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

                


        

        
           

          
            
              
              

            

            
              i

              
                

              

            

            
              
              

            

          

           

          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

                


        

        
           

          
            
              
              

            

            
              ii

              
                

              

            

            
              
              

            

          

           

          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.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “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

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “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

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      “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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      “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,

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      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).

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      “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.

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      “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

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      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,

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      (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.

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
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      (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.

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
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      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;

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
          30

          
            

          

        

        
          
          

        

      

       

      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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      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,

       

      
        
          
          

        

        
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      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.

       

      (c)           As
of the Effective Date, there is $628,900,000 in aggregate principal amount of
Mortgage Bonds outstanding.

       

      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.

       

      
        
          
          

        

        
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      (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.

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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;

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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).

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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;

       

      
        
          
          

        

        
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      (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.

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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

       

      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
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.

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      (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.

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      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;

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
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      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,
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      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.

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
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      (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

       

      
        
          
          

        

        
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      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.

       

      
        
          
          

        

        
          67

          
            

          

        

        
          
          

        

      

       

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

      


      
        
          
          

        

        
          68

          
            

          

        

        
          
          

        

      

       

      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