign Lender shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, or reasonably requested by the Borrower as will permit such payments to be made without withholding.

(e) In addition, the Borrower or the Administrative Agent shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

SECTION 2.14. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.11, 2.12 or 2.13, or otherwise) prior to 12:00 noon, Chicago, Illinois time, on the date when due, in immediately available funds, without set-off, counterclaim, recoupment or deduction of any kind. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices located at 10 South Dearborn, Chicago, Illinois 60603 (or such other office as the Administrative Agent shall from time to time designate to the Borrower), except payments to be made directly to the Issuing Bank as expressly provided herein and except that payments

pursuant to Sections 2.11, 2.12, 2.13 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder or under any other Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any fees payable pursuant to Section 2.08 or any payment accruing interest, such fees and such interest shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars.

(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the

Lenders or the Issuing Bank, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders and the Issuing Bank, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or the Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.02(e) or (f), 2.03(b) or 2.14(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.15. Mitigation Obligations; Replacement of Lenders.

(a) If any Lender requests compensation under Section 2.11, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.13, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.11 or 2.13, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If (i) any Lender requests compensation under Section 2.11, (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.13, (iii) any Lender defaults in its obligation to fund Loans hereunder, or (iv) any Lender has not consented to a proposed amendment, waiver or modification under this Agreement that requires the consent of all Lenders and which has been approved by Required Lenders, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent and the Issuing Bank, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.11 or payments required to be made pursuant to Section 2.13, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

ARTICLE III

Representations and Warranties

The Borrower represents and warrants to the Administrative Agent, the Lenders and the Issuing Bank that:

SECTION 3.01. Organization; Powers. The Borrower and each of its Consolidated Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite corporate, partnership, limited liability company or other applicable organizational power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business, in and is in good standing, in every jurisdiction where such qualification is required.

SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrower’s organizational powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes, the Mortgage Indenture constitutes, and each other Loan Document to which the Borrower is to be a party, when executed and delivered by the Borrower (and, in the case of the Collateral Mortgage Bonds, authenticated by the trustee therefor), will constitute, a legal, valid and binding obligation of the Borrower, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except for (i) the ACC Order, which has been obtained and is in full force and effect, and (ii) filings necessary to perfect Liens created under the Loan Documents (other than the Lien of the Mortgage Indenture, in respect of which all requisite filings have been made), (b) will not violate any Requirement of Law, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any of its Consolidated Subsidiaries or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any of its Consolidated Subsidiaries, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any of its Consolidated Subsidiaries, except Liens created under the Loan Documents or under the Mortgage Indenture.

SECTION 3.04. Financial Condition; No Material Adverse Change; Secured Indebtedness.

(a) The audited consolidated balance sheet and related statements of income, stockholders’ equity and cash flows of the Borrower and its Consolidated Subsidiaries for the fiscal year ended December 31, 2007 and the most recent financial statements delivered by the Borrower pursuant to Section 5.01(a) or (b), in each case, present fairly, in all material respects,

the financial position and results of operations and cash flows of the Borrower and its Consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements delivered pursuant to Section 5.01(a). Neither the Borrower nor any of its Consolidated Subsidiaries had, at the date of the most recent balance sheet referred to above, any Guarantee, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including any interest rate or foreign currency swap or exchange transaction, which, in any case, is material to the Borrower and its Consolidated Subsidiaries, taken as a whole, and which is not reflected in the foregoing statements or in the notes thereto. During the period from December 31, 2007 to and including the Effective Date there has been no sale, transfer or other disposition by the Borrower or any of its Consolidated Subsidiaries of any part of its business or property, and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person), which, in either case, is material in relation to the consolidated financial condition of the Borrower and its Consolidated Subsidiaries taken as a whole at December 31, 2007.

(b) Except to the extent that any specific change is explicitly disclosed in the Disclosure Documents, since December 31, 2007, there has been no material adverse change in the financial condition, results of operations, business or prospects of the Borrower and its Consolidated Subsidiaries, taken as a whole.

SECTION 3.05. Properties.

(a) Other than as explicitly disclosed in the Disclosure Documents, each of the Borrower and its Consolidated Subsidiaries has good title to, or valid leasehold interests in, and enjoys peaceful and undisturbed possession of, all its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes.

(b) Each of the Borrower and its Consolidated Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.06. Litigation and Environmental Matters.

(a) Except as explicitly disclosed in the Disclosure Documents, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any of its Consolidated Subsidiaries (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would, individually or in the aggregate, result in a Material Adverse Effect or (ii) that involve any of the Loan Documents, the Mortgage Indenture or the Transactions.

(b) Except as explicitly disclosed in the Disclosure Documents, and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any of its Consolidated Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability.

(c) Since the date of this Agreement, there has been no change in the status of any matter disclosed in the Disclosure Documents that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect.

SECTION 3.07. Compliance with Laws and Agreements. Except as explicitly disclosed in the Disclosure Documents, each of the Borrower and its Consolidated Subsidiaries is in compliance with all Requirements of Law, including the Fair Labor Standards Act, the Americans with Disabilities Act, the Foreign Corrupt Practices Act and Anti-Terrorism Laws, applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to be in compliance, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing.

SECTION 3.08. Federal Regulations. No part of the proceeds of any Loans will be used for “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U.

SECTION 3.09. Investment Company Status.

(a) Neither the Borrower nor any of its Consolidated Subsidiaries is an “investment company” or a company “controlled” by an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

(b) The Borrower is not subject to regulation under any Requirement of Law (other than Regulation X of the Board and Requirements of Law pertaining to utility regulation) which limits its ability to incur Indebtedness.

SECTION 3.10. Taxes. Each of the Borrower and its Consolidated Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.11. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan by an amount that has resulted or could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount that has resulted or could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.12. Security Documents.

(a) The Collateral Mortgage Bonds, when executed and delivered by the Borrower and authenticated by the trustee therefor, will be entitled to the benefits of the Mortgage Indenture and secured by the Lien of the Mortgage Indenture. Upon the delivery of any Collateral Mortgage Bonds to the Administrative Agent under a Bond Delivery Agreement and at all times thereafter, such Collateral Mortgage Bonds will be “Outstanding” and the Administrative Agent will be the “Holder” of the Collateral Mortgage Bonds for all purposes of the Mortgage Indenture. The Mortgage Indenture constitutes a valid mortgage lien on and a valid and perfected security interest in the properties or franchises described therein as being subject to the Lien of the Mortgage Indenture. As of the Effective Date no material properties or franchises subject to the Lien of the Mortgage Indenture have been released from such Lien, and, as of any subsequent date, no such properties or franchises shall have been released from the Lien of the Mortgage Indenture except in accordance with the terms thereof and hereof.

(b) The provisions of the Security Documents not covered by paragraph (a) above, when executed and delivered by the Borrower pursuant to this Agreement, will be effective to create, in favor of the Administrative Agent for the benefit of the secured parties thereunder, legal, valid and enforceable Liens on or in all of the Collateral subject thereto, and all necessary deliveries of property to the Administrative Agent and all necessary and appropriate recordings and filings will have been made in all necessary and appropriate public offices so that the Liens created by such Security Documents shall constitute perfected Liens on or in all rights, titles, estates and interests of the Borrower and any applicable Subsidiaries in the Collateral covered thereby, prior and superior to all other Liens, and all necessary and appropriate consents to the creation and perfection of such Liens have been obtained. No mortgage or financing statement or other instrument or recordation covering all or any part of the Collateral is or will be on file in any recording office which has not been terminated or released, except as may have been filed in favor of the Administrative Agent.

SECTION 3.13. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial

statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder (as modified or supplemented by, and taken together with, other information so furnished) contains any misstatement of a material fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to forward looking statements, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and notes that there can be no assurance that such expectations, beliefs or projections will be achieved or accomplished and that such projections are subject to an increasing degree of uncertainty as they relate to later periods of time.

SECTION 3.14. Solvency. On the Effective Date, the Borrower is Solvent.

SECTION 3.15. Labor Matters. There are no strikes or other labor disputes against the Borrower or any of its Subsidiaries pending or, to the knowledge of the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the Borrower and its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from the Borrower or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Borrower or the relevant Subsidiary.

SECTION 3.16. Anti-Terrorism Laws.

(a) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates is in violation of any Requirement of Law relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

(b) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates is any of the following:

(i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed on the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(iii) a Person with whom the Borrower is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv) a Person who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(v) a Person that is named as a “specially designated national or blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list.

(c) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (b)(i), (ii), (iii) or (v) above or, to the knowledge of the Borrower, clause (b)(iv) above; (ii) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order; or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purposes of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(d) No broker or other agent (other than the Arrangers) is acting for the benefit of the Borrower or any of its Affiliates, or benefiting in any capacity, in each case in connection with the Loan Documents.

ARTICLE IV

Conditions

SECTION 4.01. Effective Date. This Agreement, and the obligations of the Lenders to make Loans and acquire participations in Letters of Credit, and the obligations of the Issuing Bank to issue Letters of Credit hereunder, shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02):

(a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement.

(b) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent, the Issuing Bank and the Lenders and dated the Effective Date) of each of (i) Raymond S. Heyman, Esq., General Counsel for the Borrower, substantially in the form of Exhibit E-1, (ii) Thelen Reid Brown Raysman & Steiner LLP, New York counsel for the Borrower, substantially in the form of Exhibit E-2, and (iii) Rodey, Dickason, Sloan, Akin & Robb, PA, special New Mexico counsel for the Borrower, substantially in the form of Exhibit E-3, and covering such other matters relating to the Borrower, the Loan Documents or the Transactions as the Required Lenders shall reasonably request. The Borrower hereby requests such counsel to deliver such opinions.

(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions

and any other legal matters relating to the Borrower, the Loan Documents, the Mortgage Indenture, the Lien of the Mortgage Indenture or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel.

(d) The conditions set forth in paragraphs (a) and (b) of Section 4.02 shall be satisfied, and the Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with such conditions as of the Effective Date.

(e) The Administrative Agent and the Arrangers shall have received all fees and other amounts due and payable on or prior to the Effective Date, including all up-front fees and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document.

(f) The Administrative Agent shall have received (i) a copy of the Mortgage Indenture, including all amendments and supplements thereto, and (ii) a copy of the ACC Order, in each case certified by an authorized officer of the Borrower as being a true, correct and complete copy thereof and as being in full force and effect.

(g) The Borrower and its Subsidiaries shall have outstanding no indebtedness or preferred stock other than (a) the Obligations, (b) the Indebtedness described in the most recent financial statements of the Borrower and its Consolidated Subsidiaries referenced in Section 3.04(a) and (c) the Indebtedness described in Schedule 4.01(g).

(h) All requisite Governmental Authorities (including, without limitation, the ACC and all other regulatory authorities) and third parties shall have approved or consented to this Agreement and the other Loan Documents and the other transactions contemplated hereby and thereby to the extent required, no stay of any applicable regulatory approval shall have been issued and there shall be no litigation or other governmental, administrative or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions on this Agreement and the other Loan Documents or the Transactions.

(i) The Administrative Agent, the Issuing Bank and the Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the Patriot Act.

(j) The Capital Stock of the Borrower (to the extent owned by UniSource Energy, which owns all Capital Stock of the Borrower) shall all be free and clear of any Liens.

SECTION 4.02. Each Credit Event. The obligation of the Issuing Bank to issue a Letter of Credit (or to issue any amendment of a Letter of Credit having the effect of extending the stated expiration date thereof, increasing the amount available for drawing thereunder or otherwise altering any of the material terms or conditions thereof), shall be subject to the satisfaction of the following conditions:

(a) The representations and warranties of the Borrower set forth in this Agreement and the other Loan Documents shall be true and correct on and as of the date of such

issuance, both before and after giving effect thereto, as though made on and as of such date (except where such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date).

(b) At the time of and immediately after giving effect to such issuance, no Default or Event of Default shall have occurred and be continuing.

(c) The Administrative Agent shall have received on or before the date of such issuance (in each case in form and substance satisfactory to the Administrative Agent): (i) Collateral Mortgage Bonds in an aggregate principal amount equal to the sum of (A) the stated amount of such Letter of Credit and (B) the aggregate stated amount of all other Letters of Credit issued on or before such date; (ii) duly executed originals of the Supplemental Indenture(s), the Bond Delivery Agreement(s) and all other documents, instruments and filings relating to the issuance and authentication of such Collateral Mortgage Bonds, which shall be in full force and effect on such date; (iii) duly executed copies of the Revenue Bond Indenture, Revenue Bond Loan Agreement, Remarketing Agreement, Bond Purchase Agreement, official statement and all other related agreements, instruments and filings relating to the Revenue Bonds that will be supported by such Revenue Bond Letter of Credit (collectively, the “Revenue Bond Documents”), certified by an authorized officer of the Borrower as being a true, correct and complete copy thereof and as being in full force and effect; (iv) counterparts of a Revenue Bond Pledge Agreement, duly executed by the Borrower and the other parties thereto, with respect to any such Revenue Bonds that may be purchased with the proceeds of a Purchase Price Disbursement under such Revenue Bond Letter of Credit; (v) favorable written opinions of New York, Arizona and New Mexico counsel to the Borrower with respect to the Collateral, the ACC Order and any other matters reasonably requested by the Administrative Agent with respect to the applicable Revenue Bond Indenture and other Revenue Bond Documents; (vi) to the extent reasonably requested by the Administrative Agent, all documents, instruments and filings creating or perfecting the Lien of the Mortgage Indenture; (vii) all other documents and instruments required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Security Documents; (viii) a letter from S&P and/or Moody’s to the effect that the Revenue Bonds that will be supported by such Revenue Bond Letter of Credit have been rated at least A-1 or VMIG-1, respectively; and (ix) a certificate of an authorized officer of each of the trustee and the tender agent under the applicable Revenue Bond Indenture certifying the names, true signatures and incumbency of the officers of the trustee authorized to make drawings under such Revenue Bond Letter of Credit and of the officers of the tender agent authorized to execute the applicable Revenue Bond Pledge Agreement, respectively.

(d) The Borrower shall have delivered to the Administrative Agent a certificate duly executed by an authorized officer of the Borrower certifying that the representations and warranties of the Borrower contained in the applicable Revenue Bond Loan Agreement, Remarketing Agreement and Bond Purchase Agreement are true and correct in all material respects on and as of the date of such issuance, both before and after giving effect thereto, as though made on and as of such date (except where such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date).

(e) If requested by the Administrative Agent, the Borrower shall have delivered to the Administrative Agent a certificate duly executed by an authorized officer of the Borrower containing such additional representations and warranties with respect to the Collateral and the Revenue Bond Documents as the Administrative Agent may reasonably request.

Each issuance of a Letter of Credit (or any amendment of a Letter of Credit having the effect of extending the stated expiration date thereof, increasing the amount available for drawing thereunder or otherwise altering any of the material terms or conditions thereof) shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

ARTICLE V

Affirmative Covenants

Until the Aggregate Commitments have expired or been terminated, the principal of and interest on each Loan and all fees and other amounts payable hereunder have been paid in full, all Letters of Credit have expired or terminated and all LC Disbursements have been reimbursed in full, the Borrower covenants and agrees with the Administrative Agent, the Issuing Bank and the Lenders that:

SECTION 5.01. Financial Statements and Other Information. The Borrower will furnish to the Administrative Agent (and the Administrative Agent will, promptly after its receipt thereof, forward such copies to the Lenders):

(a) as soon as available and in any event within 60 days after the end of each of the first three fiscal quarterly periods of each fiscal year of the Borrower, or 15 days after the date on which its quarterly report for such fiscal quarterly period is required to be filed with the Securities and Exchange Commission, whichever is later, consolidated statements of income of the Borrower and its Consolidated Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, consolidated statements of cash flows of the Borrower and its Consolidated Subsidiaries from the beginning of the applicable fiscal year to the end of such period and the related consolidated balance sheets as of the end of such period, setting forth in each case in comparative form the corresponding consolidated figures for the corresponding period in the preceding fiscal year, accompanied by a certificate of a Financial Officer of the Borrower, which certificate shall state that the financial statements fairly present in all material respects the consolidated financial condition and results of operations, as the case may be, of the Borrower and its Consolidated Subsidiaries in accordance with GAAP, consistently applied (except where noted), as of the end of, and for, such period (subject to normal year-end audit adjustments and the absence of footnotes);

(b) as soon as available and in any event within 105 days after the end of each fiscal year of the Borrower, or 15 days after the date on which its annual report for such fiscal year is required to be filed with the Securities and Exchange Commission, whichever is later, consolidated statements of income and cash flows of the Borrower and its Consolidated Subsidiaries for such year and the related consolidated balance sheets as of the end of such year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion of independent public accountants of

recognized national standing selected by the Borrower, which opinion shall not contain any qualification or exception as to the scope of such audit and shall state that the consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of the Borrower and its Consolidated Subsidiaries as of the end of, and for, such fiscal year and have been prepared in accordance with GAAP, consistently applied (except where noted);

(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with Sections 6.06 and 6.07 and (iii) stating whether any change in GAAP or in the application thereof not disclosed in any prior such certificate has occurred since December 31, 2007 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) concurrently with any delivery of financial statements under clause (b) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines);

(e) promptly upon their becoming available, copies of all registration statements (other than on Form S-8 or any successor form) and regular periodic reports, if any, that the Borrower shall have filed pursuant to Section 13(a) or 15 of the Securities Exchange Act of 1934, as amended, with the Securities and Exchange Commission (or any governmental agency substituted therefor) or filed with any national securities exchange;

(f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed;

(g) promptly upon their becoming available, copies of all current reports on Form 8-K filed by the Borrower with the Securities and Exchange Commission, and all similar reports filed with any national securities exchange;

(h) promptly upon their becoming available, copies of (i) any certified resolutions of the Board of Directors of the Borrower and net earnings certificates delivered under the Mortgage Indenture in connection with the issuance of Mortgage Bonds upon the basis of net property additions or deposits of cash; any certificates of a Financial Officer under the Mortgage Indenture with respect to amounts charged to replacement reserve, detailing insurance on the Borrower’s property or showing compliance by the Borrower with the covenants contained in the Mortgage Indenture; any supplemental indentures to the Mortgage Indenture; any redemption notices under the Mortgage Indenture; and any notices of defaults under the Mortgage Indenture or accelerations of Mortgage Bonds; (ii) any notices of default under the documentation for any Sale Leaseback of the Borrower or any Consolidated Subsidiary, any notices of non-payment of rent or any other material amounts owing under any such Sale Leaseback documentation and any notices of acceleration of any amounts due under any such

Sale Leaseback documentation; and (iii) any written notices from the ACC of non-compliance by the Borrower or any of its Consolidated Subsidiaries with any material ACC decision or with any other rules, regulations or orders of the ACC, and any written notices of any extraordinary audit or investigation by the ACC into the business, affairs or operations of the Borrower or any of its Consolidated Subsidiaries;

(i) as soon as practicable and in any event within five Business Days after the Borrower receives written notice of an upgrading or a downgrading of the Index Debt by any Rating Agency, a notice of such upgrading or downgrading;

(j) if requested by the Administrative Agent, concurrently with any delivery of financial statements under clause (a) or (b) above, consolidating statements of income and cash flows for the applicable periods and the consolidating balance sheets as of the end of such periods, accompanied (i) in the case of a delivery of financial statements under clause (a) above, by a certificate of a Financial Officer of the Borrower, which certificate shall state that such financial statements fairly present in all material respects the consolidating financial condition and results of operations, as the case may be, of the Borrower and its Consolidated Subsidiaries in accordance with GAAP, consistently applied (except where noted), as of the end of, and for, the applicable period (subject to normal year-end audit adjustments), and (ii) in the case of a delivery of financial statements under clause (b) above, by (A) a certificate of a Financial Officer of the Borrower, which certificate shall state that such consolidating financial statements fairly present in all material respects the financial condition and results of operations of the Borrower and its Consolidated Subsidiaries as of the end of, and for, the applicable fiscal year and have been prepared in accordance with GAAP, consistently applied (except where noted), and (B) a certificate of the independent public accountants referred to in clause (b) above, which certificate should state that such consolidating financial statements are the consolidating financial statements that served as the basis for the audited consolidated financial statements in respect of which such accountants delivered the opinion referred to in such clause (b); and

(k) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, the Mortgage Indenture or any Revenue Bond Document, as the Administrative Agent or any Lender may reasonably request.

So long as the Borrower files quarterly or annual reports with the Securities and Exchange Commission which contain financial statements meeting the financial reporting requirements of the Securities Exchange Act of 1934, and the rules and regulations promulgated thereunder, such financial statements may be delivered by the Borrower in satisfaction of its obligations to deliver consolidated financial statements pursuant to clauses (a) or (b), as the case may be, of this Section 5.01.

SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $25,000,000; and

(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. The Borrower will, and will cause each of its Consolidated Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business, except to the extent the failure to do so could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03.

SECTION 5.04. Payment of Obligations. The Borrower will, and will cause each of its Consolidated Subsidiaries to, pay its obligations, including Tax liabilities and assessments (including water assessments by the Arizona State Land Department), that, if not paid, could reasonably be expected to result in a Material Adverse Effect, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto to the extent required by and otherwise in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.05. Maintenance of Properties; Insurance. The Borrower will, and will cause each of its Consolidated Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted; provided that the Borrower or any of its Consolidated Subsidiaries may discontinue the operation of any of its properties to the extent, in the judgment of the Borrower, it is no longer advisable to operate such property, or to the extent the Borrower or such Subsidiary intends to sell or otherwise dispose of such property, which disposition is not prohibited by Section 6.04; and (b) maintain, with financially sound and reputable insurance companies, or through its own program of self-insurance, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations.

SECTION 5.06. Books and Records; Inspection Rights. The Borrower will, and will cause each of its Consolidated Subsidiaries to, keep proper books of record and account in which entries are made of all dealings and transactions in relation to its business and activities, all in accordance with customary and prudent business practices. The Borrower will, and will cause each of its Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, and, subject to contractual or statutory limitations regarding confidential or proprietary information, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers, all at such reasonable times and as often as reasonably requested.

SECTION 5.07. Compliance with Laws and Agreements. The Borrower will, and will cause each of its Subsidiaries to, comply with (a) all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including, without limitation, ERISA and Environmental Laws) and (b) the Revenue Bond Loan Agreements, in each case except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.08. Use of Letters of Credit. Each Revenue Bond Letter of Credit will be issued only to support the Revenue Bonds referenced in such Revenue Bond Letter of Credit.

SECTION 5.09. Environmental Laws.

(a) The Borrower will, and will cause each of its Consolidated Subsidiaries to, comply with, and use commercially reasonable efforts to insure compliance by all tenants and subtenants, if any, with, all Environmental Laws, and will, and will cause each of its Consolidated Subsidiaries to, obtain and comply with and maintain, and use commercially reasonable efforts to insure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, registrations or permits required by Environmental Laws, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect;

(b) The Borrower will, and will cause each of its Consolidated Subsidiaries to, conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, except to the extent that the failure to take such actions could not reasonably be expected to have a Material Adverse Effect, and promptly comply with all lawful orders and directives of all Governmental Authorities respecting Environmental Laws, except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.10. Further Assurances. The Borrower will, and will cause each of its Consolidated Subsidiaries to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan

Documents or under the Mortgage Indenture or to grant, preserve, protect or perfect the Liens created or intended to be created by the Mortgage Indenture or the Security Documents or the validity or priority of any such Lien, all at the expense of the Borrower. The Borrower also agrees to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents or by or under the Mortgage Indenture.

ARTICLE VI

Negative Covenants

SECTION 6.01. Indebtedness. The Borrower will not permit:

(a) the aggregate principal amount of Mortgage Bonds outstanding at any time to exceed the sum of (i) $750,000,000 plus (ii) the lesser of (A) $90,000,000 or (B) the excess, if any, of (x) the aggregate amount of Revolving Commitments (as such term is defined in the Existing Credit Agreement) under the Existing Credit Agreement (or, if the Existing Credit Agreement or the Revolving Commitments thereunder have been terminated and replaced by another revolving credit agreement, the aggregate amount of revolving loan commitments under such revolving credit agreement) over (y) $60,000,000; provided that there shall be disregarded for purposes of any determination under this paragraph the principal amount of any outstanding Mortgage Bonds which (A) are to be redeemed or paid at maturity within 90 days after the date of such determination or (B) evidence or secure the Borrower’s obligations in respect of industrial development revenue bonds of the same principal amount (or related reimbursement obligations) which are to be redeemed or paid at maturity within 90 days after the date of such determination; provided, however, that (1) in the case of any such redemption, either irrevocable and unconditional notice of redemption shall have been given or irrevocable and unconditional instructions shall have been given to the related trustee to give such notice of redemption and (2) in the case of any such redemption or payment, cash in an amount sufficient to redeem or repay the Mortgage Bonds to be disregarded (or the obligations evidenced or secured thereby) shall have been deposited with the applicable trustee for the redemption or payment thereof; or

(b) the aggregate amount of Guarantees by the Borrower and the Consolidated Subsidiaries (other than Guarantees of the Obligations and other than Guarantees by the Borrower or any Consolidated Subsidiary of Indebtedness or obligations of the Borrower or a Consolidated Subsidiary) outstanding at any time to exceed $30,000,000.

SECTION 6.02. Liens. The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on the Mortgaged Property (as defined in the Mortgage Indenture) now owned or hereafter acquired by the Borrower, or any income therefrom, prior to the Lien of the Mortgage Indenture, except Permitted Encumbrances and Prepaid Liens (as such terms are defined in the Mortgage Indenture) and any other Liens expressly permitted pursuant to Section 5 of Article IV of the Mortgage Indenture.

SECTION 6.03. Fundamental Changes.

(a) The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) its assets as an entirety or substantially as an entirety, or all or substantially all of the Capital Stock of any of its Consolidated Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing (i) any Person may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Consolidated Subsidiary may merge with any other Consolidated Subsidiary, and (iii) the Borrower may merge with or into or consolidate with or transfer its assets as an entirety or substantially as an entirety to any Person, so long as (A) immediately prior to and immediately after giving effect to such merger, consolidation or transfer, the Person with or into which the Borrower shall ultimately merge or consolidate or to whom the Borrower shall ultimately transfer its assets as an entirety or substantially as an entirety is in the Utility Business; (B) the Required Lenders shall have determined (so long as such determination is exercised in good faith and after consultation with the Borrower) that the rating of the first mortgage bonds (or bonds otherwise denominated that benefit from a first Lien on such Person’s utility assets, or, if such Person has no first mortgage bonds, the rating of the senior unsecured long-term Indebtedness of such Person that is not guaranteed and does not benefit from any other credit enhancement) of the surviving Person of any such merger, consolidation, acquisition or transfer of assets shall be at least BBB- or higher by S&P and Baa3 or higher by Moody’s (unless the requirements of this clause (B) shall have been waived by the Required Lenders); provided that the requirement of this clause (B) shall be deemed to have been satisfied if, prior to the consummation of any such merger, consolidation or transfer, the Borrower shall have delivered written evidence from each such Rating Agency to the effect that, upon such merger, consolidation or transfer, the applicable rating of such surviving Person would be equal to or higher than the ratings specified in this clause (B); (C) in the case of any merger or consolidation or transfer of assets in which the Borrower is not the surviving corporation, the Person formed by any such consolidation or transfer of assets or into which the Borrower shall be merged or consolidated or to which such assets are transferred shall have executed an agreement in form reasonably satisfactory to the Administrative Agent containing an assumption by the surviving Person of the due and punctual performance of each obligation, agreement, covenant and condition of each of the Loan Documents and the Mortgage Indenture to be performed or complied with by the Borrower; and (D) the Administrative Agent shall have received an opinion of counsel, in form and substance reasonably satisfactory to the Administrative Agent and its counsel, with respect to the due authorization, execution, delivery, validity and enforceability of the assumption agreement referred to in clause (C) of this Section 6.03, of the enforceability and continuation of the Liens created pursuant to the Security Documents and such other matters as the Required Lenders may reasonably require.

(b) The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, engage to any material extent in any business other than the Utility Business.

SECTION 6.04. Sale of Assets.

(a) The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including leasehold interests), whether now owned or hereafter acquired, except:

(i) inventory and other property in the ordinary course of business;

(ii) sales of accounts receivable;

(iii) property, businesses or assets (including receivables and leasehold interests) with an aggregate Fair Value not in excess of $250,000,000; provided that the aggregate Fair Value of such property, businesses or assets permitted to be disposed of pursuant to this clause (iii) shall be increased on a dollar for dollar basis by the aggregate amount of each reduction of the Aggregate Commitments in respect of which the Borrower shall have given the Administrative Agent, for the benefit of the Lenders, written evidence of the Borrower’s agreement not to issue Indebtedness under the Mortgage Indenture based upon the Mortgage Bonds retired in connection with such reduction;

(iv) property in connection with any securitization (e.g., stranded costs) or sale of assets required by law; and

(v) any sale of the Borrower’s assets as an entirety or substantially as an entirety in accordance with Section 6.03, provided that any assets of the Borrower not included in such sale shall be deemed to have been disposed of in a transaction subject to the limitations of this Section 6.04, including the dollar limit set forth in clause (iii) above;

provided, that any Consolidated Subsidiary may convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets to the Borrower or any other Consolidated Subsidiary. Investments by the Borrower and the Consolidated Subsidiaries in, and contributions by the Borrower and the Consolidated Subsidiaries to, Consolidated Subsidiaries shall be deemed not to constitute transfers of assets subject to the limitations of this Section 6.04 to the extent such investments or contributions are made in cash.

(b) Without limitation of subsection (a) above, the Borrower will not, and will not permit any of its Consolidated Subsidiaries to, convey, sell, lease, assign, transfer or otherwise dispose of all or substantially all of its generating assets (including leasehold interests), whether now owned or hereafter acquired, except as required by applicable law.

SECTION 6.05. Restricted Payments.

(a) The Borrower will not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment at any time that any Default has occurred and is continuing or would occur as a result of such action, except that (i) the Borrower may declare and pay dividends with respect to its capital stock payable solely in additional shares of its common stock and (ii) the Borrower may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and its Subsidiaries.

(b) The Borrower will not, and will not permit any Consolidated Subsidiary to, directly or indirectly, purchase or acquire any Capital Stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make any loans or advances to, Guarantee any obligations of, or make any investment or otherwise acquire any other interest in, any Affiliate of the Borrower (other than a Consolidated Subsidiary) (each of the foregoing, an “Affiliate Investment”), at any time that a Default has occurred and is continuing or, as a result of the making of such Affiliate Investment, would occur or would be deemed to occur pursuant to the next sentence. For purposes of determining whether a Default would be deemed to occur under Section 6.06 or 6.07 as a result of an Affiliate Investment, the applicable computations shall be made as if the Affiliate Investment were a dividend and did not result in the creation of any asset.

SECTION 6.06. Cash Coverage Ratio. The Borrower will not permit the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense, in each case for the twelve-month period ended on the last day of any fiscal quarter commencing with the fiscal quarter ended March 31, 2008, to be less than 2.25 to 1.0.

SECTION 6.07. Leverage Test. The Borrower will not permit the ratio of (a) Consolidated Total Indebtedness at the end of any fiscal quarter to (b) Consolidated EBITDA for the twelve-month period ended on such date to be greater than 4.00 to 1.0.

SECTION 6.08. Amendments to Documents. The Borrower will not, and will not permit any Consolidated Subsidiary to, amend, modify or change, or consent or agree to any amendment, modification or change to, the Mortgage Indenture or, upon the execution and delivery thereof pursuant to the terms of this Agreement, any Supplemental Indenture, any Revenue Bond Indenture, any Revenue Bond Loan Agreement, any Revenue Bonds or any Remarketing Agreement, in each case without the prior written consent of the Required Lenders and the Issuing Bank, provided that (i) such consent shall not be required in connection with any amendment of the Mortgage Indenture for which the Mortgage Indenture does not require the consent of any bondholder, (ii) such consent shall not be unreasonably withheld with respect to any amendment of the Mortgage Indenture that has been approved by bondholders entitled to vote under the Mortgage Indenture who hold bonds in an aggregate principal amount greater than the principal amount of the Collateral Mortgage Bonds (if any), (iii) such consent shall not be required in connection with any amendment of any Revenue Bond Indenture, any Revenue Bond Loan Agreement or any Revenue Bonds to provide for a mandatory tender of Revenue Bonds at any time when such Revenue Bonds are currently subject to mandatory redemption at a purchase price which does not exceed the applicable redemption price, and (iv) such consent shall not be required in connection with (A) any amendment of any Remarketing Agreement that does not (1) reduce or otherwise adversely affect the obligations of the remarketing agent thereunder or (2) adversely affect the rights or remedies of the Issuing Bank or the Lenders with respect to any Revenue Bonds or (B) any replacement of any Remarketing Agreement with another Remarketing Agreement that contains substantially identical terms and conditions as the replaced Remarketing Agreement, entered into by the Borrower solely for the purpose of replacing the existing remarketing agent.

SECTION 6.09. Sale Leaseback Transactions. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any Sale Leaseback if the aggregate annual basic rent payments under all Sale Leasebacks entered into by the Borrower and its Subsidiaries after the date hereof would exceed $20,000,000 in any fiscal year after giving effect to such Sale Leaseback.

SECTION 6.10. Release of Collateral under the Mortgage Indenture. The Borrower will not, and will not permit any of its Subsidiaries to, permit any asset (including any cash) to be released from the Lien of the Mortgage Indenture other than in accordance with the terms and provisions of the Mortgage Indenture.

SECTION 6.11. Transactions with Affiliates. The Borrower will not, and will not permit any of the Consolidated Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates which are not Consolidated Subsidiaries, except (a) at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Borrower and the Consolidated Subsidiaries not involving any other Affiliate, (c) any Restricted Payment permitted by Section 6.05(a), (d) shared corporate or administrative services and staffing with Affiliates, including accounting, legal, human resources and treasury operations, provided on customary terms for similarly situated companies, (e) tax sharing arrangements on customary terms for similarly situated companies, (f) customary fees paid to members of the board of directors of the Borrower and the Consolidated Subsidiaries who are not officers of the Borrower or any Subsidiary and (g) transactions to acquire, either through asset purchases, mergers or purchases of Capital Stock, the business and operations of Southwest Energy Solutions, Inc. or Millennium Environmental Group, Inc.

SECTION 6.12. Limitation on Hedge Agreements. The Borrower will not, and will not permit any of the Consolidated Subsidiaries to, enter into any Hedge Agreement other than Hedge Agreements entered into in the ordinary course of business.

SECTION 6.13. Restrictive Agreements. The Borrower will not, and will not permit any of its Consolidated Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Consolidated Subsidiary to pay dividends or other distributions with respect to any shares of its Capital Stock or to make or repay loans or advances to the Borrower or any other Consolidated Subsidiary or to Guarantee Indebtedness of the Borrower or any other Consolidated Subsidiary; provided that the foregoing shall not apply to restrictions and conditions (i) imposed by law, (ii) imposed by any Loan Document, (iii) contained in agreements entered into after the Effective Date which contain restrictions no more restrictive than those contained in the Loan Documents and (iv) contained in agreements relating to the sale of a Subsidiary pending such sale; provided in the case of this clause (iv) such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder.

ARTICLE VII

Events of Default

If any of the following events (“Events of Default”) shall occur:

(a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise, subject in the case of any such reimbursement obligation to a grace period of two days;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days;

(c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Consolidated Subsidiary in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;

(d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.03 (with respect to the Borrower’s existence) or 5.08 or in Article VI;

(e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender);

(f) the Borrower or any Significant Subsidiary shall fail to make any payment of principal (regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption (other than pursuant to provisions permitting the tendering of such Indebtedness from time to time for repurchase or redemption without regard to the occurrence or non-occurrence of any event or condition) or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) the Borrower or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) the Borrower or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of $20,000,000 shall be rendered against the Borrower, any Significant Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Significant Subsidiary to enforce any such judgment;

(l) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, has resulted or could reasonably be expected to result in a Material Adverse Effect;

(m) (i) any Lien purported to be created under any Security Document (after the execution and delivery thereof pursuant to the terms of this Agreement) or the Mortgage Indenture shall cease to be, or shall be asserted by the Borrower or any Consolidated Subsidiary not to be, a valid and perfected Lien on any collateral subject thereto, with the priority required by the applicable Security Document or the Mortgage Indenture, as applicable, except (A) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents or (B) as a result of the Administrative Agent’s failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under any Security Document, or (ii) any Collateral Mortgage Bond (after the execution and delivery thereof pursuant to the terms of this Agreement) shall for any reason (x) cease to be entitled to the benefits of the Mortgage Indenture or to be secured by the Lien of the Mortgage Indenture equally and ratably with all other bonds, if any, outstanding under the Mortgage Indenture or (y) cease to be a legal, valid and binding obligation of the Borrower; or

(n) any Change in Control shall occur; or

(o) any material provision of this Agreement or any other Loan Document to which the Borrower is a party shall for any reason, except to the extent permitted by the express terms hereof or thereof, cease to be valid and binding on or enforceable against the Borrower, or the Borrower shall so assert in writing;

then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, (A) the Issuing Bank (in the case of clauses (iii) and (vi) below) shall, at the request of the Administrative Agent or the Required Lenders, and (B) the Administrative Agent may, and at the request of the Required Lenders shall, in each case by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Aggregate Commitments, and thereupon the Aggregate Commitments shall terminate immediately, (ii) declare the Loans and LC Disbursements then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans and LC Disbursements so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, (iii) take any action under Section 2.02(k), (iv) deliver a notice of redemption under any or all of the Supplemental Indentures stating that such notice is being delivered pursuant to this Article VII, (v) require the Borrower to (in which case the Borrower shall) deposit immediately with the Administrative Agent cash collateral in an amount equal to the aggregate undrawn amount of all outstanding Letters of Credit at such time, to be held by the Administrative Agent (for the benefit of the Issuing Bank and the Lenders) as security for the Borrower’s reimbursement obligations in respect of such Letters of Credit, and (vi) direct the Issuing Bank to (in which case the Issuing Bank shall) exercise the rights and remedies available under the Revenue Bond Pledge Agreements and, in addition thereto, all the rights and remedies of a secured party on default under the Uniform Commercial Code as in effect in the State of New York at that time in respect of the Collateral (as defined in the Revenue Bond Pledge Agreements); and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Aggregate Commitments shall automatically terminate and the principal of the Loans and LC Disbursements then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder and the cash collateral referred to in clause (v) above, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Notwithstanding anything to the contrary contained herein, no notice given or declaration made by the Administrative Agent pursuant to this Article VII shall affect (1) the obligation of the Issuing Bank to make any payment under any Letter of Credit in accordance with the terms of such Letter of Credit or (2) the participatory interest of each Lender in each such payment.

ARTICLE VIII

The Administrative Agent

Each of the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions

on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Required Lenders or the Borrower may at any time, with the consent of the Borrower (provided that such consent shall not be required if an Event of Default under clause (a), (b), (h), (i) or (j) of Article VII shall have occurred and is continuing) or the Required Lenders, as the case may be, replace the Administrative Agent (it being understood that any such replacement Administrative Agent shall be a Person that serves as Administrative Agent for other credit facilities of a comparable size), provided that the Required Lenders or the Borrower may not replace the Administrative Agent unless, after giving effect to such replacement and each contemporaneous assignment, the Required Lenders or the Borrower shall have arranged in connection with such replacement, to the extent requested by the Administrative Agent, that (a) neither the Administrative Agent nor any of its Affiliates shall have outstanding any Letter of Credit, Loan, LC Disbursement, Revenue Bond Commitment or other obligation of any kind under this Agreement or any other Loan Document and (b) each of the Administrative Agent and its Affiliates shall have received payment in full of all amounts owing to it under or in respect of this Agreement and each other Loan Document.

The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder.

The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any

condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. Notwithstanding anything herein to the contrary, no Lender identified as the Syndication Agent or a Co-Documentation Agent shall have any separate duties, responsibilities, obligations or authority as Syndication Agent or Co-Documentation Agent.

The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be any commercial bank organized under the laws of the United States of America or any State thereof having a combined capital and surplus and undivided profits of not less than $500,000,000, or an Affiliate of any such bank.

Upon the acceptance of its appointment as Administrative Agent hereunder by a successor or replacement, such successor or replacement shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring or replaced Administrative Agent, and the retiring or replaced Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent’s resignation or replacement hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or related agreement or any document furnished hereunder or thereunder.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices.

(a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(i) if to the Borrower, to it at One South Church Avenue, Tucson, Arizona 85701, Attention of Chief Financial Officer (Telecopy No. (520) 884-3612; e-mail address: KLarson@tep.com);

(ii) if to the Administrative Agent, to JPMorgan Chase Bank, N.A., 10 South Dearborn, Floor 9, Mail Code IL1-0090, Chicago, Illinois 60603, Attention of Nancy Barwig (Telecopy No. (312) 732-1762; e-mail address: nancy.r.barwig@jpmorgan.com), with a copy to each of (A) JPMorgan Chase Bank, N.A., 10 South Dearborn, Floor 9, Mail Code IL1-0874, Chicago, Illinois 60603, Attention of Lisa Tverdek (Telecopy No. (312) 325-3238), and (B) JPMorgan Chase Bank, N.A., 10 South Dearborn, Floor 7, Mail Code IL1-0010, Chicago, Illinois 60603, Attention of Kenyae Mosley (Telecopy No. (312) 732-2729);

(iii) if to the Issuing Bank, to JPMorgan Chase Bank, N.A., 300 South Riverside Plaza, Mail Code IL1-0236, Standby Letter of Credit Unit, Chicago, Illinois 60606-0236, Attention of Standby Service Unit (Telecopy No. (312) 954-6163), with a copy to the Administrative Agent at its address set forth in clause (ii) above; and

(iv) if to any other Agent or any Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

SECTION 9.02. Waivers; Amendments.

(a) No failure or delay by the Administrative Agent, the Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document or the Mortgage Indenture shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the Issuing Bank and the Lenders hereunder and under the other Loan Documents and the Mortgage Indenture are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or the Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Borrower, in each case with the consent of the Required Lenders or, in the case of any Supplemental Indenture or any Collateral Mortgage Bonds, in each case with the consent of the Required Lenders and as provided by the Mortgage Indenture with the Administrative Agent exercising the rights of the holder of such Collateral Mortgage Bonds and acting at the direction of the Required Lenders; provided that no such agreement shall (i) increase any Revenue Bond Commitment of any Lender without the written consent of such Lender, (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, or change the definition of “Applicable Margin” or “Commitment Fee Rate”, in each case without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Revenue Bond Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.14(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, (vi) amend or waive

any of the conditions set forth in Section 4.02(c), without the written consent of each Lender, or (vii) release all or any portion of the Collateral Mortgage Bonds or release all or substantially all of any other Collateral from the Liens of the Security Documents without the consent of each Lender, in each case except for any such release expressly permitted hereunder or under any Security Document; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent or the Issuing Bank hereunder without the prior written consent of such Agent or Issuing Bank, as the case may be. Notwithstanding the foregoing, any provision of this Agreement requiring the consent of a Lender unwilling to provide such consent may be amended by an agreement in writing entered into by the Borrower, the Required Lenders, the Issuing Bank and the Administrative Agent if (1) by the terms of such agreement the Aggregate Commitment of each such opposing Lender shall terminate upon the effectiveness of such amendment and (2) at the time such amendment becomes effective, each such opposing Lender receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under the Loan Documents.

SECTION 9.03. Expenses; Indemnity; Damage Waiver.

(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Arrangers and their respective Affiliates (including due diligence expenses and the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Arrangers) in connection with the arrangement and syndication of the credit facilities provided for herein, the preparation, execution, delivery and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated); (ii) all out-of-pocket expenses and charges of each Arranger in connection with any evaluations of Collateral conducted by it; (iii) all reasonable out-of-pocket expenses incurred by the Issuing Bank in connection with the issuance, amendment or extension of any Letter of Credit or any demand for payment thereunder; and (iv) all out-of-pocket expenses incurred by the Administrative Agent, the Issuing Bank or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent, the Issuing Bank or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit.

(b) The Borrower shall indemnify the Administrative Agent, each Arranger, the Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated thereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged

presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee.

(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, any Arranger or the Issuing Bank under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, such Arranger or the Issuing Bank, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, such Arranger or the Issuing Bank in its capacity as such.

(d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof.

(e) All amounts due under this Section shall be payable promptly after delivery to the Borrower of a reasonably detailed statement therefor.

SECTION 9.04. Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of the Issuing Bank that issues any Letter of Credit) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Arrangers, the Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revenue Bond Commitment and the Revenue Bond Loans owing to it); provided that (i) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, each of the

Administrative Agent and the Issuing Bank must give its prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, the Borrower must give its prior written consent to such assignment (which consent shall not be unreasonably withheld), (iii) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, or an assignment of the entire remaining amount of the assigning Lender’s Aggregate Commitment, the amount of the Revenue Bond Commitment of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall be in an aggregate amount of not less than $5,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, (iv) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, and (v) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Borrower otherwise required under this paragraph shall not be required (A) if an Event of Default shall have occurred and be continuing or (B) in connection with the initial syndication of the Aggregate Commitments and Loans. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.11, 2.12, 2.13 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.

(c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in New York, New York or Chicago, Illinois a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Aggregate Commitments of, and principal amount of the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Bank and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Bank and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(d) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such

Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(e) Any Lender may, without the consent of the Borrower, the Administrative Agent or the Issuing Bank, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Revenue Bond Commitment and the Revenue Bond Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent, the Issuing Bank and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.11, 2.12 and 2.13 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.14(c) as though it were a Lender.

(f) A Participant shall not be entitled to receive any greater payment under Section 2.11 or 2.13 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.13 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.13(d) as though it were a Lender.

(g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrower, the Issuing Bank or the Administrative Agent, assign or pledge all or any portion of its rights under this Agreement, including the Loans and notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued by, such fund, as security for such obligations or securities; provided that any foreclosure or similar action by such trustee or representative shall be subject to the provisions of this Section 9.04(b) concerning assignments.

(h) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement or the option to pay to the Administrative Agent for the account of the Issuing Bank all or any part of such Granting Lender’s Applicable Percentage of any LC Disbursement made by the Issuing Bank and not reimbursed by the Borrower that such Granting Lender would otherwise be obligated to pay to the Administrative Agent for the account of the Issuing Bank pursuant to this Agreement, as the case may be; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan or to pay such Granting Lender’s Applicable Percentage of any LC Disbursement reimbursement obligation and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan or to pay all or any part of such Granting Lender’s Applicable Percentage of any LC Disbursement reimbursement obligation, the Granting Lender shall be obligated to make such Loan or to pay its Applicable Percentage of any LC Disbursement reimbursement obligation, as the case may be, pursuant to the terms hereof. The making of a Loan by an SPC or the payment by such SPC of such Granting Lender’s Applicable Percentage of any LC Disbursement reimbursement obligation hereunder shall utilize the Revenue Bond Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender or such LC Disbursement reimbursement obligation were paid by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC in connection with its activities as an SPC hereunder any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary in this Section 9.04, any SPC may (A) with notice to, but without the prior written consent of, the Borrower, the Issuing Bank and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans or LC Disbursement reimbursement obligations to the Granting Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans or payment of LC Disbursement reimbursement obligations and (ii) disclose on a confidential basis consistent with the provisions of Section 9.12 any non-public information relating to its Loans or LC Disbursement reimbursement obligations to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. The provisions of this Section relating any SPC may not be amended without the written consent of such SPC.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or

on its behalf and notwithstanding that any Agent, the Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as any Revenue Bond Commitment has not expired or terminated. The provisions of Sections 2.11, 2.12, 2.13 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Aggregate Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent, the Arrangers and the Issuing Bank constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.

(a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, the Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction.

(c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the confidentiality of the Information (as defined

below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, auditors, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Agent, the Issuing Bank or any Lender on a nonconfidential basis from a source other than the Borrower. For the purposes of this Section, “Information” means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to any Agent, the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan or LC Disbursement, together with all fees, charges and other amounts which are treated as interest on such Loan or LC Disbursement under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan or LC Disbursement in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.14. Patriot Act Notice. Each Lender and each Agent (for itself and not on behalf of any other party) hereby notifies the Borrower that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot Act”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or such Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

	TUCSON ELECTRIC POWER COMPANY
	By:	/s/ Kevin P. Larson
		Name: Kevin P. Larson Title: Senior Vice President, CFO, Treasurer

	JPMORGAN CHASE BANK, N.A., as Administrative Agent, as the Issuing Bank and as a Lender
	By:	/s/ Nancy R. Barwig
		Name: Nancy R. Barwig Title: Vice President

S-1

	UNION BANK OF CALIFORNIA, N.A., as Syndication Agent and as a Lender
	By:	/s/ Jeffrey P. Fesenmaier
		Name: Jeffrey P. Fesenmaier Title: Vice President

S-2

	ABN AMRO BANK N.V., as Co-Documentation Agent and as a Lender
	By:	/s/ R. Scott Donaldson
		Name: R. Scott Donaldson Title: Director

	By:	/s/ Todd Vaubel
		Name: Todd Vaubel Title: Vice President

S-3

	SUNTRUST BANK, as Co-Documentation Agent and as a Lender
	By:	/s/ Andrew Johnson
		Name: Andrew Johnson Title: Director

S-4

	WELLS FARGO BANK, NATIONAL ASSOCIATION, as Co-Documentation Agent and as a Lender
	By:	/s/ Clyde Gossert
		Name: Clyde Gossert Title: Vice President

S-5

	COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as a Lender
	By:	/s/ Hans J. Scholz
		Name: Hans J. Scholz Title: Vice President

	By:	/s/ Eli Davis
		Name: Eli Davis Title: Assistant Treasurer

S-6

	COMPASS BANK, an Alabama banking corporation, as a Lender
	By:	/s/ Mark K. Smith
		Name: Mark K. Smith Title: Senior Vice President

S-7

EX-4.(B) 3 supp-indenture.htm SUPPLEMENTAL INDENTURE supp-indenture.htm

Exhibit 4(b)

Supplemental Indenture No. 8

______________________________

TUCSON ELECTRIC POWER COMPANY

THE BANK OF NEW YORK,

Trustee

______________________________

Dated as of June 1, 2008

Supplemental to Indenture of Mortgage and Deed of Trust,

dated as of December 1, 1992

______________________________

Creating a Series of Bonds Designated

First Mortgage Bonds, Collateral Series G

______________________________

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

SUPPLEMENTAL INDENTURE NO. 8, dated as of June 1, 2008, between Tucson Electric Power Company (hereinafter sometimes called the “Company”), a corporation organized and existing under the laws of the State of Arizona, having its principal office at One South Church Avenue, in the City of Tucson, Arizona, as trustor, and The Bank of New York (successor in trust to Bank of Montreal Trust Company), a banking corporation organized and existing under the laws of the State of New York and having its principal office at 101 Barclay Street, in the Borough of Manhattan, The City of New York, New York, as trustee (hereinafter sometimes called the “Trustee”), under the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992, between the Company and the Trustee (hereinafter called the “Original Indenture”), as heretofore amended and supplemented, this Supplemental Indenture No. 8 being supplemental thereto (the Original Indenture as heretofore amended and supplemented, and as supplemented hereby, and as it may from time to time be further supplemented, modified, altered or amended by any supplemental indenture entered into in accordance with and pursuant to the provisions thereof, is hereinafter called the “Indenture”).

Recitals of the Company

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

WHEREAS, the Company proposes to establish a series of Bonds designated “First Mortgage Bonds, Collateral Series G” and to be limited in aggregate principal amount (except as contemplated in clause (b) of Section 2 of Article II of the Original Indenture) to $132,000,000, such series of Bonds and such Bonds to be hereinafter sometimes called, respectively, “Series 8” and “Series 8 Bonds”; and

WHEREAS, all acts and proceedings required by law and by the articles of incorporation and by-laws of the Company, including all action requisite on the part of its shareholders, directors and officers, necessary to make the Series 8 Bonds, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute this Supplemental Indenture a valid, binding and legal instrument, in accordance with its and their terms, have been done and taken; and the execution and delivery of this Supplemental Indenture No. 8 have been in all respects duly authorized; and

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

Granting Clauses

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 8 WITNESSETH, that, in order to secure the payment of the principal of and premium, if any, and interest, if any, on all Bonds at any time Outstanding under the Indenture according to their tenor, purport and effect, and to secure the performance and observance of all the covenants and conditions therein and herein contained (except any covenant of the Company with respect to the refund or reimbursement of taxes, assessments or other governmental charges on account of the ownership of the Bonds of any series or the income derived therefrom, for which the Holders of the Bonds shall look only to the Company and not to the property hereby mortgaged or pledged), and to declare the terms and conditions upon and subject to which the Series 8 Bonds are to be issued, and for and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Holders thereof, and of the sum of $1 duly paid to the Company by the Trustee at or before the ensealing and delivery hereof, and for other good and valuable consideration, the receipt and sufficiency whereof are hereby acknowledged, the Company has executed and delivered this Supplemental Indenture No. 8, and by these presents does grant, bargain, sell, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto the Trustee, and grant to the Trustee a security interest in:

All and singular the premises, property, assets, rights and franchises of the Company (except Excepted Property), whether now or hereafter owned, constructed or acquired, of whatever character and wherever situated including, among other things (but reference to or enumeration of any particular kinds, classes or items of property shall not be deemed to exclude from the operation and effect of this Supplemental Indenture No. 8 any kind, class or item not so referred to or enumerated), all right, title and interest of the Company in and to the property described as granted in “Schedule A” attached to this Supplemental Indenture No. 8 and made part of these Granting Clauses to the same extent as if fully set forth in the same, and all plants for the generation of electricity by water, steam and/or other power; all power houses, substations, transmission lines, and distributing systems; all offices, buildings and structures, and the equipment thereof; all machinery, engines, boilers, dynamos, machines, regulators, meters, transformers, generators and motors; all appliances whether electrical, gas or mechanical, conduits, cables and lines; all pipes, service pipes, fittings, valves and connections, poles, wires, tools, implements, apparatus, furniture, and chattels; all municipal franchises and other franchises; all lines for the transmission and/or distribution of electric current, including towers, poles, wires, cables, pipes, conduits, street lighting systems and all apparatus for use in connection therewith; all real estate, lands, and leaseholds; all easements, servitudes, licenses, permits, rights, powers, franchises, privileges, rights-of-way and other rights in or relating to real estate or the occupancy of the same and all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore described; it being the intention of the parties that all property of every kind, real, personal or mixed (including, but not limited to, all property of the types hereinbefore described), other than Excepted Property, which may be acquired by the Company after the date hereof, shall, immediately upon the acquisition thereof by the Company, to the extent of such acquisition, and without any further conveyance or assignment, become and be subject to the direct lien of the Indenture as fully and completely as though now owned by the Company and described in said “Schedule A”; it further being the intention of the parties, however, that the lien of and security interest granted by this

Supplemental Indenture No. 8 shall not result in the Trustee having greater rights with respect to any property of the Company, real, personal or mixed (including, but not limited to, leasehold interests in property), than the rights of the Company with respect to such property.

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

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

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

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

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

And Upon the Trusts, Uses and Purposes and subject to the covenants, agreements and conditions hereinafter set forth and declared.

ARTICLE I

Additional Definitions

Section 1. Applicability of Article

For all purposes of this Supplemental Indenture No. 8, except as otherwise expressly provided or unless the context otherwise requires, the terms defined in this Article shall have the meanings herein specified and include the plural as well as the singular.

Section 2. Additional Definitions.

“Administrative Agent” means JPMorgan Chase Bank, N.A., in its capacity as Administrative Agent under the Reimbursement Agreement.

“Interest Payment Date” means the last day of each March, June, September and December; provided, however, that the first Interest Payment Date shall be September 30, 2008.

“Maturity” means the date on which the principal of the Series 8 Bonds becomes due and payable, whether at stated maturity, upon redemption or acceleration, or otherwise.

“Reimbursement Agreement” means the Letter of Credit and Reimbursement Agreement, dated as of April 30, 2008, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Issuing Bank, the Syndication Agent party thereto, the Co-Documentation Agents party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, as amended, amended and restated, supplemented or otherwise modified from time to time.

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

A copy of the Reimbursement Agreement is filed at the office of the Administrative Agent at 10 South Dearborn, Floor 9, Chicago, Illinois 60603, and at the office of the Company at One South Church Avenue, Tucson, Arizona 85701.

ARTICLE II

Series 8 Bonds

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

(a) the title of the Bonds of such series shall be “First Mortgage Bonds, Collateral Series G” (such Bonds being hereinafter sometimes called the “Series 8 Bonds”);

(b) the aggregate principal amount of Series 8 Bonds which may be authenticated and delivered under the Indenture shall be limited to $132,000,000, except as contemplated in subdivision (b) of Section 2 of Article II of the Original Indenture;

(d) the Series 8 Bonds shall mature on April 30, 2012;

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

(f) the office of the Trustee in New York, New York, shall be the office or agency of the Company in The City of New York where (i) the principal of the Series 8 Bonds and interest payable thereon at Maturity shall be payable upon presentation thereof, (ii) registration of transfer of the Series 8 Bonds may be effected, (iii) exchanges of the Series 8 Bonds may be effected and (iv) notices and demands to or upon the Company in respect of the Series 8 Bonds or the Indenture may be served; provided, however, that the Company reserves the right to change, by written notice to the Trustee, such office or agency in The City of New York; and provided, further, that the principal office of the Company in Tucson, Arizona shall be an additional financial office or agency where the principal of the Series 8 Bonds and interest payable thereon at Maturity shall be payable upon presentation thereof; interest payable on the Series 8 Bonds prior to Maturity shall be paid by the Company directly to the Holders thereof;

(g) the Series 8 Bonds shall not be redeemable, in whole or in part, at the option of the Company;

(h) upon (i) the occurrence of an Event of Default under the Reimbursement Agreement, and further upon the condition that, in accordance with the terms of the Reimbursement Agreement, the Aggregate Commitments shall have been or shall have terminated and the Loans shall have been declared to be or shall have otherwise become due and payable immediately and the Administrative Agent shall have delivered to the Company a notice demanding redemption of the Series 8 Bonds which notice states that it is being delivered pursuant to Article VII of the Reimbursement Agreement or (ii) the occurrence of an Event of Default under clause (h) or (i) of Article VII of the Reimbursement Agreement, then all Series 8 Bonds shall be redeemed immediately at the principal amount thereof plus accrued interest to the date of redemption;

(i) the Series 8 Bonds shall be issued in denominations of $1,000 and any amount in excess thereof;

(j) not applicable;

(k) not applicable;

(l) not applicable;

(m) not applicable;

(n) not applicable;

(o) not applicable;

(p) not applicable;

(q) the Series 8 Bonds are to be issued and delivered to the Administrative Agent in order to provide collateral security for the obligation of the Company under the Reimbursement Agreement to pay the Obligations, as described in subdivision (u) below. The Series 8 Bonds are non-transferable, except to a successor Administrative Agent under the Reimbursement Agreement;

(r) not applicable;

(s) no service charge shall be made for the registration of transfer or exchange of Series 8 Bonds;

(t) not applicable;

(u) (i) the Series 8 Bonds are to be issued and delivered to the Administrative Agent in order to provide collateral security for the obligation of the Company under the Reimbursement Agreement to pay the Obligations, to the extent and subject to the limitations set forth in clauses (ii) and (iii) of this subdivision;

(ii) the obligation of the Company to pay interest on the Series 8 Bonds on any Interest Payment Date prior to Maturity (x) shall be deemed to have been satisfied and discharged in full in the event that all amounts then due in respect of the Obligations shall have been paid or (y) shall be deemed to remain unsatisfied in an amount equal to the aggregate amount then due in respect of the Obligations and remaining unpaid (not in excess, however, of the amount otherwise then due in respect of interest on the Series 8 Bonds);

(iii) the obligation of the Company to pay the principal of and any accrued interest on the Series 8 Bonds at or after Maturity (x) shall be deemed to have been satisfied and discharged in full in the event that all amounts then due in respect of the Obligations shall have been paid and no Letter of Credit shall remain outstanding or (y) shall be deemed to remain unsatisfied in an amount equal to the aggregate amount then due in respect of the Obligations and remaining unpaid plus the aggregate stated amount of the outstanding Letters of Credit (not in excess, however, of the amount otherwise then due in respect of principal of and accrued interest on the Series 8 Bonds);

(iv) the Trustee shall be entitled to presume that the obligation of the Company to pay the principal of and interest on the Series 8 Bonds as the same shall become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the Administrative Agent, signed by an authorized officer thereof, stating that the principal of and/or interest on the Series 8 Bonds has become due and payable and has not been fully paid, and specifying the amount of funds required to make such payment;

(v) in the event of an application by the Administrative Agent for payment or for a substituted Series 8 Bond pursuant to Section 11 of Article II of the Original Indenture, the Administrative Agent shall not be required to provide any indemnity or pay any expenses or charges as contemplated in said Section 11; and

(vi) the Series 8 Bonds shall have such other terms as are set forth in the form of bond attached hereto as Exhibit A, which form is hereby designated as the form of the Series 8 Bonds.

ARTICLE III

Miscellaneous Provisions

This Supplemental Indenture No. 8 is a supplement to the Original Indenture. As heretofore supplemented and further supplemented by this Supplemental Indenture No. 8, the Original Indenture is in all respects ratified, approved and confirmed, and the Original Indenture as heretofore supplemented and this Supplemental Indenture No. 8 shall together constitute one and the same instrument.

The Trustee makes no representation as to the validity or sufficiency of this Supplemental Indenture No. 8. The statements and recitals herein are deemed to be those of the Company and not of the Trustee.

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

	Tucson Electric Power Company
	By	/s/ Kentton C. Grant
		Vice President

Attest:

/s/ Linda Kennedy

Secretary

	The Bank of New York, Trustee
	By	/s/ Rafael Miranda
		Rafael Miranda Vice President

Attest:

/s/ Timothy Casey

Timothy Casey

Assistant Treasurer

State of Arizona )

) ss.:

County of Pima )

This instrument was acknowledged before me this 19th day of June, 2008 by Kentton C. Grant, as Vice President, Finance and Rates, and Linda Kennedy, as Secretary, of Tucson Electric Power Company, an Arizona corporation, known to me to be the individuals who executed this instrument, and known to me to be a Vice President and the Secretary, respectively, of said corporation, and who personally acknowledged before me and stated that they executed said instrument on behalf of said corporation for the purposes and consideration therein expressed.

	/s/ Tracy M. Munoz
	Notary Public

State of New York )

) ss.:

County of New York )

This instrument was acknowledged before me this 16th day of June, 2008 by Rafael E. Miranda, as Authorized Signatory, and Timothy Casey, as Authorized Signatory, of The Bank of New York, a New York banking corporation, known to me to be the individuals who executed this instrument, and known to me to be Authorized Signatories of said corporation, and who personally acknowledged before me and stated that they executed said instrument on behalf of said corporation for the purposes and consideration therein expressed.

	/s/ Carlos R. Luciano
	Notary Public

Exhibit A

[Form of Bond]

This bond is non-transferable,

except to a successor Administrative Agent under the

Reimbursement Agreement referred to herein.

No. ________________

$ _______

TUCSON ELECTRIC POWER COMPANY

FIRST MORTGAGE BOND, COLLATERAL SERIES G

DUE APRIL 30, 2012

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

JPMorgan Chase Bank, N.A.

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

DOLLARS

on April 30, 2012 in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts, at the office or agency of the Company in The City of New York, or in the City of Tucson, Arizona, upon presentation hereof, and quarterly, on March 31, June 30, September 30 and December 31 in each year, commencing September 30, 2008 (each an “Interest Payment Date”), and at Maturity (as defined in Supplemental Indenture No. 8 hereinafter referred to), to pay interest thereon in like coin or currency at the rate specified below, from the Interest Payment Date next preceding the date of this bond (unless this bond be dated on an Interest Payment Date, in which case from the date hereof; or unless this bond be dated prior to the first Interest Payment Date, in which case from and including the date of the first authentication and delivery of the bonds of this series), until the Company’s obligation with respect to such principal sum shall be discharged.

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

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

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indenture hereinafter mentioned, may afford additional security for the bonds of any particular series) by the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992 (the “Original Indenture”), from the Company to The Bank of New York (successor in trust to Bank of Montreal Trust Company), as trustee (the “Trustee”), as supplemented by eight supplemental indentures including Supplemental Indenture No. 8, dated as of June 1, 2008 (the Original Indenture, as so supplemented, and such Supplemental Indenture being hereinafter called the “Indenture” and “Supplemental Indenture No. 8”, respectively), to which Indenture reference is hereby made for a description of the property mortgaged and pledged, the nature and extent of the security provided by the Indenture, the rights and limitations of rights of the Company, the Trustee and the holders of said bonds with respect to the security provided by the Indenture, the powers, duties and immunities of the Trustee, the terms and conditions upon which such bonds are and are to be secured, and the circumstances under which additional bonds may be issued. The acceptance of this bond shall be deemed to constitute the consent and agreement by the holder hereof to all of the terms and provisions of the Indenture. This bond is one of a series of bonds designated as the First Mortgage Bonds, Collateral Series G, of the Company.

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

The Company has issued and delivered the bonds of this series to JPMorgan Chase Bank, N.A., as Administrative Agent (the “Administrative Agent”) under the Letter of Credit and Reimbursement Agreement, dated as of April 30, 2008, among the Company, the Lenders party thereto, JPMorgan Chase Bank, N.A., as Issuing Bank, the Syndication Agent party thereto, the Co-Documentation Agents party thereto and the Administrative Agent, as amended, amended and restated, supplemented or otherwise modified from time to time (the “Reimbursement Agreement”), in order to provide collateral security for the obligation of the Company thereunder to pay the Obligations (as defined in Supplemental Indenture No. 8).

Upon the occurrence of an Event of Default under the Reimbursement Agreement, and further upon such additional conditions as are set forth in subdivision (h) of Article II of Supplemental Indenture No. 8, then all bonds of this series shall be redeemed immediately at the principal amount thereof plus accrued interest to the date of redemption.

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

The obligation of the Company to pay the principal of and accrued interest on the bonds of this series at or after Maturity (x) shall be deemed to have been satisfied and discharged in full in the event that all amounts then due in respect of the Obligations shall have been paid and no Letter of Credit (as defined in Supplemental Indenture No. 8) shall remain outstanding or (y) shall be deemed to remain unsatisfied in an amount equal to the aggregate amount then due in respect of the Obligations and remaining unpaid plus the aggregate stated amount of the outstanding Letters of Credit (not in excess, however, of the amount otherwise then due in respect of principal of and accrued interest on the bonds of this series).

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

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

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

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

A-4

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

Dated: June __, 2008

	TUCSON ELECTRIC POWER COMPANY
	By:

Attest:

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[FORM OF TRUSTEE’S CERTIFICATE OF AUTHENTICATION]

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

Dated: June __, 2008

	The Bank of New York, Trustee
	By:

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SCHEDULE A

DESCRIPTION OF MORTGAGED PROPERTY

Generic Description

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

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

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

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

A-7

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

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

Specific Description of Any Additional Real Property

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

A-8

Annex 1

Schedule A

Legal description for T.E.P. Camino del Cerro Substation

PARCEL 1

A parcel of land situated within that certain real property described and recorded in Book 96 of Deeds of Real Estate at Page 296 in the Office of the Recorder, Pima County, Arizona, being a portion of the south half of the southwest quarter of Section 17, Township 13 South, Range 13 East, Gila and Salt River Meridian, Pima County, Arizona, said parcel described as follows:

COMMENCING at northwest corner of said south half of the southwest quarter of Section 17, said corner being a found 1 ½ inch aluminum capped ½ inch rebar and bears South 00° 53’04” West (basis of bearing), 1316.24 feet to the southwest corner of Section 17 being a found 2” BCSM;

Thence North 89’ 56’ 43” East, 990.71 feet along the north line of said south half of the southwest quarter of Section 17 to a point, said point bears N 89° 56’ 43” East, 1653.77 feet to the northeast corner of said south half of the southwest quarter of Section 17 being a found ½ inch rebar with a1” plastic cap marked LS 16097, and said point also being the Point of Beginning.

Thence continuing N 89’ 56’ 43” East, 32.84 feet along the north line of said south half of the southwest quarter of Section 17 to a set 1/2 inch rebar tagged RLS 27234;

Thence South 32° 56’ 52” East, 480.17 feet to a set 1/2 inch rebar tagged RLS 27234;

Thence South 57° 03’ 08” West, 312.00 feet to a set 1/2 inch rebar tagged RLS 27234;

Thence North 32° 56’ 52” West, 498.00 feet to a set 1/2 inch rebar tagged RLS 27234;

Thence North 57° 03’ 08” East, 284.43 feet to a set ½ inch rebar tagged RLS 27234 and being the Point of Beginning.

The above-described parcel of land contains 155,130.2 sq. ft., more or less.

PARCEL 2

TOGETHER WITH a thirty (30) foot wide easement appurtenant for underground utilities, maintenance and ingress-egress, the centerline of which is described as follows:

COMMENCING at the southwest corner of Section 17;

Thence South 89° 57’ 28” East, 181405 feet along the south line of said Section 17;

A-9

Thence North 00° 02’ 32” East, 75.00 feet to the Point of Beginning;

Thence continuing North 00° 02’ 32” East, 156,63 feet to the beginning of a curve concave to the west having a radius of 200.00 feet;

Thence northwesterly 109.72 feet along said curve through a central angle of 31° 25’ 57”;

Thence North 31° 23’ 25” West, 616.62 feet to the beginning of a curve concave to the south have a radius of 106.00 feet;

Thence westerly 161.71 feet along said curve through a central angle of 87° 24’ 34”;

Thence South 61° 12’ 01” West, 19.12 feet to the beginning of a curve concave to the north having a radius of 50.12 feet;

Thence westerly 41.39 feet along said curve through a central angle of 47° 18’ 44” to a point on the south line of the afore-described Parcel.1, said point bears N 57° 03’ 08” East, 51.97 feet to the southwest corner thereof mid also being the terminus of said centerline.

The above-described parcel of land contains 33,141.0 sq. ft. more or less.

PARCEL 3

TOGETHER WITH an exclusive easement for underground electric systems, being a thirty (30) foot wide strip of land lying northerly of the following described line.

COMMENCING at the northwest corner of the south half of the southwest quarter of Section 17;

Thence North 89° 56’ 43” East, 101.27 feet along the north line of said south half of the southwest quarter of Section 17 to a point on the east right-of-way of Silverbell Road as described and recorded in Docket 5607 at Page 887 in the Office of the Recorder, Pima County, Arizona;

Thence South 30° 06’ 03” East, 100.71 feet along the said east right-of-way of Silverbell Road to the Point of Beginning;

Thence North 59° 48’ 19” East, 114.45 feet to a point, said point being perpendicular to and 30 feet southerly of the said north line of the south half of the southwest quarter of Section 17;

A-10

Thence North 89° 56’ 43” East, 693.49 feet parallel with said north line to a point on the northwesterly line of the above-described Parcel 1, said point bears North 57° 03’ 03” East, 55.24 feet to the north east corner thereof and the terminus of said easement.

The side lines of said 30 foot strip easement are to be prolonged or shortened to meet at angle points and to terminate at the easterly right-of-way line of Silverbell Road and the northwesterly line of said Camino del Cerro Substation.

The above-described parcel of land contains 25,175.4 sq. ft., more or less.

PARCEL 4

TOGETHER WITH an easement appurtenant for ingress-egress, lying southeasterly of the afore-described Parcel 1, more particularly described as follows:

COMMENCING at the northwest corner of the south half of the southwest quarter of Section 17;

Thence North 89° 56’ 43” East, 1023.55 feet along the north line of said south half of the southwest quarter of Section 17 to the northeast corner of the afore-described Parcel 1;

Thence South 32° 56’ 52” East, 480.17 feet to the southeast corner of the afore-described Parcel 1;

Thence South 57° 03’ 08” West, 261.85 feet along the southeasterly line of the afore-described Parcel 1 to the Point of Beginning;

Thence South 32° 56’ 52” East, 30.00 feet;

Thence North 57° 03’ 08” East, 226.91 feet to a point on the westerly side line of the afore-described Parcel 2, being the beginning of a non-tangent curve concave to the north having a radius of 65.12 feet, to which beginning of curve a radial line bears South 13° 02’ 15” East;

Thence westerly 47.09 feet along said curve through a central angle of 41° 26’ 04”;

Thence South 57° 03’ 08” West, 191.94 feet to the Point of Beginning.

The above-described parcel of land contains 6152.5 sq. ft., more or less.

A-11

EX-4.(C) 4 indenture.htm INDENTURE OF TRUST 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.

	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

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

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

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:

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.

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

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.

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

(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.

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

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.

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;

(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.

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.

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.

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

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.

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

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.

(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.

(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

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.

(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

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);

(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

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.

(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.

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;

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

(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

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:

(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.

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.

(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:

(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

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.

(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

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

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.

(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

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.

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.

(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

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

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.

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.

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.

(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

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.

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

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).

(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

(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.

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

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.

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

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.

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

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.

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.

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.

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

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

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

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.

(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

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

(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

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

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

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.

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:

(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;

(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.

(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.

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.

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

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.

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;

(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.

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

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

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

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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.

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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.

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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.

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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.

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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

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.

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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

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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.

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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

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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.

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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

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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

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

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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.

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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: ______________________

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EX-4.(D) 5 loan-agreement.htm LOAN AGREEMENT loan-agreement.htm

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.

	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

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 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:

Authorized Company Representative:

“Authorized Company Representative” shall mean each person at the time designated to act on behalf of the Company by written certificate furnished to the Authority and the Trustee

containing the specimen signature of such person and signed on behalf of the Company by its President, any Vice President or its Treasurer, together with its Secretary or any Assistant Secretary.

Bond Counsel:

Bond 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.

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:

1997 Bonds:

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;

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

Person:

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

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.

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;

(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

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,

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.

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

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.

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.

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.

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

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

(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

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.

(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

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.

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.

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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

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.

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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.