INDENTURE OF TRUST

Exhibit 4(a)

INDENTURE OF TRUST
(2009 SERIES A)

BETWEEN

THE INDUSTRIAL DEVELOPMENT AUTHORITY
OF THE COUNTY OF PIMA

AND

U.S. BANK TRUST NATIONAL ASSOCIATION

DATED AS OF OCTOBER 1, 2009

Authorizing

Pollution Control Revenue Bonds,
2009 Series A
(Tucson Electric Power Company San Juan Project)

TABLE OF CONTENTS ^*

INDENTURE OF TRUST

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

W I T N E S S E T H:

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

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

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

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

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

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

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

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

ARTICLE I

DEFINITIONS

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

Act:

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

Administration Expenses:

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

Authority:

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

Authorized Company Representative:

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

Bond Counsel:

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

Bond Fund:

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

Bonds:

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

Code:

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

Company:

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

Depositary:

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

Facilities:

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

Government Obligations:

“Government Obligations” shall mean:

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

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

Indenture:

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

Investment Securities:

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

Loan Agreement:

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

Loan Payments:

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

1954 Code:

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

1997 Bonds:

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

Notice by Mail:

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

Notice by Publication:

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

Plant:

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

Outstanding:

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

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

(b) those paid pursuant to Section 2.07 hereof;

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

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

Owner:

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

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

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

Rebate Fund:

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

Receipts and Revenues of the Authority from the Loan Agreement:

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

Record Date:

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

Registrar; Principal Office thereof:

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

Supplemental Indenture:

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

Supplemental Loan Agreement:

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

Tax Agreement:

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

Trust Estate:

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

Trustee; Principal Office thereof:

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

ARTICLE II

THE BONDS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

ARTICLE III

REDEMPTION OF BONDS

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

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

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

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

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

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

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

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

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

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

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

ARTICLE IV

THE BOND FUND

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

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

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

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

(ii) all Loan Payments; and

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

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

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

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

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

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

Section 4.07 Moneys Held in Trust . All moneys and Investment Securities held by the Trustee in the Bond Fund, and all moneys required to be deposited with or paid to the Trustee for deposit into the Bond Fund, and all moneys withdrawn from the Bond Fund and held by the Trustee, the Paying Agent or any Co-Paying Agent, shall be held by the Trustee, the Paying Agent or any Co-Paying Agent, as the case may be, in trust, and such moneys and Investment Securities (other than moneys held pursuant to Section 4.06 hereof and moneys or Investment Securities held in the Rebate Fund established in furtherance of the obligations of the Company under clause (b) of Section 6.04 of the Loan Agreement), while so held or so required to be deposited or paid, shall constitute part of the Trust Estate and be subject to the lien and security interest created hereby in favor of the Trustee, for the benefit of the Owners from time to time of the Bonds. The