Amended and Restated Credit Agreement (Unisource)


    
       

      Exhibit
        4.1

      


      [EXECUTION
        COPY]

      


      
        

        

      

      


      


      


       

      AMENDED
        AND RESTATED CREDIT AGREEMENT

       

      dated
        as
        of

       

      August
        11, 2006

       

      among

       

      UNISOURCE
        ENERGY CORPORATION,

       

      an
        Arizona corporation,

      as
        Borrower,

       

      THE
        LENDERS PARTY HERETO,
        

       

      


      THE
        BANK OF NEW YORK and JPMORGAN CHASE BANK, N.A.,

      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

      


      


      


      
        

        



      


      UNION
        BANK OF CALIFORNIA, N.A.,

      as
        Lead Arranger

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      TABLE
        OF
        CONTENTS

      Page

      
        	
                 

                ARTICLE
                  I                
                  Definitions

                 

              	 
	
                SECTION
                  1.01.

              	
                Defined
                  Terms

              	
                1

              
	
                SECTION
                  1.02.

              	
                Classification
                  of Loans and Borrowings

              	
                22

              
	
                SECTION
                  1.03.

              	
                Terms
                  Generally

              	
                22

              
	
                SECTION
                  1.04.

              	
                Accounting
                  Terms; GAAP

              	
                22

              
	
                SECTION
                  1.05.

              	
                Pro
                  Forma Calculations

              	
                23

              
	
                 

                ARTICLE
                  II              
                   The Credits

                 

              	 
	
                SECTION
                  2.01.

              	
                Commitments

              	
                23

              
	
                SECTION
                  2.02.

              	
                Loans
                  and Borrowings

              	
                23

              
	
                SECTION
                  2.03.

              	
                Requests
                  for Borrowings

              	
                24

              
	
                SECTION
                  2.04.

              	
                Funding
                  of Borrowings

              	
                25

              
	
                SECTION
                  2.05.

              	
                Interest
                  Elections

              	
                25

              
	
                SECTION
                  2.06.

              	
                Termination
                  and Reduction of Commitments

              	
                26

              
	
                SECTION
                  2.07.

              	
                Repayment
                  of Loans; Evidence of Debt

              	
                27

              
	
                SECTION
                  2.08.

              	
                Amortization
                  of Term Loans

              	
                28

              
	
                SECTION
                  2.09.

              	
                Prepayment
                  of Loans

              	
                28

              
	
                SECTION
                  2.10.

              	
                Fees

              	
                29

              
	
                SECTION
                  2.11.

              	
                Interest

              	
                29

              
	
                SECTION
                  2.12.

              	
                Alternate
                  Rate of Interest

              	
                30

              
	
                SECTION
                  2.13.

              	
                Increased
                  Costs

              	
                31

              
	
                SECTION
                  2.14.

              	
                Break
                  Funding Payments

              	
                32

              
	
                SECTION
                  2.15.

              	
                Taxes

              	
                32

              
	
                SECTION
                  2.16.

              	
                Payments
                  Generally; Pro
                  Rata
                  Treatment; Sharing of Set-offs

              	
                33

              
	
                SECTION
                  2.17.

              	
                Mitigation
                  Obligations; Replacement of Lenders

              	
                34

              
	
                SECTION
                  2.18.

              	
                Illegality

              	
                35

              
	
                SECTION
                  2.19.

              	
                New
                  Lenders

              	
                35

              
	
                 

                ARTICLE
                  III             
                   Representations and Warranties

                 

              	 
	
                SECTION
                  3.01.

              	
                Organization;
                  Powers

              	
                36

              
	
                SECTION
                  3.02.

              	
                Authorization;
                  Enforceability

              	
                36

              
	
                SECTION
                  3.03.

              	
                Governmental
                  Approvals; No Conflicts

              	
                36

              
	
                SECTION
                  3.04.

              	
                Financial
                  Condition; No Material Adverse Change

              	
                36

              
	
                SECTION
                  3.05.

              	
                Properties

              	
                37

              
	
                SECTION
                  3.06.

              	
                Litigation
                  and Environmental Matters

              	
                37

              
	
                SECTION
                  3.07.

              	
                Compliance
                  with Laws and Agreements

              	
                38

              
	
                SECTION
                  3.08.

              	
                Federal
                  Regulations

              	
                38

              
	
                SECTION
                  3.09.

              	
                Investment
                  Company Status

              	
                38

              
	
                SECTION
                  3.10.

              	
                Taxes

              	
                38

              
	
                SECTION
                  3.11.

              	
                ERISA

              	
                38

              
	
                SECTION
                  3.12.

              	
                Security
                  Documents

              	
                39

              


      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	
                SECTION
                  3.13.

              	
                Disclosure

              	
                39

              
	
                SECTION
                  3.14.

              	
                Solvency

              	
                39

              
	
                SECTION
                  3.15.

              	
                Labor
                  Matters

              	
                39

              
	
                SECTION
                  3.16.

              	
                Anti-Terrorism
                  Laws

              	
                40

              
	
                SECTION
                  3.17.

              	
                Ownership
                  of Subsidiaries

              	
                41

              
	
                 

                ARTICLE
                  IV              
                  Conditions Precedent

                 

              	 
	
                SECTION
                  4.01.

              	
                Effective
                  Date

              	
                41

              
	
                SECTION
                  4.02.

              	
                Each
                  Credit Event

              	
                42

              
	
                 

                ARTICLE
                  V               
                  Affirmative Covenants

                 

              	 
	
                SECTION
                  5.01.

              	
                Financial
                  Statements; Ratings Change and Other Information

              	
                43

              
	
                SECTION
                  5.02.

              	
                Notices
                  of Material Events

              	
                45

              
	
                SECTION
                  5.03.

              	
                Information
                  Regarding Collateral

              	
                46

              
	
                SECTION
                  5.04.

              	
                Existence;
                  Conduct of Business

              	
                46

              
	
                SECTION
                  5.05.

              	
                Payment
                  of Obligations

              	
                46

              
	
                SECTION
                  5.06.

              	
                Maintenance
                  of Properties; Insurance

              	
                46

              
	
                SECTION
                  5.07.

              	
                Books
                  and Records; Inspection Rights

              	
                47

              
	
                SECTION
                  5.08.

              	
                Compliance
                  with Laws

              	
                47

              
	
                SECTION
                  5.09.

              	
                Use
                  of Proceeds

              	
                47

              
	
                SECTION
                  5.10.

              	
                Environmental
                  Laws

              	
                47

              
	
                SECTION
                  5.11.

              	
                Further
                  Assurances

              	
                47

              
	
                SECTION
                  5.12.

              	
                Additional
                  Security

              	
                48

              
	
                SECTION
                  5.13.

              	
                Maintain
                  Ownership of Subsidiaries

              	
                48

              
	
                 

                ARTICLE
                  VI             
                  Negative Covenants

                 

              	 
	
                SECTION
                  6.01.

              	
                Indebtedness

              	
                48

              
	
                SECTION
                  6.02.

              	
                Liens

              	
                49

              
	
                SECTION
                  6.03.

              	
                Fundamental
                  Changes

              	
                50

              
	
                SECTION
                  6.04.

              	
                Investments,
                  Loans, Advances and Acquisitions

              	
                52

              
	
                SECTION
                  6.05.

              	
                Asset
                  Sales

              	
                54

              
	
                SECTION
                  6.06.

              	
                Sale
                  and Leaseback Transactions

              	
                55

              
	
                SECTION
                  6.07.

              	
                Limitation
                  on Hedge Agreements

              	
                55

              
	
                SECTION
                  6.08.

              	
                Restricted
                  Payments; Certain Payments of Indebtedness

              	
                55

              
	
                SECTION
                  6.09.

              	
                Transactions
                  with Affiliates

              	
                56

              
	
                SECTION
                  6.10.

              	
                Restrictive
                  Agreements

              	
                56

              
	
                SECTION
                  6.11.

              	
                Amendment
                  of Material Documents

              	
                57

              
	
                SECTION
                  6.12.

              	
                Cash
                  Coverage Ratio

              	
                57

              
	
                SECTION
                  6.13.

              	
                Leverage
                  Test

              	
                57

              
	
                 

                ARTICLE
                  VII   
Events
                  of Default

                 

              	
                 

                58

                 

              
	
                 

                ARTICLE
                  VIII            The
                  Administrative Agent

                 

              	
                 

                60

                 

              


      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        	
                 

                ARTICLE
                  IX     Miscellaneous

                 

              	 
	
                SECTION
                  9.01.

              	
                Notices

              	
                62

              
	
                SECTION
                  9.02.

              	
                Waivers;
                  Amendments

              	
                63

              
	
                SECTION
                  9.03.

              	
                Expenses;
                  Indemnity; Damage Waiver

              	
                65

              
	
                SECTION
                  9.04.

              	
                Successors
                  and Assigns

              	
                66

              
	
                SECTION
                  9.05.

              	
                Survival

              	
                69

              
	
                SECTION
                  9.06.

              	
                Counterparts;
                  Integration; Effectiveness

              	
                69

              
	
                SECTION
                  9.07.

              	
                Severability

              	
                69

              
	
                SECTION
                  9.08.

              	
                Right
                  of Setoff

              	
                70

              
	
                SECTION
                  9.09.

              	
                Governing
                  Law; Jurisdiction; Consent to Service of Process

              	
                70

              
	
                SECTION
                  9.10.

              	
                WAIVER
                  OF JURY TRIAL

              	
                70

              
	
                SECTION
                  9.11.

              	
                Headings

              	
                71

              
	
                SECTION
                  9.12.

              	
                Confidentiality

              	
                71

              


      

      
        	
                SECTION
                  9.13.

              	
                Interest
                  Rate Limitation

              	
                71

              
	
                SECTION
                  9.14

              	
                Patriot
                  Act Notice

              	
                72

              


      

      


      

        SCHEDULES:

         

        Schedule
          2.01  -
           Commitments

        Schedule
          3.04  -
           Acquisitions

        Schedule
          6.01  -
           Existing
          Indebtedness

        Schedule
          6.02  -
           Existing
          Liens

        Schedule
          6.04  -
           Existing
          Investments

        Schedule
          6.10  -
           Existing
          Restrictions

         

        EXHIBITS:

         

        Exhibit
          A
 -
           Form
          of
          Assignment and Assumption

        Exhibit
          B
 - 
           Form
          of
          Borrower Pledge Agreement

        Exhibit
          C  -   Form
          of
          Opinion of Thelen Reid & Priest LLP, New York counsel for the

                            
           Borrower

        Exhibit
          D - 
           Form
          of
          Opinion of the General Counsel of the Borrower

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      This
        AMENDED AND RESTATED CREDIT AGREEMENT, dated as of August 11, 2006, among
        UNISOURCE ENERGY CORPORATION, the LENDERS party hereto, THE BANK OF NEW YORK
        and
        JPMORGAN CHASE BANK, N.A., 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.

       

      RECITALS

       

      The
        Borrower, the Existing Revolving Lenders, the Existing Term Lenders, The
        Bank of
        New York, as syndication agent, Commerzbank AG, New York and Grand Cayman
        Branches, as documentation agent, and Union Bank of California, N.A., as
        administrative agent, previously entered into that certain Credit Agreement,
        dated as of April 15, 2005 (as amended, supplemented or otherwise modified
        from
        time to time prior to the date hereof, the “Existing
        Credit Agreement”).
        The
        parties hereto desire to amend and restate the Existing Credit Agreement,
        on the
        terms and conditions set forth herein.

       

      NOW,
        THEREFORE, in consideration of the premises and the mutual covenants herein
        contained, the parties hereto hereby agree that
        the
        Existing Credit Agreement is hereby amended and restated in its entirety,
        without novation, as follows:

       

      ARTICLE
        I

      Definitions

       

      SECTION
        1.01. Defined
        Terms.
        As used
        in this Agreement (including the recitals hereto), 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.

       

      “Acquired
        EBITDA”
means,
        with respect to any Pro Forma Entity for any period, the Consolidated Net
        Income
        of such Pro Forma Entity for such period plus
        the
        sum,
        without duplication, of the amounts for such period of the following to the
        extent deducted in calculating such Consolidated Net Income: (a) interest
        expense, (b) tax expense based on income, (c) depreciation expense, (d)
        amortization expense, including amortization of deferred financing fees,
        (e)
        extraordinary losses and non-recurring charges, (f) non-cash charges (including
        the non-cash portion of pension expense and non-cash interest expense), (g)
        losses on asset sales, (h) expenses or charges incurred in connection with
        the issuance of debt or equity securities, (i) deductions for minority
        interest expense and (j) restructuring charges or provisions, minus,
        to the
        extent added in computing such Consolidated Net Income, without duplication,
        the
        sum of (i) interest income, (ii) extraordinary or non-recurring gains,
        (iii) gains on asset sales, (iv) additions for minority interest income and
        (v)
        other non-cash items increasing Consolidated Net

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       Income
        of such Pro Forma Entity, all as determined on a consolidated basis in
        accordance with GAAP.

       

      “Acquired
        Entity or Business”
shall
        have the meaning provided in the definition of the term “Consolidated
        EBITDA”.

       

      “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
        Union Bank of California, N.A., in its capacity as administrative agent for
        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-Syndication Agents, the Co-Documentation Agents and the Administrative
        Agent.

       

      “Agreement”
means
        this Amended and Restated Credit Agreement, dated as of August 11, 2006, by
        and among the Borrower, the Lenders party hereto, the Co-Syndication Agents,
        the
        Co-Documentation Agents and the Administrative Agent.

       

      “Alternate
        Base Rate”
means,
        for any day, a rate per
        annum
        equal to
        the greater of (a) the Reference 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 Reference Rate or the Federal
        Funds
        Effective Rate shall be effective from and including the effective date of
        such
        change in the Reference Rate or the Federal Funds Effective Rate,
        respectively.

       

      “Anti-Terrorism
        Laws”
has
        the
        meaning assigned to such term in Section 3.16(a).

       

      “Applicable
        Percentage”
means
        (a) with respect to any Revolving Lender, the percentage of the total Revolving
        Commitments represented by such Lender’s Revolving Commitment, and (b) with
        respect to any Term Lender, the percentage of the principal amount of the
        Term
        Loans represented by such Lender’s Term Loans. If the Revolving Commitments have
        terminated or expired, the Applicable Percentages shall be determined based
        upon
        the Revolving Commitments most recently in effect, giving effect to any
        assignments.

       

      “Applicable
        Rate”
means,
        for any day, (a) for each ABR Loan, a rate per
        annum
        equal to
        0.25% and (b) for each Eurodollar Loan, a rate per
        annum
        equal to
        1.25%; provided,
        however,
        that in
        the event that, and at all times during which, TEP shall not have the ability
        under all Requirements of Law (including all orders of the ACC) to distribute
        100% of its current

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      year
        net
        income to its shareholders, “Applicable
        Rate”
shall
        mean (i) for each ABR Loan, a rate per
        annum
        equal to
        0.50% and (ii) for each Eurodollar Loan, a rate per
        annum
        equal to
        1.50%. 

       

      “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.

       

      “Arranger”
means
        Union Bank, as Lead Arranger for the credit facilities 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.

       

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

       

      “Borrower
        Cash Flow”
means,
        for any period, (a) the aggregate amount of Restricted Payments received
        by the
        Borrower from the Subsidiaries during such period; plus
        (b) the
        aggregate amount of payments received by the Borrower during such period
        under
        the UniSource Tax Sharing Agreement; plus
        (c) the
        aggregate amount of cash interest earnings and cash dividends received by
        the
        Borrower during such period in respect of any Permitted Investments of the
        Borrower; minus
        (d) the
        aggregate amount of Taxes paid by the Borrower in cash during such
        period.

       

      “Borrower
        Debt Service”
means,
        for any period, (a) the aggregate amount of all cash payments made by the
        Borrower during 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 on a
        stand alone basis, plus
        (b) the
        aggregate amount of all scheduled principal payments on Indebtedness of the
        Borrower made or required to be made by the Borrower during such period
        (including any such scheduled principal payments required to be made during
        such
        period that were prepaid by the Borrower during such period), determined
        for the
        Borrower on a stand alone basis. 

       

      “Borrower
        Pledge Agreement”
means
        the Amended and Restated Borrower Pledge Agreement, in the form of
        Exhibit B, to be executed and delivered by the Borrower.

       

      “Borrower
        Subsidiary”
means
        a
        Subsidiary of the Borrower that is not a TEP Subsidiary or a UES
        Subsidiary.

       

      
        “Borrowing”
means
          Loans of the same Class and Type, 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.

         

      

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Borrowing
        Request”
means
        a
        request by the Borrower for a Borrowing in accordance with Section
        2.03.

       

      “Business
        Day”
means
        any day that is not a Saturday, Sunday or other day on which commercial banks
        in
        Los Angeles, California or New York City are authorized or required by law
        to
        remain 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 such Person and its subsidiaries that are 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 all future payments to be
        made.

       

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

       

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

       

      “Change
        in Law”
means
        (a) the adoption of any law, rule or regulation after the date of this
        Agreement, (b) any change in any law, rule or regulation or in the
        interpretation or application thereof by any Governmental Authority after
        the
        date of this Agreement or (c) compliance by any Lender (or, for purposes of
        Section 2.13(b), by any lending office of such Lender or by such Lender’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.

       

      “Class”,
        when
        used in reference to any Loan or Borrowing, refers to whether such Loan,
        or the
        Loans comprising such Borrowing, are Revolving Loans or Term Loans, and when
        used in reference to any Commitment, refers to whether such Commitment is
        a
        Revolving Commitment or Term Commitment.

       

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

       

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

       

      “Collateral”
means
        all “Collateral”, as defined in any applicable Security Document.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Commitment”
means
        a
        Revolving Commitment, a Term Commitment or any combination thereof (as the
        context requires).

       

      “Consolidated
        EBITDA”
means,
        with respect to any Person for any period, Consolidated Net Income of such
        Person and its subsidiaries for such period plus,
        to the
        extent deducted in computing such Consolidated Net Income, without duplication,
        the sum of (a) interest expense, (b) any tax expense based on income, (c)
        depreciation expense, (d) amortization expense, including amortization of
        deferred financing fees, (e) extraordinary losses and non-recurring charges,
        (f)
        non-cash charges (including the non-cash portion of pension expense and non-cash
        interest expense), (g) losses on asset sales, (h) restructuring charges or
        provisions, (i) in the case of any period that includes a period ending during
        the fiscal year 2006, Transaction Expenses, (j) expenses or charges incurred
        in
        connection with any issuance of debt or equity securities, (k) any fees and
        expenses related to Permitted Acquisitions, (l) deductions for minority interest
        expense and (m) one-time expenses resulting from the consummation of the
        Transactions, minus,
        to the
        extent added in computing such Consolidated Net Income, without duplication,
        the
        sum of (i) interest income, (ii) extraordinary or non-recurring gains, (iii)
        gains on asset sales, (iv) additions for minority interest income and (v)
        other
        non-cash items increasing such Consolidated Net Income, all as determined
        on a
        consolidated basis in accordance with GAAP; provided
        that (A)
        there shall be included in determining Consolidated EBITDA for the Borrower
        for
        any period the Acquired EBITDA of any Person, property, business or asset
        acquired to the extent not subsequently sold, transferred or otherwise disposed
        of (but not including the Acquired EBITDA of any related Person, property,
        business or assets to the extent not so acquired) by the Borrower or any
        Subsidiary during such period (each such Person, property, business or asset
        acquired and not subsequently so disposed of, an “Acquired
        Entity or Business”),
        in
        each case based on the actual Acquired EBITDA of such Acquired Entity or
        Business for such period (including the portion thereof occurring prior to
        such
        acquisition), (B) for purposes of the definition of the term “Permitted
        Acquisition” and Sections 6.04 and 6.13, there shall be an adjustment to
        Consolidated EBITDA for the Borrower in respect of each Acquired Entity or
        Business equal to the amount of the Pro Forma Adjustment with respect to
        such
        Acquired Entity or Business for such period (including the portion thereof
        occurring prior to such acquisition) as specified in the Pro Forma Adjustment
        Certificate delivered to the Lenders and the Administrative Agent, and (C)
        for
        purposes of Section 6.04 and 6.13 only, there shall be excluded in determining
        Consolidated EBITDA for the Borrower for any period the Acquired EBITDA of
        any
        Person, property, business or asset sold, transferred or otherwise disposed
        of
        by the Borrower of any Subsidiary during such period (each Person, property,
        business or asset so sold or disposed of, a “Sold
        Entity or Business”),
        in
        each case based on the actual Acquired EBITDA of such Sold Entity or Business
        for such period (including the portion thereof occurring prior to such sale,
        transfer or disposition).

       

      “Consolidated
        Net Income”
means,
        for any fiscal period for any Person, net income of such Person and its
        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.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Consolidated
        Total Indebtedness”
means,
        as of the last day of any fiscal quarter, (a) the sum (without duplication)
        for
        the Borrower and the Subsidiaries as of such day of (i) the aggregate
        outstanding principal amount of the Loans, (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 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
        Subsidiaries as of such day and (ii) to the extent included in clause (a)(ii)
        above, any Treasury Indebtedness of the Borrower and the 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.

       

      “Co-Syndication
        Agents”
means
        The Bank of New York and JPMorgan Chase Bank, N.A., in their capacity as
        co-syndication agents for the Lenders. 

       

      “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 Annual Report on Form 10-K of the Borrower for the fiscal year ended
        December 31, 2005, as filed with the SEC, (ii) the Quarterly Reports on Form
        10-Q of the Borrower for the fiscal quarters ended March 31, 2006 and June
        30,
        2006, as filed with the SEC, and (iii) the Current Reports on Form 8-K of
        the
        Borrower as filed with the SEC on May 25, 2006, June 6, 2006, June 12, 2006,
        June 26, 2006, June 27, 2006, July 5, 2006 and August 8, 2006.

       

      “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 

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      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.

       

      “Equity
        Interests”
means
        shares of capital stock, partnership interests, membership interests in a
        limited liability company, beneficial interests in a trust or other equity
        ownership interests in a Person, and any warrants, options or other rights
        entitling the holder thereof to purchase or acquire any such equity
        interest.

       

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

       

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

       

      “ERISA
        Event”
means
        (a) any “reportable event”, as defined in Section 4043 of ERISA or the
        regulations issued thereunder with respect to a Plan (other than an event
        for
        which the 30-day notice period is waived); (b) the existence with respect
        to any
        Plan of an “accumulated funding deficiency” (as defined in Section 412 of the
        Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant
        to
        Section 412(d) of the Code or Section 303(d) of ERISA of an application for
        a
        waiver of the minimum funding standard with respect to any Plan; (d) the
        incurrence by the Borrower or any of its ERISA Affiliates of any liability
        under
        Title IV of ERISA with respect to the termination of any Plan; (e) the receipt
        by the Borrower or any ERISA Affiliate from the PBGC of any notice of its
        intent
        to institute proceedings to terminate any Plan or to appoint a trustee to
        administer any Plan under Section 4042 of ERISA or the providing of notice
        by a
        plan administrator of the intent to terminate any Plan under Section 4041
        of
        ERISA; (f) the incurrence by the Borrower or any of its ERISA Affiliates
        of any
        liability with respect to the withdrawal or partial withdrawal from any Plan
        or
        Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate
        of
        any notice, or the receipt by any Multiemployer Plan from the Borrower or
        any
        ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability
        or a determination that a Multiemployer Plan is, or is expected to be, insolvent
        or in reorganization, within the meaning of Title IV of ERISA.

       

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

       

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

       

      “Exchange
        Act”
means
        the Securities Exchange Act of 1934, as amended.

       

      “Excluded
        Taxes”
means,
        with respect to the Administrative Agent, any Lender 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

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      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 2.17(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 2.15(d).

      
         

      

      “Existing
        Credit Agreement”
has
        the
        meaning assigned to such term in the recitals. 

       

      “Existing
        Revolving Lenders”
means
        each Lender that is a Revolving Lender (as defined in the Existing Credit
        Agreement) under the Existing Credit Agreement.

       

      “Existing
        Term Lenders”
means
        each Lender that is a Term Lender (as defined in the Existing Credit Agreement)
        under the Existing Credit Agreement.

       

      “Fair
        Value”
means,
        with respect to any assets or property owned by the Borrower or any Subsidiary,
        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
        Subsidiary in good faith.

       

      “Federal
        Funds Effective Rate”
means,
        for any day, the weighted average of the rates on overnight Federal funds
        transactions with members of the Federal Reserve System arranged by Federal
        funds brokers, as published on the next succeeding Business Day by the Federal
        Reserve Bank of New York, or, if such rate is not so published for any day
        that
        is a Business Day, the average of the quotations for such day for such
        transactions received by the Administrative Agent from three Federal funds
        brokers of recognized standing selected by it.

       

      “FERC”
means
        the Federal Energy Regulatory Commission.

       

      “Final
        Maturity Date”
means
        the date that occurs five (5) years after the Effective Date.

       

      “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.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      “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.

       

      “Increasing
        Revolving Lender”
means
        each Existing Revolving Lender whose Revolving Commitment (as set forth on
        Schedule 2.01) exceeds its Revolving Commitment (as defined in the Existing
        Credit Agreement) under the Existing Credit Agreement.

       

      “Increasing
        Term Lender”
means
        each Existing Term Lender whose Term Commitment (as set forth on Schedule
        2.01)
        exceeds its Term Commitment (as defined in the Existing Credit Agreement)
        under
        the Existing Credit Agreement.

       

      “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

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      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.

       

      “Information
        Memorandum”
means
        the Confidential Information Memorandum dated July 2006 relating to the
        Borrower and the Transactions.

       

      “Interest
        Election Request”
means
        a
        request by the Borrower to convert or continue a Revolving Borrowing or a
        Term
        Borrowing in accordance with Section 2.05.

       

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

       

      “Interest
        Period”
means,
        with respect to any Eurodollar Borrowing, the period commencing on the date
        of
        such Borrowing (which initially shall be the date on which such Borrowing
        is
        made and thereafter shall be the effective date of the most recent conversion
        or
        continuation of such Borrowing) and ending on the numerically corresponding
        day
        in the calendar month that is one, two, three or six months thereafter, as
        the
        Borrower may elect; provided,
        that
        (i) if any Interest Period would end on a day other than a Business Day,
        such
        Interest Period shall be extended to the next succeeding Business Day unless
        such next succeeding Business Day would fall in the next calendar month,
        in
        which case such Interest Period shall end on the next preceding Business
        Day and
        (ii) any Interest Period that commences on the last Business Day of a calendar
        month (or on a day for which there is no numerically corresponding day in
        the
        last calendar month of such Interest Period) shall end on the last Business
        Day
        of the last calendar month of such Interest Period.

       

      “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. 

       

      “Leverage
        Ratio”
means,
        as of any date, the ratio of (a) Consolidated Total Indebtedness on the last
        day
        of the most recent fiscal quarter ended prior to such date for which financial
        statements are required to be delivered to the Lenders pursuant to Section
        5.01(a) or (b) to (b) Consolidated EBITDA of the Borrower and the Subsidiaries
        for the four-fiscal-quarter period ended on the last day of such fiscal
        quarter.

       

      “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’

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      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.

       

      “Limited
        Subsidiaries”
means
        all of the Subsidiaries other than TEP, the Millennium Entities, and any
        other
        Person that becomes a Subsidiary after the Original Effective Date.

       

      “Loan
        Documents”
means
        this Agreement, any promissory note delivered pursuant to Section 2.07, and
        the
        Security Documents.

       

      “Loans”
means
        the loans made by the Lenders to the Borrower pursuant to this
        Agreement.

       

      “Material
        Adverse Effect”
means
        a
        material adverse effect on (a) the financial condition, assets, operations
        or
        business 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 (c)
        the rights of or benefits available to the Administrative Agent or the Lenders
        under any Loan Document.

       

      “Material
        Indebtedness”
means
        Indebtedness (other than the Loans), 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 the Significant Subsidiaries.

       

      “MEG”
means
        Millennium Environmental Group, Inc., an Arizona corporation.

       

      “Millennium”
means
        Millennium Energy Holdings, Inc., an Arizona corporation.

       

      “Millennium
        Entities”
means
        Millennium, all subsidiaries of Millennium and all other Persons Controlled
        by
        Millennium and/or the subsidiaries of Millennium.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      “Moody’s”
means
        Moody’s Investors Service, Inc. or any successor thereto.

       

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

       

      “New
        Revolving Lenders”
means
        each Revolving Lender that is not an Existing Revolving Lender.

       

      “New
        Term Lenders”
means
        each Term Lender that is not an Existing Term Lender.

       

      “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, when and as due, whether at maturity, by acceleration,
        upon one or more dates set for prepayment or otherwise, and (ii) all other
        monetary obligations, including fees, costs, expenses and indemnities, whether
        primary, secondary, direct, contingent, fixed or otherwise (including monetary
        obligations incurred during the pendency of any bankruptcy, insolvency,
        receivership or other similar proceeding, regardless of whether allowed or
        allowable in such proceeding), of the Borrower under this Agreement, the
        other
        Loan Documents and the Specified Hedge Agreements; and (b) the due and punctual
        performance of all other covenants, agreements, obligations and liabilities
        of
        the Borrower under or pursuant to this Agreement, the other Loan Documents
        and
        the Specified Hedge Agreements; provided,
        that
        (i) obligations of the Borrower under any Specified Hedge Agreement shall
        be
        secured pursuant to the Security Documents only to the extent that, and for
        so
        long as, the other Obligations are so secured and (ii) any release of Collateral
        effected in the manner permitted by this Agreement or the Security Documents
        shall not require the consent of holders of obligations under Specified Hedge
        Agreements.

       

      “Original
        Effective Date”
means
        April 15, 2005.

       

      “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.

       

      “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.

       

      “Permitted
        Acquisition”
means
        the acquisition of Capital Stock by the Borrower or the acquisition (whether
        pursuant to any acquisition of Capital Stock, assets or otherwise) by any
        Subsidiary of (x) assets constituting a business unit located in the United
        States or (y) Capital Stock of Persons constituted a resident in the United
        States (or any state thereof), but only if (a) such acquisition and all
        transactions related thereto shall be consummated in accordance with applicable
        law; (b) no Default or Event of Default shall have occurred and be

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      continuing
        at the time of such acquisition or would occur after giving effect to such
        acquisition and the Borrower and the Subsidiaries shall be in compliance
        with
        Section 6.03(b) after giving effect to such acquisition; and (c) the Borrower
        shall be in compliance, on a pro
        forma
        basis
        after giving effect to such acquisition (including any Indebtedness assumed
        or
        permitted to exist or incurred pursuant to Section 6.01(a) in connection
        with
        such acquisition and any related Pro Forma Adjustment), with the covenants
        set
        forth in Sections 6.12 and 6.13, as such covenants are recomputed as at the
        last
        day of the most recently ended fiscal quarter under such Sections as if such
        acquisition had occurred on the first day of the four-fiscal-quarter period
        ended on such date, and such compliance shall have been certified in a
        certificate of a Financial Officer, in form and substance reasonably
        satisfactory to the Administrative Agent, delivered to the Administrative
        Agent.

       

      “Permitted
        Encumbrances”
        means:

       

      (a)     Liens
        imposed by law for taxes that are not yet due or are being contested in
        compliance with Section 5.05;

       

      (b)     carriers’,
        warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
        imposed by law, arising in the ordinary course of business and securing
        obligations that are not overdue by more than 30 days or are being contested
        in
        compliance with Section 5.05;

       

      (c)     pledges
        and deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
        regulations;

       

      (d)     deposits
        to secure the performance of bids, trade contracts, leases, statutory
        obligations, surety and appeal bonds, performance bonds and other obligations
        of
        a like nature, in each case in the ordinary course of business;

       

      (e)     judgment
        liens in respect of judgments that do not constitute an Event of Default
        under
        clause (k) of Article VII; 

       

      (f)     ground
        leases, easements and joint use agreements in respect of real property on
        which
        facilities owned or leased by the Borrower or any of the Subsidiaries are
        located and which in each case, do not interfere in any material respect
        with
        the business of the Borrower and the Subsidiaries taken as a whole;

       

      (g)     any
        interest or title of a lessor or secured by a lessor’s interest under any lease
        permitted by this Agreement and which in each case, do not interfere in any
        material respect with the business of the Borrower and the Subsidiaries taken
        as
        a whole;

       

      (h)     Liens
        incurred by the licensing of trademarks by the Borrower or any Subsidiary
        to
        others in the ordinary course of business; 

       

      (i)     leases
        or
        subleases granted to others, not interfering in any material respect with
        the
        business of the Borrower and the Subsidiaries taken as a whole;

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (j)     easements,
        licenses, restrictions, exceptions, reservations or other outstanding interests
        in or against any property and/or rights-of-way of the Borrower or any
        Subsidiary created or existing by way of, or for the purpose of, public
        highways, private roads, railroads, railroad sidetracks, pipelines, coal-hauling
        facilities, ash disposal facilities and fuel-handling activities used in
        connection with the operation of a generating unit, gas transportation lines,
        transmission lines, distribution lines, telegraph or telephone lines, mains,
        ditches, canals and other like purposes; water rights of any Governmental
        Authorities or other Person; and building and use restrictions, and which
        in
        each case, do not interfere in any material respect with the business of
        the
        Borrower and the Subsidiaries taken as a whole;

       

      (k)     any
        obligations or duties affecting the property of the Borrower or any Subsidiary
        to any Governmental Authority with respect to any franchise, grant, license
        or
        permit from such Governmental Authority;

       

      (l)     defects
        in title to overflow and flood lands and rights, and in title to rights-of-way
        for roads, transmission lines, distribution lines, mains, ditches, canals,
        telegraph or telephone lines, railroads, railroad sidetracks or for other
        purposes of the Borrower or any Subsidiary over public or private property,
        none
        of which materially impair the use of the property affected
        thereby;

       

      (m)     rights
        reserved to or vested in any Governmental Authority by the terms of any right,
        power, franchise, grant, license or permit, or by any provision of law, to
        terminate such right, power, franchise, grant, license or permit or to purchase
        or recapture or to designate a purchaser of any of the property of the Borrower
        or any Subsidiary or otherwise to control or regulate any property of the
        Borrower or any Subsidiary and which in each case, do not interfere in any
        material respect with the business of the Borrower and the Subsidiaries taken
        as
        a whole;

       

      (n)     rights
        granted or created or burdens assumed by the Borrower or any Subsidiary under
        agreements for the joint use of poles and equipment, and similar agreements;
        and
        burdens created under any law or governmental regulation or permit requiring
        the
        Borrower or any Subsidiary to maintain certain facilities or perform certain
        acts as a condition of the Borrower’s or any Subsidiary’s occupancy of or
        interference with any public lands or any river or stream or navigable waters
        or
        bridge or highway and which in each case, do not interfere in any material
        respect with the business of the Borrower and the Subsidiaries taken as a
        whole;
        and

       

      (o)     any
        right
        of use, ingress, egress, partition, easement, license or reservation,
        contractual or otherwise, of any common owner in any property, plant, system
        or
        facility owned by the Borrower or any Subsidiary with another party; and
        any
        lien securing indebtedness of any such common owner, neither payable by,
        nor
        assumed nor guaranteed by, the Borrower or any Subsidiary, existing as to
        any
        undivided interest of such other common owner in such common owned property
        and
        which in each case, do not interfere in any material respect with the business
        of the Borrower and the Subsidiaries taken as a whole;

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      provided,
        that
        the term “Permitted Encumbrances” shall not include any Lien securing
        Indebtedness except as set forth in clause (o) above.

       

      “Permitted
        Investments”
        means:

       

      (a)     direct
        obligations of, or obligations the principal of and interest on which are
        unconditionally guaranteed by, the United States of America (or by any agency
        thereof to the extent such obligations are backed by the full faith and credit
        of the United States of America), in each case maturing within 24 months
        from
        the date of acquisition thereof;

       

      (b)     securities
        issued by any state of the United States or any political subdivision or
        public
        instrumentality of any such state having maturities of not more than 24 months
        from the date of acquisition thereof and, at the time of acquisition, having
        an
        investment grade rating generally obtainable from either S&P or
        Moody’s;

       

      (c)     investments
        in commercial paper maturing within 12 months from the date of acquisition
        thereof and having, at such date of acquisition, a credit rating of at least
        A-2
        or P-2 from S&P or Moody’s (or, if at any time neither S&P nor Moody’s
        shall be rating such obligations, an equivalent rating from another nationally
        recognized rating service);

       

      (d)     investments
        in certificates of deposit, banker’s acceptances and time deposits maturing
        within 12 months from the date of acquisition thereof issued or guaranteed
        by or
        placed with, and money market deposit accounts issued or offered by, any
        domestic office of any commercial bank organized under the laws of the United
        States of America or any State thereof which has a combined capital and surplus
        and undivided profits of not less than $500,000,000;

       

      (e)     fully
        collateralized repurchase agreements with a term of not more than 30 days
        for
        securities described in clause (a), (b), (c) or (d) above and entered into
        with
        a financial institution satisfying the criteria described in clause (d) above
        or
        a securities dealer of nationally recognized standing; and

       

      (f)     shares
        of
        investment companies that are registered under the Investment Company Act
        of
        1940 and invest solely in one or more of the types of securities described
        in
        clauses (a) through (e) above.

       

      “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.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      “Pro
        Forma Adjustment”
means,
        for any period that includes any of the four fiscal quarters first following
        any
        Permitted Acquisition, with respect to the Acquired EBITDA of the applicable
        Acquired Entity or Business and/or with respect to the Consolidated EBITDA
        of
        the Borrower and the Subsidiaries after giving effect to such Permitted
        Acquisition, the pro
        forma
        increase
        or decrease in such Acquired EBITDA and/or the Consolidated EBITDA of the
        Borrower and the Subsidiaries after giving effect to such Permitted Acquisition,
        as the case may be, projected by the Borrower in good faith as a result of
        reasonably identifiable and supportable net cost savings or additional net
        costs, as the case may be, determined in accordance with Sections 1.04 and
        1.05.

       

      “Pro
        Forma Adjustment Certificate”
means
        any certificate of a Financial Officer delivered pursuant to Section
        5.01(k).

       

      “Pro
        Forma Entity”
means
        any Acquired Entity or Business or any Sold Entity or Business.

       

      “Qualified
        Counterparty”
means,
        with respect to any Specified Hedge Agreement, any counterparty thereto that,
        at
        the time such Specified Hedge Agreement was entered into, was a Lender or
        an
        affiliate of a Lender.

       

      “Rating
        Agencies”
means
        either of Moody’s or S&P.

       

      “Reference
        Rate”
means
        the variable rate of interest per
        annum
        established by Union Bank from time to time as its “reference rate”. Such
“reference rate” is set by Union Bank as a general reference rate of interest,
        taking into account such factors as Union Bank may deem appropriate, it being
        understood that many of Union Bank’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 Union Bank may make various commercial
        or other loans at rates of interest having no relationship to such rate.
        For
        purposes of this Agreement, each change in the Reference Rate shall be effective
        as of the opening of business on the date announced as the effective date
        of any
        change in such “reference rate”.

       

      “Register”
has
        the
        meaning assigned to such term in Section 9.04(c). 

       

      “Regulation
        D”
means
        Regulation D of the Board.

       

      “Regulation
        U”
means
        Regulation U of the Board.

       

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

       

      “Repayment
        Date”
means
        the last Business Day of each March, June, September and December, commencing
        on
        the first such date to occur following the Effective Date.

       

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

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      “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,
        as to any Person, any dividend or other distribution (whether in cash,
        securities or other property) with respect to any Equity Interests in such
        Person, 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
        Equity Interests in such Person or any option, warrant or other right to
        acquire
        any such Equity Interests in such Person.

       

      “Revolving
        Availability Period”
means
        the period from and after the Effective Date to but excluding the earlier
        of the
        Final Maturity Date and the date of the termination of the Revolving
        Commitments.

       

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

       

      “Revolving
        Commitment”
means,
        with respect to each Lender, the commitment, if any, of such Lender to make
        Revolving Loans hereunder, expressed as an amount representing the maximum
        aggregate permitted amount of such Lender’s Revolving Exposure hereunder, as
        such commitment may be (a) reduced from time to time pursuant to Section
        2.06
        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
        Revolving Commitment is set forth on Schedule 2.01, or in the Assignment
        and
        Assumption pursuant to which such Lender shall have assumed its Revolving
        Commitment, as applicable. The initial aggregate amount of the Lenders’
Revolving Commitments is $70,000,000.

       

      “Revolving
        Exposure”
means,
        with respect to any Lender at any time, the sum of the aggregate outstanding
        principal amount of such Lender’s Revolving Loans at such time.

       

      “Revolving
        Lender”
means
        a
        Lender with a Revolving Commitment, or if the Revolving Commitments have
        terminated or expired, a Lender with Revolving Exposure.

       

      “Revolving
        Loan”
means
        a
        Loan made pursuant to clause (b) of Section 2.01.

       

      “S&P”
means
        Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies,
        Inc. or any successor thereto.

       

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

       

      “SEC”
means
        the Securities and Exchange Commission.

       

      “Security
        Documents”
means
        the Borrower Pledge Agreement and each of the other security agreements,
        pledges, mortgages, assignments (collateral or otherwise) and 

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      consents,
        if any, and each other security agreement
        or other instrument or document executed and delivered pursuant to any of
        the
        foregoing documents, in each case to secure any of the Obligations.

       

      “Significant
        Subsidiary”
means
        (a) TEP, (b) San Carlos, (c) any Subsidiary that directly or indirectly owns
        or
        Controls any other Significant Subsidiary and (d) 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(a) or (b) was greater
        than or equal to 15% of the consolidated total assets as of such date of
        the
        Borrower and the 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.

       

      “Sold
        Entity or Business”
shall
        have the meaning provided in the definition of the term “Consolidated
        EBITDA”.

       

      “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.

       

      “Southwest
        Energy”
means
        Southwest Energy Solutions, Inc.

       

      “Specified
        Hedge Agreement”
means
        any Hedging Agreement entered into by the Borrower and any Qualified
        Counterparty.

       

      “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 of the Board). Such reserve
        percentages shall include those imposed pursuant to such 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 such 

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      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.

       

      “Subordinated
        Debt”
means
        unsecured Indebtedness of the Borrower and the Subsidiaries subordinated
        in
        right of payment to the Obligations.

       

      “subsidiary”
means,
        with respect to any Person (the “parent”)
        at any
        date, any corporation, limited liability company, partnership, association
        or
        other entity the accounts of which would be consolidated with those of the
        parent in the parent’s consolidated financial statements if such financial
        statements were prepared in accordance with GAAP as of such date, as well
        as any
        other corporation, limited liability company, partnership, association or
        other
        entity (a) of which securities or other ownership interests representing
        more
        than 50% of the equity or more than 50% of the ordinary voting power or,
        in the
        case of a partnership, more than 50% of the general partnership interests
        are,
        as of such date, owned, controlled or held, or (b) that is, as of such date,
        otherwise Controlled by the parent or one or more subsidiaries of the
        parent.

       

      “Subsidiary”
means
        any subsidiary of the Borrower.

       

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

       

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

       

      “TEP
        Bond Delivery Agreement”
means
        that certain Bond Delivery Agreement, dated as of May 4, 2005, between TEP
        and Union Bank, as Administrative Agent under the TEP Credit
        Agreement.

       

      “TEP
        Collateral Mortgage Bonds”
means
        the Second Mortgage Bonds, Collateral Series E, substantially in the form
        attached to the TEP Sixth Supplemental Indenture.

       

      “TEP
        Credit Agreement”
means
        that certain Amended and Restated Credit Agreement, dated as of August 11,
        2006,
        by and among TEP, the lenders party thereto, the issuing banks party thereto,
        Union Bank, as administrative agent, The Bank of New York and JPMorgan Chase
        Bank, N.A., as co-syndication agents, and Wells Fargo Bank, National Association
        and LaSalle Bank National Association, as co-documentation agents, and any
        refinancing or renewal thereof so long as such refinancing or renewal complies
        with the provisions of Section 6.11.

       

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

       

      “TEP
        Loan Documents”
means
        the TEP Credit Agreement, the TEP Bond Delivery Agreement, the TEP Sixth
        Supplemental Indenture, the TEP Collateral Mortgage Bonds, the TEP Revenue
        Bond
        Pledge Agreements and the other TEP Security Documents.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      “TEP
        Revenue Bond Pledge Agreements”
means,
        collectively, all pledge agreements executed in connection with the TEP Credit
        Agreement.

       

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

       

      “TEP
        Security Documents”
means
        the TEP Indenture, the TEP Sixth Supplemental Indenture, the TEP Collateral
        Mortgage Bonds, the TEP Bond Delivery Agreement, the TEP Revenue Bond Pledge
        Agreements, and each other security agreement or other instrument or document
        executed and delivered pursuant to the TEP Loan Documents (including, without
        limitation, (i) any supplemental indenture to the TEP Indenture providing
        for
        the issuance of TEP Mortgage Bonds to secure the obligations of TEP under
        any
        refinancing or renewal of, or any increase in the aggregate amount of
        commitments under, the TEP Credit Agreement and (ii) any TEP Mortgage Bonds
        issued pursuant to any such supplemental indenture).

       

      “TEP
        Sixth Supplemental Indenture”
means
        Supplemental Indenture No. 6 under the TEP Indenture, by and between TEP
        and The Bank of New York (successor in trust to Bank of Montreal Trust Company),
        as trustee.

       

      “TEP
        Subsidiary”
means
        any subsidiary of TEP.

       

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

       

      “Term
        Commitment”
means,
        with respect to each Lender, the commitment, if any, of such Lender to make
        Term
        Loans hereunder on the Effective Date, expressed as an amount representing
        the
        maximum principal amount of the Term Loans to be made by such Lender hereunder.
        The amount of each Lender’s Term Commitment is set forth on Schedule 2.01. The
        initial aggregate amount of the Lenders’ Term Commitments is
        $30,000,000.

       

      “Term
        Lender”
means
        a
        Lender with a Term Commitment or an outstanding Term Loan.

       

      “Term
        Loan”
means
        a
        Loan made pursuant to clause (a) of Section 2.01.

       

      “Transaction
        Expenses”
means
        any fees or expenses incurred or paid by the Borrower or any Subsidiary in
        connection with the Transactions and the other transactions contemplated
        hereby.

       

      “Transactions”
means
        the execution, delivery and performance by the Borrower of this Agreement
        and
        the other Loan Documents, the borrowing of 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
        

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      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.

       

      “UED”
means
        UniSource Energy Development Company, an Arizona corporation.

       

      “UES”
means
        UniSource Energy Services, Inc., an Arizona corporation.

       

      “UES
        Subsidiary”
means
        any subsidiary of UES.

       

      “Union
        Bank”
means
        Union Bank of California, N.A., a national banking association.

       

      “UniSource
        Tax Sharing Agreement”
means
        the Tucson Electric Power Company and Subsidiaries Income Tax Allocation
        Policy
& Procedures, Effective Date: January 1, 1997, as the same may be amended,
        supplemented, replaced or otherwise modified from time to time. The Borrower
        acknowledges and agrees that references in the UniSource Tax Sharing Agreement
        (as in effect on the Effective Date) to “TEP” and the “TEP Group” have been, and
        will continue to be, deemed to comprise the Borrower and the Borrower and
        its
        Subsidiaries, respectively.

       

      “Unrestricted
        Cash”
means
        cash and Permitted Investments of the Borrower and the Subsidiaries, in each
        case not subject to a Lien (including, without limitation, any Lien permitted
        hereunder), setoff (other than ordinary course setoff rights of a depository
        bank arising under a bank depository agreement for customary fees, charges
        and
        other account-related expenses due to such depository bank thereunder),
        counterclaim, recoupment, defense or other right in favor of any Person and,
        in
        the case of any such cash and Permitted Investments of any Subsidiary, not
        subject to any legal, contractual or other restriction on the ability of
        such
        Subsidiary to distribute all such cash and Permitted Investments to the
        Borrower.

       

      “UNS
        Credit Agreement”
means
        the Amended and Restated Credit Agreement, dated as of August 11, 2006,
        among UNS Gas and UNS Electric, as borrowers, UES, as guarantor, the banks
        named
        therein and the other lenders from time to time party thereto, and Union
        Bank,
        as administrative agent.

       

      “UNS
        Electric”
means
        UNS Electric, Inc., an Arizona corporation.

       

      “UNS
        Gas”
means
        UNS Gas, Inc., an Arizona corporation.

       

      “UNS
        Note Agreements”
means,
        collectively, (i) the Note Purchase and Guaranty Agreement, dated as of August
        11, 2003, among UNS Electric, UES and the Purchasers named therein, and (ii)
        the
        Note Purchase and Guaranty Agreement, dated as of August 11, 2003, among
        UNS
        Gas, UES and the Purchasers named therein.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      “UNS
        Loan Documents”
means
        the UNS Credit Agreement, the UNS Note Agreements and all instruments, documents
        and agreements entered into by UES, UNS Gas and UNS Electric in connection
        therewith.

       

      “Utility
        Business”
means
        the business of producing, developing, generating, transmitting, distributing,
        selling or supplying electrical energy or natural gas 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 TEP, any TEP Subsidiary, UES
        or
        any UES Subsidiary to enter.

       

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

       

      SECTION
        1.02. Classification
        of Loans and Borrowings.
        For
        purposes of this Agreement, Loans may be classified and referred to by Class
        (e.g.,
        a
“Revolving
        Loan”)
        or by
        Type (e.g.,
        a
“Eurodollar
        Loan”)
        or by
        Class and Type (e.g.,
        a
“Eurodollar
        Revolving Loan”).
        Borrowings also may be classified and referred to by Class (e.g.,
        a
“Revolving
        Borrowing”)
        or by
        Type (e.g.,
        a
“Eurodollar
        Borrowing”)
        or by
        Class and Type (e.g.,
        a
“Eurodollar
        Revolving 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 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 (including the effects of the application or
        discontinuance of the application of accounting for the 

       

      
        
          
          

        

        
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      effects
        of regulation to all or any portion of the Borrower’s operations), or if the
        Administrative Agent notifies the Borrower that the Required Lenders request
        an
        amendment to any provision hereof for such purpose, regardless of whether
        any
        such notice is given before or after such change in GAAP or in the application
        thereof, then such provision shall be interpreted on the basis of GAAP as
        in
        effect and applied immediately before such change shall have become effective
        until such notice shall have been withdrawn or such provision amended in
        accordance herewith.

       

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

       

      ARTICLE
        II

      The
        Credits

       

      SECTION
        2.01. Commitments.
        Subject
        to the terms and conditions set forth herein, each Lender agrees (a) to make
        Term Loans to the Borrower on the Effective Date in an aggregate principal
        amount not exceeding its Term Commitment and (b) to make Revolving Loans
        to the
        Borrower from time to time during the Revolving Availability Period in an
        aggregate principal amount that will not result in (x) such Lender’s Revolving
        Exposure exceeding such Lender’s Revolving Commitment or (y) the sum of the
        total Revolving Exposures exceeding the Revolving Commitments. Within the
        foregoing limits and subject to the terms and conditions set forth herein,
        the
        Borrower may borrow, prepay and reborrow Revolving Loans. Amounts repaid
        in
        respect of Term Loans may not be reborrowed.

       

      SECTION
        2.02. Loans
        and Borrowings.

       

      (a)    Each
        Loan
        shall be made as part of a Borrowing consisting of Loans of the same Class
        and
        Type made by the Lenders ratably in accordance with their respective Commitments
        of the applicable Class. The failure of any Lender to make any Loan required
        to
        be made by it shall not relieve any other Lender of its obligations hereunder;
        provided
        that the
        Commitments of the Lenders are several and no Lender shall be responsible
        for
        any other Lender’s failure to make Loans as required.

       

      (b)    Subject
        to Section 2.12, each Revolving Borrowing and Term Borrowing shall be comprised
        entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
        accordance herewith. 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.

       

      
        
          
          

        

        
          23

          
            

          

        

        
          
          

        

      

       

      (c)    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. At the time that each ABR Borrowing
        is
        made, such Borrowing shall be in an aggregate amount that is an integral
        multiple of $1,000,000 and not less than $1,000,000; provided
        that an
        ABR Revolving Borrowing may be in an aggregate amount that is equal to the
        entire unused balance of the total Revolving Commitments. Borrowings
        ofmore than one Type and Class may be outstanding at the same time;
        provided
        that
        there shall not at any time be more than a total of eight (8) Eurodollar
        Borrowings outstanding.

       

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

       

      SECTION
        2.03. Requests
        for Borrowings.
        To
        request a Revolving Borrowing or Term Borrowing, the Borrower shall notify
        the
        Administrative Agent of such request by telephone (a) in the case of a
        Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California
        time,
        three Business Days before the date of the proposed Borrowing or (b) in the
        case
        of an ABR Borrowing, not later than 11:00 a.m., Los Angeles, California time,
        one Business Day before the date of the proposed Borrowing. Each such telephonic
        Borrowing Request shall be irrevocable and shall be confirmed promptly by
        hand
        delivery or telecopy to the Administrative Agent of a written Borrowing Request
        in a form approved by the Administrative Agent and signed by the Borrower.
        Each
        such telephonic and written Borrowing Request shall specify the following
        information in compliance with Section 2.02:

       

      (i)     whether
        the requested Borrowing is to be a Revolving Borrowing or a Term
        Borrowing;

       

      (ii)     the
        aggregate amount of such Borrowing;

       

      (iii)     the
        date
        of such Borrowing, which shall be a Business Day;

       

      (iv)     whether
        such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

       

      (v)     in
        the
        case of a Eurodollar Borrowing, the initial Interest Period to be applicable
        thereto, which shall be a period contemplated by the definition of the term
        “Interest Period”; and

       

      (vi)     the
        location and number of the Borrower’s account to which funds are to be
        disbursed.

       

      If
        no
        election as to the Type of Borrowing is specified, then the requested Borrowing
        shall be an ABR Borrowing. If no Interest Period is specified with respect
        to
        any requested Eurodollar Borrowing, then the Borrower shall be deemed to
        have
        selected an Interest Period of one month’s duration. Promptly following receipt
        of a Borrowing Request in accordance with this Section, the Administrative
        Agent
        shall advise each Lender of the details thereof and of the amount of such
        Lender’s Loan to be made as part of the requested Borrowing.

       

      SECTION
        2.04. Funding
        of Borrowings.

       

      (a)    Each
        Lender shall make each Loan to be made by it hereunder on the proposed date
        thereof by wire transfer of immediately available funds by 10:00 a.m., Los
        Angeles, California time, to the account of the Administrative Agent most
        recently designated by it for such purpose by notice to the Lenders. The
        Administrative Agent will make such Loans

       

      
        
          
          

        

        
          24

          
            

          

        

        
          
          

        

      

       

      available
        to the Borrower by promptly crediting the amounts so received, in like funds,
        to
        an account of the Borrower designated by the Borrower in the applicable
        Borrowing Request.

       

      (b)    Unless
        the Administrative Agent shall have received notice from a Lender prior to
        the
        proposed date of any Borrowing that such Lender will not make available to
        the
        Administrative Agent such Lender’s share of such Borrowing, the Administrative
        Agent may in its sole discretion assume that such Lender has made such share
        available on such date in accordance with paragraph (a) of this Section and
        may,
        in reliance upon such assumption, make available to the Borrower a corresponding
        amount. In such event, if a Lender has not in fact made its share of the
        applicable Borrowing available to the Administrative Agent, then the applicable
        Lender and the Borrower severally agree to pay to the Administrative Agent
        forthwith on demand such corresponding amount with interest thereon, for
        each
        day from and including the date such amount is made available to the Borrower
        to
        but excluding the date of payment to the Administrative Agent, at (i) in
        the
        case of such Lender, 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 or (ii) in the case of the Borrower, the interest
        rate
        applicable to ABR Loans. If such Lender pays such amount to the Administrative
        Agent, then such amount shall constitute such Lender’s Loan included in such
        Borrowing.

       

      SECTION
        2.05. Interest
        Elections.

       

      (a)    Each
        Revolving Borrowing and Term Borrowing initially shall be of the Type specified
        in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing,
        shall have an initial Interest Period as specified in such Borrowing Request.
        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 by the time that a Borrowing
        Request would be required under Section 2.03 if the Borrower were requesting
        a
        Borrowing of the Type resulting from such election to be made on the effective
        date of such election. Each such telephonic Interest Election Request shall
        be
        irrevocable and shall be confirmed promptly by hand delivery or telecopy
        to the
        Administrative Agent of a written Interest Election Request in a form approved
        by the Administrative Agent and signed by the Borrower.

       

      (c)    Each
        telephonic and written Interest Election Request shall specify the following
        information in compliance with Section 2.02:

       

      (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);

       

      
        
          
          

        

        
          25

          
            

          

        

        
          
          

        

      

       

      (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, if an Event of Default has
        occurred and is continuing (i) 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
        2.06. Termination
        and Reduction of Commitments.

       

      (a)    Unless
        previously terminated, (i) the unused Term Commitments shall terminate at
        5:00
        p.m., Los Angeles, California time, on the Effective Date and (ii) the Revolving
        Commitments shall terminate on the Final Maturity Date.

       

      (b)    The
        Borrower may at any time terminate, or from time to time reduce, the Commitments
        of any Class; provided
        that (i)
        each reduction of the Commitments of any Class 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 Revolving Commitments if, after
        giving effect to any concurrent prepayment of the Revolving Loans in accordance
        with Section 2.09, the aggregate Revolving Exposures would exceed the aggregate
        Revolving Commitments.

       

      (c)    The
        Borrower shall notify the Administrative Agent of any election to terminate
        or
        reduce the Commitments under paragraph (b) of this Section at least three
        Business Days prior to the effective date of such termination or reduction,
        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 Revolving 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

       

      
        
          
          

        

        
          26

          
            

          

        

        
          
          

        

      

       

      (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
        Commitments of any Class shall be permanent. Each reduction of the Commitments
        of any Class shall be made ratably among the Lenders in accordance with their
        respective Commitments of such Class.

       

      SECTION
        2.07. Repayment
        of Loans; Evidence of Debt.

       

      (a)    The
        Borrower hereby unconditionally promises to pay (i) to the Administrative
        Agent
        for the account of each Revolving Lender the then unpaid principal amount
        of
        each Revolving Loan on the Final Maturity Date; and (ii) to the Administrative
        Agent for the account of each Term Lender the then unpaid principal amount
        of
        the Term Loans of such Term Lender as provided in Section 2.08.

       

      (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.

       

      (c)    The
        Administrative Agent shall maintain accounts in which it shall record (i)
        the
        amount of each Loan made hereunder, the Class and 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 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 in accordance with the terms of this Agreement.

       

      (e)    Any
        Lender may request that Loans of any Class 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
        2.08. Amortization
        of Term Loans.

       

      (a)    Subject
        to adjustment pursuant to paragraph (c) of this Section, on each Repayment
        Date
        occurring prior to the Final Maturity Date, the Borrower shall pay to the
        Administrative Agent, for the account of the Term Lenders, a principal amount
        of
        the Term Loans in an aggregate amount equal to $1,500,000.

       

      
        
          
          

        

        
          27

          
            

          

        

        
          
          

        

      

       

      (b)    To
        the
        extent not previously paid, all Term Loans shall be due and payable on the
        Final
        Maturity Date.

       

      (c)    Any
        prepayment of a Term Borrowing shall be applied to reduce the subsequent
        scheduled repayments of Term Borrowings to be made pursuant to this Section
        ratably.

       

      SECTION
        2.09. Prepayment
        of Loans.

       

      (a)    Subject
        to prior notice in accordance with paragraph (e) of this Section, 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 2.14).

       

      (b)    On
        the
        date of any termination of the Revolving Commitments, the Borrower shall
        repay
        or prepay all outstanding Revolving Borrowings. If, as a result of any partial
        reduction of the Revolving Commitments, the sum of the Revolving Exposures
        would
        exceed the total Revolving Commitments after giving effect thereto, then
        the
        Borrower shall, on the date of such reduction, repay or prepay Revolving
        Borrowings in an amount equal to such excess.

       

      (c)    In
        the
        event that (i) all or a majority of the voting Capital Stock of UNS Gas or
        UNS
        Electric is sold, transferred or otherwise conveyed to any Person (other
        than a
        wholly-owned Subsidiary of UES), or (ii) all or substantially all of the
        assets
        of UNS Gas or UNS Electric are sold, transferred, leased or otherwise conveyed
        to any Person (other than a wholly-owned Subsidiary of UES), in each case
        in any
        one transaction or series of transactions, and at any time thereafter UES
        pays
        or makes a Restricted Payment in cash to the Borrower, the Borrower shall
        repay
        or prepay outstanding Borrowings (if any) in a principal amount equal to
        50% of
        each such cash Restricted Payment; provided,
        however,
        that
        (A) the Borrower shall repay or prepay in full the outstanding principal
        amount
        of the Term Loan prior to prepaying any Revolving Borrowings, and (B) the
        aggregate amount of repayments and prepayments required to be made by the
        Borrower pursuant to this paragraph (c) shall not exceed 50% of the aggregate
        net proceeds from any such transaction or transactions. The Borrower
        acknowledges and agrees that this paragraph (c) shall not constitute (1)
        a
        waiver of any Default or Event of Default that may occur if and to the extent
        that any such transaction is not permitted by the terms of this Agreement
        or any
        other Loan Document or (2) a consent by the Lenders to any such prohibited
        transaction.

       

      (d)    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 (e) of this
        Section.

       

      (e)    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 11:00 a.m., Los Angeles, California
        time,
        three Business Days before the date of prepayment, or (ii) in the case of
        prepayment of an ABR Borrowing, not later than 11:00 a.m., Los Angeles,
        California time, one Business Day before the date of

       

      
        
          
          

        

        
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      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 Revolving Commitments as contemplated by Section 2.06,
        then
        such notice of prepayment may be revoked if such notice of termination is
        revoked in accordance with Section 2.06. 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 amount that
        would be permitted in the case of an advance of a Borrowing of the same Type
        as
        provided in Section 2.02. Each prepayment of a Borrowing shall be applied
        ratably to the Loans included in the prepaid Borrowing. Prepayments shall
        be
        accompanied by accrued interest to the extent required by Section 2.11 and
        any
        amounts required to be paid pursuant to Section 2.14 in connection with such
        prepayment.

       

      SECTION
        2.10. Fees.

       

      (a)    The
        Borrower agrees to pay to the Administrative Agent for the account of each
        Revolving Lender a commitment fee, which shall accrue at a rate equal to
        0.25%
per
        annum
        on the
        daily unused amount of each Revolving Commitment of such Revolving Lender
        during
        the period from and including the Effective Date to but excluding the date
        on
        which such Revolving Commitment terminates. Accrued commitment fees shall
        be
        payable quarterly in arrears on the last Business Day of March, June, September
        and December of each year and on the date on which the Revolving Commitments
        terminate. 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 to the Administrative Agent, for its own account,
        fees
        payable in the amounts and at the times separately agreed upon by the Borrower
        and the Administrative Agent.

       

      (c)    All
        fees
        payable hereunder shall be paid on the dates due, in immediately available
        funds, to the Administrative Agent for distribution, in the case of commitment
        fees, to the Lenders entitled thereto. Fees paid shall not be refundable
        under
        any circumstances.

       

      SECTION
        2.11. Interest.

       

      (a)    The
        Loans
        comprising each ABR Borrowing shall bear interest at the Alternate Base Rate
        plus the Applicable Rate.

       

      (b)    The
        Loans
        comprising each Eurodollar Borrowing shall bear interest at the Adjusted
        LIBO
        Rate for the Interest Period in effect for such Borrowing plus the Applicable
        Rate.

       

      (c)    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 (b) of this Section until the
        Interest Period applicable thereto shall have expired and thereafter at a
        per annum
        rate
        equal to the Alternate Base Rate plus
        the
        Applicable Rate for ABR 

       

      
        
          
          

        

        
          29

          
            

          

        

        
          
          

        

      

       

      Loans
        plus 2.0%.
        In addition, if any principal of or interest on any Loan 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 the preceding paragraphs
        of
        this Section or (B) in the case of any other amount, 2.0% plus
        the rate
        applicable to ABR Loans as provided in paragraph (a) of this
        Section.

       

      (d)    Accrued
        interest on each Loan shall be payable in arrears on each Interest Payment
        Date
        for such Loan and, in the case of Revolving Loans, upon termination of the
        Revolving Commitments; provided
        that (i)
        interest accrued pursuant to paragraph (c) of this Section shall be payable
        on
        demand, (ii) in the event of any repayment or prepayment of any Loan, accrued
        interest on the principal amount repaid or prepaid shall be payable on the
        date
        of such repayment or prepayment and (iii) 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.

       

      (e)    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 Reference 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, Adjusted LIBO
        Rate
        or LIBO Rate shall be determined by the Administrative Agent, and such
        determination shall be conclusive absent manifest error.

       

      SECTION
        2.12. 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 for such Interest Period; or

       

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

       

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

       

      
        
          
          

        

        
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      SECTION
        2.13. 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); or

       

      (ii)     impose
        on
        any Lender, the Administrative Agent or the London interbank market any other
        condition affecting this Agreement or Eurodollar Loans made by such
        Lender;

       

      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 reduce the amount of any sum received or receivable
        by
        such Lender or the Administrative Agent hereunder (whether of principal,
        interest or otherwise), then the Borrower will pay to such Lender or the
        Administrative Agent, as the case may be, such additional amount or amounts
        as
        will compensate such Lender or the Administrative Agent, as the case may
        be, for
        such additional costs incurred or reduction suffered.

       

      (b)    If
        any
        Lender 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 capital or
        on the capital of such Lender’s holding company, if any, as a consequence of
        this Agreement or the Loans made by such Lender, to a level below that which
        such Lender or such Lender’s holding company could have achieved but for such
        Change in Law (taking into consideration such Lender’s policies and the policies
        of such Lender’s holding company with respect to capital adequacy), then from
        time to time the Borrower will pay to such Lender such additional amount
        or
        amounts as will compensate such Lender or such Lender’s holding company for any
        such reduction suffered.

       

      (c)    A
        certificate of a Lender setting forth the amount or amounts necessary to
        compensate such Lender or its holding company, as the case may be, as specified
        in paragraph (a) or (b) of this Section shall be delivered to the Borrower
        and
        shall be conclusive absent manifest error. The Borrower shall pay such Lender
        the amount shown as due on any such certificate within 10 days after receipt
        thereof.

       

      (d)    Failure
        or delay on the part of any Lender to demand compensation pursuant to this
        Section shall not constitute a waiver of such Lender’s right to demand such
        compensation; provided
        that the
        Borrower shall not be required to compensate a Lender pursuant to this Section
        for any increased costs or reductions incurred more than 270 days prior to
        the
        date that such Lender notifies the Borrower of the Change in Law giving rise
        to
        such increased costs or reductions and of such Lender’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.

       

      
        
          
          

        

        
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      SECTION
        2.14. 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
        borrow, convert, continue or prepay any Revolving Loan or Term Loan on the
        date
        specified in any notice delivered pursuant hereto (regardless of whether
        such
        notice may be revoked under Section 2.06(c) and is revoked in accordance
        therewith), or (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 2.17, then, in any such event, the Borrower
        shall
        compensate each 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 borrow, 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 10 days after receipt
        thereof.

       

      SECTION
        2.15. Taxes.

       

      (a)    Any
        and
        all payments by or on account of any obligation of the Borrower hereunder
        or
        under any other Loan Document shall be made free and clear of and without
        deduction for any Indemnified Taxes or Other Taxes; provided
        that if
        the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
        from such payments, then (i) the sum payable shall be increased as necessary
        so
        that after making all required deductions (including deductions applicable
        to
        additional sums payable under this Section) the Administrative Agent or Lender
        (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 and each Lender, within
        10
        days after written demand therefor, for the full amount of any Indemnified
        Taxes
        or Other Taxes paid by the Administrative Agent or such Lender, 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 

       

      
        
          
          

        

        
          32

          
            

          

        

        
          
          

        

      

       

      by
        a
        Lender, or by the Administrative Agent on its own behalf or on behalf of
        a
        Lender, 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 by 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 shall pay any Other Taxes to the relevant Governmental
        Authority in accordance with applicable law.

       

      SECTION
        2.16. 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 or fees, or of amounts
        payable under Section 2.13, 2.14 or 2.15, or otherwise) prior to 10:00 a.m.,
        Los
        Angeles, California 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 445 South
        Figueroa Street, Los Angeles, California 90071 (or such other office as the
        Administrative Agent shall from time to time designate to the Borrower),
        except
        that payments pursuant to Sections 2.13, 2.14, 2.15 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 commitments fees or any
        payment
        accruing interest, such commitment 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, 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 then due hereunder, ratably among
        the
        parties entitled thereto in accordance with the amounts of principal then
        due to
        such parties.

       

      
        
          
          

        

        
          33

          
            

          

        

        
          
          

        

      

       

      (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
        resulting in such Lender receiving payment of a greater proportion of the
        aggregate amount of its Loans 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 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; 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 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 hereunder that the Borrower will not make such payment, the
        Administrative Agent may assume that the Borrower has made such payment on
        such
        date in accordance herewith and may, in reliance upon such assumption,
        distribute to the Lenders the amount due. In such event, if the Borrower
        has not
        in fact made such payment, then each of the Lenders severally agrees to repay
        to
        the Administrative Agent forthwith on demand the amount so distributed to
        such
        Lender 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 2.04(b) or 2.16(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
        2.17. Mitigation
        Obligations; Replacement of Lenders.

       

      (a)    If
        any
        Lender requests compensation under Section 2.13, 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 2.15, 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

       

      
        
          
          

        

        
          34

          
            

          

        

        
          
          

        

      

       

      amounts
        payable pursuant to Section 2.13 or 2.15, 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 2.13, (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 2.15, (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 the 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 of 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 (A)
        the Borrower shall have received the prior written consent of the Administrative
        Agent, which consent shall not unreasonably be withheld, (B) such Lender
        shall
        have received payment of an amount equal to the outstanding principal of
        its
        Loans, 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 (C) in the case of any such assignment resulting from a claim for
        compensation under Section 2.13 or payments required to be made pursuant
        to
        Section 2.15, 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. 

       

      SECTION
        2.18. Illegality.
        Notwithstanding any other provision of this Agreement, if any Change in Law
        makes it unlawful, or any Governmental Authority asserts that it is unlawful,
        for any Lender to perform its obligations hereunder to make, continue or
        convert
        into Eurodollar Loans, then, on notice thereof and demand therefor by such
        Lender to the Borrower through the Administrative Agent, (a) the obligation
        of
        such Lender to make, continue or convert into Eurodollar Loans shall be
        suspended until the Administrative Agent notifies the Borrower that such
        Lender
        has determined that the circumstances causing such suspension no longer exist,
        and (b) the Borrower shall forthwith prepay in full all Eurodollar Loans
        of such
        Lender then outstanding, together with accrued and unpaid interest thereon,
        unless the Borrower, within five Business Days of such notice and demand,
        converts all Eurodollar Loans of all Lenders then outstanding into ABR Loans
        in
        accordance with the terms hereof. 

       

      SECTION
        2.19. New
        Lenders.
        On the
        Effective Date, (a) each New Revolving Lender and Increasing Revolving Lender
        shall purchase by assignment from the Existing Revolving Lenders such portion
        of
        the Revolving Loans (if any) owing to them as shall be designated by the
        Administrative Agent such that, after giving effect to all such purchases
        and
        assignments, the outstanding Revolving Loans owing to each Revolving Lender
        shall equal such Revolving Lender’s Applicable Percentage of the aggregate
        amount of Revolving Loans owing to all Revolving Lenders, and (b) after giving
        effect to the repayment of the Term Loans (as defined in the Existing Credit
        Agreement) contemplated by Section 4.01(l), each New Term

       

      
        
          
          

        

        
          35

          
            

          

        

        
          
          

        

      

       

      Lender
        and Increasing Term Lender shall purchase by assignment from the Existing
        Term
        Lenders such portion of the Term Loans owing to them as shall be designated
        by
        the Administrative Agent such that, after giving effect to all such purchases
        and assignments, the outstanding Term Loans owing to each Term Lender shall
        equal such Term Lender’s Applicable Percentage of the aggregate amount of Term
        Loans owing to all Term Lenders . 

       

      ARTICLE
        III

      Representations
        and Warranties

       

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

       

      SECTION
        3.01. Organization;
        Powers.
        The
        Borrower and each Subsidiary 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, 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 corporate 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,
        and each other Loan Document to which the Borrower is to be a party, when
        executed and delivered by the Borrower, will constitute, a legal, valid and
        binding obligation of the Borrower, enforceable against the Borrower 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 such
        as
        have been obtained or made and are in full force and effect and except filings
        necessary to perfect Liens created under the Loan Documents, (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 Subsidiary or its assets, or give rise to a right thereunder to require
        any
        payment to be made by the Borrower or any Subsidiary, and (d) will not result
        in
        the creation or imposition of any Lien on any asset of the Borrower or any
        Subsidiary, except Liens created under the Loan Documents.

       

      SECTION
        3.04. Financial
        Condition; No Material Adverse Change.

       

      (a)    The
        audited consolidated balance sheet and related statements of income,
        stockholders’ equity and cash flows of the Borrower and the Subsidiaries for the
        fiscal year ended December 31, 2005 and the most recent financial statements
        delivered by the Borrower pursuant to Section 5.01(a) or (b) present fairly,
        in
        all material respects, the financial position and results of operations and
        cash
        flows of the Borrower and the Subsidiaries as of such dates

       

      
        
          
          

        

        
          36

          
            

          

        

        
          
          

        

      

       

      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(b). Neither the Borrower nor any Subsidiary 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, was material to the Borrower and the
        Subsidiaries, taken as a whole, and which was not reflected in the foregoing
        statements or in the notes thereto. Except as set forth on Schedule 3.04,
        during
        the period from December 31, 2005 to and including the Effective Date there
        has
        been no sale, transfer or other disposition by the Borrower or any Subsidiary
        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 the Subsidiaries taken as a whole at December
        31,
        2005.

       

      (b)    Except
        to
        the extent that any specific change is explicitly disclosed in the Disclosure
        Documents, since December 31, 2005, there has been no material adverse
        change in the financial condition, results of operations, business or prospects
        of the Borrower and the Subsidiaries, taken as a whole.

       

      SECTION
        3.05. Properties.

       

      (a)    Other
        than as explicitly disclosed in the Disclosure Documents, each of the Borrower
        and the Subsidiaries has good title to, or valid leasehold interests in,
        and
        enjoys peaceful and undisturbed possession of, all of 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 the 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 the 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)    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 Subsidiary (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 (except as explicitly disclosed in the Disclosure Documents)
        or
        (ii) that involve any of the Loan Documents or the Transactions.

       

      (b)    Except
        as
        explicitly disclosed in the Disclosure Documents and except with respect
        to any
        other matters that, individually or in the aggregate, could not reasonably
        be
        expected to result in a Material Adverse Effect, neither the Borrower nor
        any
        Subsidiary (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 

       

      
        
          
          

        

        
          37

          
            

          

        

        
          
          

        

      

       

      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 matters
        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
        the 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 do so, 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 Subsidiary 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, as amended.

       

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

       

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

       

      
        
          
          

        

        
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      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.
        On the
        Effective Date, the provisions of the Security Documents are 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
        have been made in all necessary and appropriate public offices so that the
        Liens
        created by such Security Documents 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 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 Subsidiary 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. Neither the Information
        Memorandum nor any of the other reports, financial statements, certificates
        or
        other information furnished by or on behalf of the Borrower to the
        Administrative Agent or any Lender in connection with the negotiation of
        this
        Agreement or any other Loan Document or delivered hereunder (as modified
        or
        supplemented by, and taken together with, other information so furnished)
        contains any material misstatement of a 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.
        The
        Borrower is Solvent. 

       

      SECTION
        3.15. Labor
        Matters.
        There
        are no strikes or other labor disputes against the Borrower or any Subsidiary
        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
        the
        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 Subsidiary on account of
        employee health and welfare insurance that (individually or in the

       

      
        
          
          

        

        
          39

          
            

          

        

        
          
          

        

      

       

      aggregate)
        could reasonably be expected to have a Material Adverse Effect if not paid
        have
        been paid or accrued as a liability on the books of the Borrower or the relevant
        Subsidiary. 

       

      SECTION
        3.16. Anti-Terrorism
        Laws.
        

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

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

       

      (d)    No
        broker
        or other agent (other than the Arranger) 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.

       

      SECTION
        3.17. Ownership
        of Subsidiaries.
        The
        Borrower is the legal and beneficial owner of all of the outstanding Capital
        Stock of TEP, UES, Millennium and UED.

       

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

       

      None
        of
        such Capital Stock owned by the Borrower is subject to any Lien, except for
        Liens on the Capital Stock of UES, Millennium and UED in favor of the
        Administrative Agent.

       

      ARTICLE
        IV

      Conditions
        Precedent

       

      SECTION
        4.01. Effective
        Date.
        The
        obligations of the Lenders under this Agreement 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) written 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 counterpart of the Borrower Pledge
        Agreement signed on behalf of the Borrower, together with (i) all documents,
        instruments and filings creating or perfecting the Lien of the Borrower Pledge
        Agreement; (ii) certificates representing the interest of the Borrower in
        each
        of its direct domestic Subsidiaries required to be pledged pursuant to the
        Borrower Pledge Agreement, accompanied by instruments of transfer and stock
        powers endorsed in blank; and (iii) 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 Borrower Pledge Agreement. 

       

      (c)     The
        Administrative Agent shall have received a favorable written opinion (addressed
        to the Administrative Agent and the Lenders and dated the Effective Date)
        of (i)
        Thelen Reid & Priest LLP, New York counsel for the Borrower, substantially
        in the form of Exhibit C, and (ii) Raymond S. Heyman, Esq., General Counsel
        for
        the Borrower, substantially in the form of Exhibit D. The Borrower hereby
        requests such counsel to deliver such opinion. 

       

      (d)     The
        Administrative Agent shall have received such documents and certificates
        as the
        Administrative Agent or its counsel may reasonably request relating to the
        organization, existence and good standing of the Borrower, the authorization
        of
        the Transactions and any other legal matters relating to the Borrower, the
        Loan
        Documents or the Transactions, all in form and substance satisfactory to
        the
        Administrative Agent and its counsel. 

       

      (e)     The
        representations and warranties of the Borrower set forth in this Agreement
        and
        the other Loan Documents shall be true and correct, no Default shall have
        occurred and be continuing, 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, confirming the same as of the Effective
        Date.


       

      (f)     Except
        for any specific change explicitly disclosed in the Disclosure Documents,
        since
        December 31, 2005, there shall have been no material

       

      
        
          
          

        

        
          41

          
            

          

        

        
          
          

        

      

       

      adverse
        change in the financial condition, results of operations, business or prospects
        of the Borrower and the Subsidiaries, taken as a whole. 

       

      (g)     The
        Administrative Agent shall have received a certificate, dated the Effective
        Date
        and signed by the President, a Vice President or a Financial Officer, confirming
        compliance with the conditions set forth in this Section 4.01. 

       

      (h)     The
        TEP
        Loan Documents shall be in full force and effect, and the Administrative
        Agent
        shall have received copies of the TEP Loan Documents, certified by a Financial
        Officer as complete and correct. 

       

      (i)     The
        Administrative Agent 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
        Administrative Agent 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. 

       

      (k)     All
        requisite Governmental Authorities and third parties, if any, shall have
        approved or consented to this Agreement and the other Loan Documents and
        the
        Transactions to the extent required and material (and the Administrative
        Agent
        shall have received certified copies of all such approvals and consents,
        which
        shall be in form and substance satisfactory to the Administrative Agent and
        the
        Lenders), no stay of any applicable regulatory approval shall have been issued
        and there shall be no litigation, 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. 

       

      (l)     The
        Borrower shall have repaid the outstanding principal amount of the Term Loans
        (as defined in the Existing Credit Agreement) under the Existing Credit
        Agreement (whether through the Borrowing of Revolving Loans hereunder on
        the
        Effective Date or otherwise) such that, after giving effect to such repayment,
        the outstanding principal amount of Term Loans shall not exceed the aggregate
        amount of the Term Commitments.

       

      (m)      All
        accrued
        and unpaid interest and fees payable by the Borrower under the Existing Credit
        Agreement shall have been paid in full.

       

      SECTION
        4.02. Each
        Credit Event.
        The
        obligation of each Lender to make a Loan on the occasion of any Borrowing,
        is
        subject to the satisfaction of the following conditions: 

       

      (a)     The
        Administrative Agent shall have received a Borrowing Request with respect
        to
        such Borrowing. 

       

      
        
          
          

        

        
          42

          
            

          

        

        
          
          

        

      

       

      (b)     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
        Borrowing, both before and after giving effect to such Borrowing and to the
        application of the proceeds thereof, 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). 

       

      (c)     At
        the
        time of and immediately after giving effect to such Borrowing, no Default
        shall
        have occurred and be continuing.

       

      Each
        Borrowing shall be deemed to constitute a representation and warranty by
        the
        Borrower on the date thereof as to the matters specified in paragraphs (a),
        (b)
        and (c) of this Section.

       

      ARTICLE
        V

      Affirmative
        Covenants

       

      Until
        the
        Commitments have expired or been terminated and the principal of and interest
        on
        each Loan and all fees and other amounts payable hereunder shall have been
        paid
        in full, the Borrower covenants and agrees with the Administrative Agent
        and the
        Lenders that:

       

      SECTION
        5.01. Financial
        Statements; Ratings Change and Other Information.
        The
        Borrower will furnish to the Administrative Agent (and the Administrative
        Agent
        will forward such copies to the Lenders): 

       

      (a)     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 SEC, whichever is later, audited
        consolidated statements of income and cash flows of the Borrower and the
        Subsidiaries for such year and the related consolidated balance sheets as
        of the
        end of such year, setting forth in each case in comparative form the
        corresponding consolidated figures for the preceding fiscal year, and
        accompanied by an opinion of independent public accountants of recognized
        national standing selected by the Borrower, which opinion shall not contain
        any
        qualification or exception as to the scope of such audit and shall state
        that
        the consolidated financial statements fairly present in all material respects
        the consolidated financial condition
        and results of operations of the Borrower and the Subsidiaries as of the
        end of,
        and for, such fiscal year and have been prepared in accordance with GAAP,
        consistently applied (except where noted);
        

       

      (b)     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 SEC, whichever is later, consolidated statements
        of income of the Borrower and the 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 the
        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 

       

      
        
          
          

        

        
          43

          
            

          

        

        
          
          

        

         

        
          
            
              
                	                 
                        	
                        consolidated
                          figures for the corresponding period in the preceding fiscal
                          year,
                          accompanied by a certificate of a Financial Officer, 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 the
                          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);


                      


              

            

          

        

      

       

      (c)     concurrently
        with any delivery of financial statements under clause (a) or (b) above,
        a
        certificate of a Financial Officer (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 6.08,
        6.12 and 6.13 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, 2005 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 (a) 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 or any Subsidiary shall have filed pursuant to Section 13(a)
        or 15
        of the Exchange Act with the SEC (or any governmental agency substituted
        therefor) or 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)     as
        soon
        as practicable and in any event within five Business Days after TEP receives
        written notice of an upgrading or a downgrading of the TEP Mortgage Bonds
        by any
        Rating Agency, a notice of such upgrading or downgrading; 

       

      (h)     promptly
        upon their becoming available, copies of all current reports on Form 8-K
        filed
        by the Borrower or any Subsidiary with the SEC, and all similar reports filed
        with any national securities exchange; 

       

      (i)     promptly
        upon their becoming available, copies of any written notices from the ACC
        or any
        other Governmental Authority of non-compliance by TEP or any TEP Subsidiary
        with
        any material decision of the ACC or the applicable Governmental Authority,
        as
        the case may be, or with any other rules, regulations or orders of the ACC
        or
        the applicable Governmental Authority, as the case may be, and any 

       

      
        
          
          

        

        
          44

          
            

          

        

        
          
          

        

      

       

      written
        notices of any extraordinary audit or
        investigation by the ACC or the applicable Governmental Authority, as the
        case
        may be, into the business, affairs or operations of TEP or any TEP Subsidiary;
        

       

      (j)     concurrently
        with any delivery of financial statements under clause (a) or (b) above with
        regard to each fiscal quarter in which the Borrower elects to make a Pro
        Forma
        Adjustment, a certificate of a Financial Officer setting forth the amount
        of
        such Pro Forma Adjustment and, in reasonable detail, the calculation and
        basis
        therefor; 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, as the Administrative Agent
        or
        any Lender may reasonably request. 

       

      So
        long
        as the Borrower is subject to the financial reporting requirements of the
        Exchange Act and the financial statements contained in any quarterly or annual
        reports filed with the SEC are prepared in accordance with the Exchange Act
        and
        the rules and regulations promulgated thereunder, such financial statements
        may
        be delivered by the Borrower in satisfaction of its obligations to deliver
        consolidated financial statements pursuant to clauses (a) or (b), as the
        case
        may be, of this Section 5.01. 

       

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

       

      (a)     the
        occurrence of any Default; 

       

      (b)     the
        filing or commencement of any action, suit or proceeding by or before any
        arbitrator or Governmental Authority against or affecting the Borrower or
        any
        Affiliate thereof 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 the 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. Information
        Regarding Collateral.
        The
        Borrower will furnish to the Administrative Agent prompt written notice of
        any
        change (i) in the Borrower’s corporate name or in any trade name used to
        identify it in the conduct of its business or in the ownership of

       

      
        
          
          

        

        
          45

          
            

          

        

        
          
          

        

      

       

      its
        properties, (ii) in the location of the Borrower’s chief executive office, its
        jurisdiction of organization, its principal place of business, any office
        in
        which it maintains books or records relating to Collateral owned by it or
        any
        office or facility at which Collateral owned by it is located (including
        the
        establishment of any such new office or facility), (iii) in the Borrower’s
        identity or corporate structure or (iv) in the Borrower’s Federal Taxpayer
        Identification Number. The Borrower agrees not to effect or permit any change
        referred to in the preceding sentence unless all filings have been made under
        the Uniform Commercial Code or otherwise that are required in order for the
        Administrative Agent to continue at all times following such change to have
        a
        valid, legal and perfected security interest in all the Collateral. The Borrower
        also agrees promptly to notify the Administrative Agent if any material portion
        of the Collateral is damaged or destroyed. 

       

      SECTION
        5.04. Existence;
        Conduct of Business.
        The
        Borrower will, and will cause each of the 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
        5.05. Payment
        of Obligations.
        The
        Borrower will, and will cause each of the 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
        5.06. Maintenance
        of Properties; Insurance.
        The
        Borrower will, and will cause each of the 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 the 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 6.05; and (b) maintain, with
        financially sound and reputable insurance companies, or through its own program
        of self-insurance, insurance in such amounts (with no greater risk retention)
        and against such risks and with such self insurance as are customarily
        maintained by companies of established reputations engaged in the same or
        similar businesses operating in the same or similar locations. The Borrower
        will
        furnish to the Lenders, upon reasonable request of the Administrative Agent,
        information in reasonable detail as to the insurance so maintained.


       

      SECTION
        5.07. Books
        and Records; Inspection Rights.
        The
        Borrower will, and will cause each of the 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 

       

      
        
          
          

        

        
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      accordance
        with customary and prudent business practices. The Borrower will, and will
        cause
        each of the 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 and independent accountants, all at such reasonable times
        and
        as often as reasonably requested. 

       

      SECTION
        5.08. Compliance
        with Laws.
        The
        Borrower will, and will cause each of the Subsidiaries to, comply with all
        laws,
        rules, regulations and orders of any Governmental Authority applicable to
        it or
        its property (including, without limitation, ERISA and Environmental Laws),
        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
        5.09. Use
        of
        Proceeds.
        The
        proceeds of the Loans will be used only for general corporate purposes of
        the
        Borrower and the Subsidiaries. No part of the proceeds of any Loan will be
        used,
        whether directly or indirectly, for any purpose that entails a violation
        of any
        of the Regulations of the Board, including Regulations G, U and X. 

       

      SECTION
        5.10. Environmental
        Laws.
        

       

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

       

      
        
          
          

        

        
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      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. 

       

      SECTION
        5.12. Additional
        Security.
        The
        Borrower will cause all of the Capital Stock of each direct domestic Subsidiary,
        and 66-2/3% of the Capital Stock of each direct foreign Subsidiary, in each
        case
        which is not subject to utility regulation and which is formed or otherwise
        purchased or acquired by the Borrower after the date hereof to be deposited
        in
        pledge with the Administrative Agent pursuant to a Security Document in form
        and
        substance reasonably satisfactory to the Administrative Agent and will deliver
        or cause to be delivered such officer’s certificates and legal opinions in
        connection therewith as may reasonably be requested by the Administrative
        Agent.


       

      SECTION
        5.13. Maintain
        Ownership of Subsidiaries.
        The
        Borrower will maintain legal and beneficial ownership of all of the outstanding
        Capital Stock of TEP, UES, Millennium and UED, free and clear of any Lien
        (except for Liens on the Capital Stock of UES, Millennium and UED in favor
        of
        the Administrative Agent); provided
        that the
        foregoing shall not prohibit any merger or consolidation permitted under
        Section
        6.03.

       

      ARTICLE
        VI

      Negative
        Covenants

       

      Until
        the
        Commitments have expired or terminated and the principal of and interest
        on each
        Loan and all fees and other amounts payable hereunder have been paid in full,
        the Borrower covenants and agrees with the Lenders that:

       

      SECTION
        6.01. Indebtedness.

       

      (a)    The
        Borrower will not, and will not permit any Subsidiary to, create, incur,
        assume
        or permit to exist any Indebtedness, except: 

       

      (i)     Indebtedness
        created under the Loan Documents; 

       

      (ii)    Indebtedness
        of TEP or any TEP Subsidiary that is not prohibited to be incurred pursuant
        to
        the TEP Loan Documents; 

       

      (iii)    Indebtedness
        of UES or any UES Subsidiary that is not prohibited to be incurred pursuant
        to
        the UNS Loan Documents; 

       

      (iv)    Indebtedness
        existing on the date hereof and set forth in Schedule 6.01 and extensions,
        renewals and replacements of any such Indebtedness that do not increase the
        outstanding principal amount thereof; 

       

      (v)     Indebtedness
        of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or
        any
        other Subsidiary; provided
        that to
        the extent such Indebtedness is owed to the Borrower, it is pledged pursuant
        to
        the Borrower Pledge Agreement; 

       

      
        
          
          

        

        
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      (vi)
        (A)  Indebtedness of the Borrower or any Borrower Subsidiary incurred to
        finance the acquisition, construction or improvement of any fixed or capital
        assets, including Capital Lease Obligations and any Indebtedness assumed
        in
        connection with the acquisition of any such assets or secured by a Lien on
        any
        such assets prior to the acquisition thereof, and extensions, renewals and
        replacements of any such Indebtedness that do not increase the outstanding
        principal amount thereof, provided
        that
        such Indebtedness is incurred prior to or within 270 days after such acquisition
        or the completion of such construction or improvement and (B) any extensions,
        renewals and replacements of any such Indebtedness that do not increase the
        outstanding principal amount thereof; 

       

      (vii)           
        Indebtedness
        of the Borrower or any Subsidiary as an account party in respect of trade
        letters of credit; and 

       

      (viii)          
        other
        Indebtedness of the Borrower or any Subsidiary which, if created, incurred,
        assumed or permitted to exist, would not result in the occurrence of a Default
        or an Event of Default (including, without limitation, a violation of Section
        6.13; provided,
        that
        for purposes of determining compliance with Section 6.13, such Indebtedness
        shall be deemed to have been incurred as of the last day of the most recently
        ended fiscal quarter). 

       

      (b)    The
        Borrower will not permit any Subsidiary to issue any preferred stock or other
        preferred Equity Interests except to a wholly-owned Subsidiary. 

       

      SECTION
        6.02. Liens.

       

      (a)    The
        Borrower will not, and will not permit any Subsidiary to, create, incur,
        assume
        or permit to exist any Lien on any property or asset now owned or hereafter
        acquired by it, or assign or sell any income or revenues (other than accounts
        receivable) or rights in respect of any thereof, except (subject to paragraph
        (b) of this Section):

       

      (i)               
        Liens
        created under the Loan Documents; 

       

      (ii)     Permitted
        Encumbrances; 

       

      (iii)            
        any
        Lien
        on any property or asset of TEP or any TEP Subsidiary not prohibited by the
        TEP
        Loan Documents; 

       

      (iv)            
        any
        Lien
        on any property or asset of UES or any UES Subsidiary not prohibited by the
        UNS
        Loan Documents; 

       

      (v)     any
        Lien
        on any property or asset of the Borrower or any Subsidiary existing on the
        date
        hereof and set forth in Schedule 6.02; provided
        that (A)
        such Lien shall not apply to any other property or asset of the Borrower
        or any
        Subsidiary and (B) such Lien shall secure only those obligations which it
        secures on the date hereof and extensions, renewals and replacements thereof
        that do not increase the outstanding principal amount thereof; 

       

      
        
          
          

        

        
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      (vi)            
        Liens
        on
        fixed or capital assets acquired, constructed or improved by the Borrower
        or any
        Borrower Subsidiary; provided
        that (A)
        such security interests secure Indebtedness permitted by Section 6.01(a)(vi),
        (B) such security interests and the Indebtedness secured thereby are incurred
        prior to or within 270 days after such acquisition or the completion of such
        construction or improvement, and (C) such security interests shall not apply
        to
        any other property or assets of the Borrower or any Borrower Subsidiary;
        

       

      (vii)           
        Liens
        existing on the assets of any Person that becomes a Subsidiary, or existing
        on
        assets acquired, pursuant to a Permitted Acquisition to the extent the Liens
        on
        such assets secure Indebtedness permitted by Section 6.01(a)(viii); provided
        that (A)
        such Liens shall not apply to any other property or assets of the Borrower
        or
        any Subsidiary and (B) such Liens attach at all times only to the same assets
        that such Liens attached to and secure only the same Indebtedness that such
        Liens secured, immediately prior to such Permitted Acquisition, and extensions,
        renewals and replacements thereof permitted pursuant to Section 6.01(a)(viii);
        

       

      (viii)
        (A)    Liens placed upon the Capital Stock or assets of any
        Subsidiary acquired pursuant to a Permitted Acquisition to secure Indebtedness
        of the Borrower or any Subsidiary incurred pursuant to Section 6.01(a)(ix)
        in
        connection with such Permitted Acquisition and (B) Liens placed upon the
        assets
        of such Subsidiary acquired pursuant to a Permitted Acquisition to secure
        a
        Guarantee by such Subsidiary of any such Indebtedness of the Borrower or
        any
        Subsidiary to the extent such Guarantee is permitted pursuant to Section
        6.01(a)(ix) in connection with such Permitted Acquisition; 

       

      (ix)     Liens
        comprised by escrow arrangements entered into in connection with assets sales,
        transfers or other dispositions permitted pursuant to Section 6.05; and


       

      (x)     additional
        Liens so long as the aggregate principal amount of the obligations secured
        by
        such Liens does not exceed $25,000,000. 

       

      (b)    The
        Borrower will not, and will not permit UES to, create, incur, assume or permit
        to exist any Lien on any property or asset now owned or hereafter acquired
        by
        the Borrower or UES (including Capital Stock in TEP, UNS Gas, UNS Electric
        or
        any other Subsidiary), or assign or sell any income or revenues (other than
        accounts receivable) or rights with respect thereto, except Liens created
        under
        the Loan Documents and Permitted Encumbrances.

       

      SECTION
        6.03. Fundamental
        Changes.

       

      (a)    The
        Borrower will not, and will not permit any Subsidiary 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) all or any substantial part of
        its
        assets, or all or substantially all of the Capital Stock of any Subsidiary
        (in
        each case, whether now owned or hereafter acquired), or liquidate
        or

       

      
        
          
          

        

        
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      dissolve,
        except that, if at the time thereof and immediately after giving effect thereto
        no Default shall have occurred and be continuing:

       

      (i)              
        any
        TEP
        Subsidiary, MEG or Southwest Energy may merge into TEP in a transaction in
        which
        TEP is the surviving corporation; 

       

      (ii)     any
        TEP
        Subsidiary, MEG or Southwest Energy may (A) merge into any other TEP Subsidiary
        or (B) sell, transfer, lease or otherwise dispose of its assets to TEP or
        any
        other TEP Subsidiary; 

       

      (iii)             
        any
        UES
        Subsidiary may merge into UES in a transaction in which UES is the surviving
        corporation; 

       

      (iv)            
        any
        UES
        Subsidiary may (A) merge into any other UES Subsidiary or (B) sell, transfer,
        lease or otherwise dispose of its assets to UES or any other UES Subsidiary;
        

       

      (v)            
        any
        Person (other than the Borrower, TEP, any TEP Subsidiary, UES and any UES
        Subsidiary) may merge into any Borrower Subsidiary in a transaction in which
        the
        surviving entity is a Borrower Subsidiary; provided,
        that in
        any merger involving Millennium or UED, Millennium or UED (as the case may
        be)
        shall be the surviving entity;

       

      (vi)            
        any
        Borrower Subsidiary may sell, transfer, lease or otherwise dispose of its
        assets
        to the Borrower or to another Borrower Subsidiary; provided,
        however,
        that
        neither UES nor UED shall sell, transfer, lease or otherwise dispose of all
        or
        any substantial part of its assets except to the Borrower, UES or UED;


       

      (vii)           
        any
        Subsidiary may liquidate or dissolve if the Borrower determines in good faith
        that such liquidation or dissolution is in the best interests of the Borrower
        and is not materially disadvantageous to the Lenders; 

       

      (viii)          
        any
        transaction permitted pursuant to Section 6.05 (to the extent not prohibited
        by
        any other clause contained in this Section); 

       

      (ix)             
        any
        transaction by TEP or any TEP Subsidiary permitted pursuant to the TEP Loan
        Documents; 

       

      (x)             
        any
        transaction by UES or any UES Subsidiary permitted pursuant to the UNS Loan
        Documents; provided,
        that in
        any merger involving UES, UES shall be the surviving entity;

       

      (xi)            
        any
        Person (other than TEP, any TEP Subsidiary, UES and any UES Subsidiary) may
        merge into the Borrower in a transaction in which the Borrower is the surviving
        corporation; 

       

      (xii)           
        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

       

      
        
          
          

        

        
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                  (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 Person formed by
                    any such
                    merger, consolidation or transfer of assets or into which the
                    Borrower
                    shall be merged or consolidated or to which such assets are transferred
                    shall be in compliance, on a pro
                    forma
                    basis after giving effect to such merger, consolidation or transfer
                    of
                    assets, with the covenants set forth in Section 6.12 and 6.13
                    as such
                    covenants are recomputed as at the last day of the most recently
                    ended
                    fiscal quarter under each such Section as if such merger, consolidation
                    or
                    transfer of assets had occurred on the first day of the
                    four-fiscal-quarter period ended on such date; (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 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 clause
                    (xii), 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;

                


        

      

       

      provided
        that any
        such merger involving a Person that is not a wholly-owned Subsidiary immediately
        prior to such merger shall not be permitted unless also permitted by Section
        6.05.

       

      (b)    The
        Borrower will not, and will not permit any Subsidiary to, engage to any material
        extent in any business other than businesses of the type conducted by the
        Borrower and its Subsidiaries on the date of execution of this Agreement
        and
        businesses reasonably related thereto. 

       

      SECTION
        6.04. Investments,
        Loans, Advances and Acquisitions.
        The
        Borrower will not, and will not permit any of the Subsidiaries to, purchase,
        hold or acquire (including pursuant to any merger with any Person that was
        not a
        wholly-owned Subsidiary prior to such merger) any Capital Stock, evidences
        of
        indebtedness or other securities (including any option, warrant or other
        right
        to acquire any of the foregoing) of, make or permit to exist any loans or
        advances to, or make or permit to exist any investment or any other interest
        in,
        any other Person, or purchase or otherwise acquire (in one transaction or
        a
        series of transactions) any assets of any other Person constituting a business
        unit, except:

       

      (a)     Permitted
        Investments; 

       

      (b)     investments,
        loans and advances existing on the date hereof and set forth on Schedule
        6.04
        and extensions, renewals or reinvestments thereof, so long as the aggregate
        amount of all such investments, loans and advances pursuant to this clause
        (b)


       

      
        
          
          

        

        
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      is
        not increased at any time above the amount of such
        investments, loans and advances on the date hereof; 

       

      (c)     investments
        by the Borrower and the Subsidiaries in Equity Interests in their respective
        Subsidiaries; 

       

      (d)     loans
        or
        advances made by the Borrower to any Subsidiary or made by any Subsidiary
        to the
        Borrower or any other Subsidiary; provided,
        that
        any such loans or advances made to the Borrower shall be Subordinated Debt;
        

       

      (e)     investments
        received in connection with the bankruptcy or reorganization of, or settlement
        of delinquent accounts and disputes with, customers and suppliers, in each
        case
        in the ordinary course of business; 

       

      (f)     investments
        by the Borrower and the Subsidiaries (other than the Millennium Entities)
        in the
        Millennium Entities in an amount not to exceed $10,000,000; and investments
        by
        any Millennium Entity in another Millennium Entity; 

       

      (g)     extensions
        of trade credit and asset purchases in the ordinary course of business;


       

      (h)     to
        the
        extent permitted by applicable law, loans and advances to officers, directors
        and employees of the Borrower or any Subsidiary (i) to finance the purchase
        of
        Capital Stock of the Borrower or any direct or indirect shareholder of the
        Borrower; and (ii) for additional purposes not contemplated by subclause
        (i)
        above in an aggregate principal amount at any time outstanding with respect
        to
        this clause (ii) not exceeding $5,000,000; 

       

      (i)     Permitted
        Acquisitions; provided
        that the
        Borrower shall be in compliance, on a pro
        forma
        basis
        after giving effect to such Permitted Acquisition, with the covenants set
        forth
        in Sections 6.12 and 6.13, as such covenants are recomputed as of the last
        day
        of the most recently ended fiscal quarter under each such Section as if such
        Permitted Acquisition had occurred on the first day of the four-fiscal-quarter
        period ended on such date; 

       

      (j)     investments
        to the extent that payment for such investments is made solely with Capital
        Stock of the Borrower; 

       

      (k)     Capital
        Lease Investments; 

       

      (l)     investments
        permitted pursuant to Section 6.08; 

       

      (m)     investments
        by TEP constituting an acquisition by TEP of the Capital Stock or assets
        of
        Southwest Energy or MEG; and 

       

      (n)     other
        investments, loans and advances by the Borrower or the Subsidiaries (other
        than
        the Millennium Entities) in an amount not to exceed $50,000,000.

       

      
        
          
          

        

        
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      Notwithstanding
        anything to the contrary contained above, the Borrower and the Subsidiaries
        (other than the Millennium Entities) will not be permitted to invest more
        than
        $10,000,000 in the Millennium Entities after the Original Effective
        Date.

       

      SECTION
        6.05. Asset
        Sales.

       

      (a)    The
        Borrower will not, and will not permit any Subsidiary 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)     conveyances,
        sales, leases, transfers and other dispositions of property, business or
        assets
        of TEP or any TEP Subsidiary that is not prohibited pursuant to the TEP Loan
        Documents; 

       

      (iv)     conveyances,
        sales, leases, transfers and other dispositions of property, business or
        assets
        of UES or any UES Subsidiary that is not prohibited pursuant to the UNS Loan
        Documents; 

       

      (v)     subject
        to Section 5.13, Capital Stock or assets of the Millennium Entities and
        Southwest Energy; 

       

      (vi)     transactions
        permitted pursuant to Section 6.03(a); and 

       

      (vii)     the
        Borrower and the Subsidiaries may sell, transfer or otherwise dispose of
        other
        assets for Fair Value in transactions not permitted under clauses (i), (ii),
        (iii), (iv) or (v) above; provided
        that (A)
        the aggregate consideration for all sales, transfers and disposals by the
        Borrower and the Subsidiaries pursuant to this clause (vii) during the term
        of
        this Agreement shall at no time exceed in the aggregate $75,000,000; (B)
        with
        respect to any such sale, transfer or disposition (or series of related sales,
        transfers or dispositions) with an aggregate consideration in excess of
        $10,000,000, (I) the Board of Directors (or authorized committee thereof)
        of the
        Borrower shall have approved such sale, transfer or disposition, as the case
        may
        be, and (II) the Borrower shall be in compliance, on a pro
        forma
        basis
        after giving effect to such sale, transfer or disposition, as the case may
        be,
        with the covenants set forth in Section 6.12 and 6.13, as such covenants
        are
        recomputed as at the last day of the most recently ended fiscal quarter under
        each such Section as if such sale, transfer or disposition had occurred on
        the
        first day of the four-fiscal-quarter period ended on such date; and (C) no
        Default is then existing and after giving effect to any such sale, transfer
        or
        disposition, as the case may be, no Default shall have occurred and be
        continuing;

       

      provided,
        that
        the Borrower or any Subsidiary may convey, sell, lease, assign, transfer
        or
        otherwise dispose of any of its property, business or assets to the Borrower
        or
        any other Subsidiary (other than a Millennium Entity), as the case may be;
        provided further,
        that
        the Borrower cannot transfer any interest in any Person pledged to the
        Administrative Agent as

       

      
        
          
          

        

        
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      collateral
        for the Obligations. Investments by the Borrower and the Subsidiaries in,
        and
        contributions by the Borrower and the Subsidiaries to, Subsidiaries shall
        be
        deemed not to constitute transfers of assets subject to the limitations of
        this
        Section 6.05 to the extent such investments or contributions are made in
        cash.


       

      (b)    The
        Borrower will not, and will not permit any Subsidiary to, convey, sell, lease,
        assign, transfer or otherwise dispose of all or any substantial part of its
        generating assets (including leasehold interests), whether now owned or
        hereafter acquired, except as required by applicable law.

       

      SECTION
        6.06. Sale
        and Leaseback Transactions.
        The
        Borrower will not, and will not permit any Subsidiary to, enter into any
        arrangement, directly or indirectly, whereby it shall sell, transfer or
        otherwise dispose of any property, real or personal, used or useful in its
        business, whether now owned or hereafter acquired, and thereafter rent or
        lease
        such property or other property that it intends to use for substantially
        the
        same purpose or purposes as the property sold or transferred, except for
        any
        such sale of any fixed or capital assets that is made for Fair Value and
        is
        consummated within 270 days after the Borrower or such Subsidiary acquires
        or
        completes the construction of such fixed or capital asset. 

       

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

       

      SECTION
        6.08. Restricted
        Payments; Certain Payments of Indebtedness.

       

      (a)    The
        Borrower will not declare or make, or agree to pay or make, directly or
        indirectly, any Restricted Payment, except:

       

      (i)     the
        Borrower may declare and pay dividends and make other distributions with
        respect
        to its Equity Interests payable solely in additional shares of its common
        stock;


       

      (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 the Subsidiaries and in accordance with the terms of employment agreements
        or shareholder or partnership agreements of the Borrower or any direct or
        indirect shareholder of the Borrower; 

       

      (iii)     the
        Borrower may redeem in whole or in part any Capital Stock of the Borrower
        (A)
        for another class of Capital Stock or rights to acquire Capital Stock of
        the
        Borrower or (B) with proceeds from substantially concurrent capital
        contributions or issuances of new classes of Capital Stock; provided
        that
        such other class of Capital Stock contains terms and provisions at least
        as
        advantageous to the Lenders in all respects material to their interests as
        those
        contained in the Capital Stock redeemed thereby; and 

       

      (iv)     the
        Borrower may pay any cash dividend so long as (A) both before and after giving
        effect to such payment, no Default has occurred and is continuing and (B)
        on the
        date of such payment, after giving effect thereto, the sum of (1)
        the

       

      
        
          
          

        

        
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                      aggregate
                        amount of Unrestricted Cash then existing plus
                        (2) the unused amount of the Revolving Commitments equals
                        or exceeds
                        $15,000,000.

                    


            

          

        

      

       

      (b)    The
        Borrower will not, and will not permit any Subsidiary to, make or agree to
        pay
        or make, directly or indirectly, any payment or other distribution (whether
        in
        cash, securities or other property) of or in respect of principal of or interest
        on any Subordinated Debt, or any payment or other distribution (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 Subordinated Debt; provided
        that so
        long as no Default has occurred and is continuing or would result therefrom,
        the
        Borrower or any of its Subsidiaries may pay, prepay, repurchase or redeem
        or
        otherwise defease all or any portion of any Subordinated Debt.

       

      SECTION
        6.09. Transactions
        with Affiliates.
        The
        Borrower will not, and will not permit any Subsidiary 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, 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 Subsidiaries not involving any other
        Affiliate, (c) any Restricted Payment permitted by Section 6.08, (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 Subsidiaries who
        are
        not officers of the Borrower or any Subsidiary and (g) transactions by TEP
        or
        any TEP Subsidiary to acquire, either through asset purchases, mergers or
        purchases of Capital Stock, the business and operations of Southwest Energy
        or
        MEG. 

       

      SECTION
        6.10. Restrictive
        Agreements.

       

      (a)    The
        Borrower will not, and will not permit TEP 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 TEP to
        pay
        dividends or other distributions with respect to any shares of its Capital
        Stock; provided
        that the
        foregoing shall not apply to restrictions and conditions (i) imposed by law,
        (ii) imposed by any Loan Document or TEP Loan Document, (iii) existing on
        the
        date hereof identified on Part A of Schedule 6.10 (but shall apply to any
        amendment or modification materially expanding the scope of any such restriction
        or condition), (iv) contained in agreements entered into after the Effective
        Date which contain restrictions no more restrictive than those contained
        in the
        TEP Loan Documents and (v) contained in agreements relating to the sale of
        a
        Subsidiary pending such sale; provided
        in the
        case of this clause (v) such restrictions and conditions apply only to the
        Subsidiary that is to be sold and such sale is permitted hereunder.


       

      (b)    In
        addition to the restrictions in paragraph (a) above, the Borrower will not,
        and
        will not permit any of the Limited 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 Subsidiary
        to pay dividends or other distributions with respect

       

      
        
          
          

        

        
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       to
        any shares of its Capital Stock or to make or repay loans or advances to
        the
        Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower
        or
        any other Subsidiary; provided
        that (w)
        the foregoing shall not apply to restrictions and conditions imposed by law
        or
        by any Loan Documents, TEP Loan Document or UNS Loan Document; (x) the foregoing
        shall not apply to restrictions and conditions existing on the date hereof
        identified on Part B of Schedule 6.10 (but shall apply to any amendment or
        modification materially expanding the scope of, any such restriction or
        condition); (y) the foregoing shall not apply to restrictions and conditions
        contained in agreements entered into after the Effective Date which contain
        restrictions no more restrictive than those contained in the Loan Documents,
        the
        TEP Loan Documents or the UNS Loan Documents; and (z) the foregoing shall
        not
        apply to customary restrictions and conditions contained in agreements relating
        to the sale of a Subsidiary pending such sale, provided
        such
        restrictions and conditions apply only to the Subsidiary that is to be sold
        and
        such sale is permitted hereunder.

       

      SECTION
        6.11. Amendment
        of Material Documents.
        The
        Borrower will not, and will not permit any Subsidiary to, amend, modify or
        change, or consent or agree to any amendment, modification or change to,
        any TEP
        Loan Document, except for amendments, modifications and changes that,
        individually and in the aggregate, could not reasonably be expected to result
        in
        a Material Adverse Effect. 

       

      SECTION
        6.12. Cash
        Coverage Ratio.
        The
        Borrower will not permit the ratio of (a) Borrower Cash Flow to (b) Borrower
        Debt Service, in each case for the four-fiscal-quarter period ended on the
        last
        day of any fiscal quarter, commencing with the fiscal quarter ending June
        30,
        2006, to be less than 1.25 to 1.0.

       

      SECTION
        6.13. Leverage
        Test.
        The
        Borrower will not permit the ratio of (a) Consolidated Total Indebtedness
        at the
        end of any fiscal quarter, commencing with the fiscal quarter ending June
        30,
        2006, to (b) Consolidated EBITDA for the four-fiscal-quarter period ended
        on
        such date to be greater than the amount specified in the chart below for
        the
        period in which such date shall occur:

      

        
          	
                   

                  Period

                   

                	
                   

                  Maximum
                    Ratio

                   

                
	
                   

                  From
                    the Effective Date through and including December 31, 2006

                	
                   

                  5.00

                
	
                   

                  From
                    January 1, 2007 through and including December 31, 2008

                	
                   

                  4.75

                
	
                   

                  From
                    and after January 1, 2009 

                	
                   

                  4.50

                


        

      

       

      
        
          
          

        

        
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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 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; 

       

      (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 Subsidiary in or in connection with any Loan Document or any amendment
        or
        modification hereof or waiver hereunder, 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 hereof or waiver
        hereunder, 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, 5.04 (with respect to the Borrower’s existence), 5.09
        or 5.13 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 (whether
        of principal or interest and 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 o        r
        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)    any
        Lien
        purported to be created under any Security Document shall cease to be, or
        shall
        be asserted by the Borrower or any Subsidiary not to be, a valid and perfected
        Lien on any Collateral subject thereto, with the priority required by the
        applicable Security Document 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

       

      (n)     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

       

      
        
          
          

        

        
          59

          
            

          

        

         

        
          	 	
                  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, the Administrative Agent may, and at the request
        of
        the Required Lenders shall, by notice to the Borrower, take any or all of
        the
        following actions, at the same or different times: (i) terminate the
        Commitments, and thereupon the Commitments shall terminate immediately, (ii)
        declare the Loans 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
        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, and/or (iii) subject
        to the receipt of any required regulatory approvals and any other applicable
        law, exercise
        in respect of the Collateral, in addition to the other rights and remedies
        provided for herein and in the Security Documents or otherwise available
        to the
        Administrative Agent or the Lenders, all the rights and remedies of a secured
        party on default under the Uniform Commercial Code in effect in the State
        of New
        York and in effect in any other jurisdiction in which any Collateral is located
        at that time;
        and in
        case of any event with respect to the Borrower described in clause (h) or
        (i) of
        this Article, the Commitments shall automatically terminate and the principal
        of
        the Loans then outstanding, together with accrued interest thereon and all
        fees
        and other obligations of the Borrower accrued hereunder, 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.

       

      ARTICLE
        VIII

      The
        Administrative Agent

       

      Each
        of
        the Lenders hereby irrevocably appoints the Administrative Agent as its agent
        and authorizes the Administrative Agent to take such actions on its behalf
        and
        to exercise such powers as are delegated to the Administrative Agent by the
        terms of the Loan Documents, together with such actions and powers as are
        reasonably incidental thereto. The Required Lenders or the Borrower may at
        any
        time, with the consent of the Borrower (provided
        that
        such consent shall not be required if an Event of Default under clause (a),
        (b),
        (h), (i) or (j) of Article VII shall have occurred and be 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, (i) neither the Administrative Agent nor
        any
        of its Affiliates shall have outstanding any Loan or Commitment or other
        obligation of any kind under this Agreement or any other Loan Document and
        (ii)
        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 

       

      
        
          
          

        

        
          60

          
            

          

        

        
          
          

        

      

       

      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 as directed
        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 the 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 with any Loan Document, (iii) the performance or observance of
        any of
        the covenants, agreements or other terms or conditions set forth in any Loan
        Document, (iv) the validity, enforceability, effectiveness or genuineness
        of any
        Loan Document or any other agreement, instrument or document, or (v) the
        satisfaction of any condition set forth in Article IV or elsewhere in any
        Loan
        Document, other than to confirm receipt of items expressly required to be
        delivered to the Administrative Agent. 

       

      Notwithstanding
        anything herein to the contrary, no Lender identified as a Co-Syndication
        Agent
        or a Co-Documentation Agent shall have any separate duties, responsibilities,
        obligations or authority as Co-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.
        

       

      
        
          
          

        

        
          61

          
            

          

        

        
          
          

        

      

       

      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 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, 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.
        Upon
        the acceptance of its appointment as Administrative Agent hereunder by a
        successor, such successor shall succeed to and become vested with all the
        rights, powers, privileges and duties of the retiring Administrative Agent,
        and
        the retiring 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 hereunder, the provisions of this Article and
        Section 9.03 shall continue in effect for the benefit of such retiring
        Administrative Agent, its sub-agents and their respective Related Parties
        in
        respect of any actions taken or omitted to be taken by any of them while
        it was
        acting as Administrative Agent. 

       

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

       

      
        
          
          

        

        
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      (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); 

       

      (ii)     if
        to the
        Administrative Agent, to Union Bank of California, N.A., 445 South Figueroa
        Street, 15th
        Floor,
        Los Angeles, California 90071, Attention of Kevin Zitar (Telecopy No. (213)
        236-4096); and 

       

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

       

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

       

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

       

      SECTION
        9.02. Waivers;
        Amendments.

       

      (a)    No
        failure or delay by the Administrative Agent or any Lender in exercising
        any
        right or power hereunder or under any other Loan Document 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
        and
        the Lenders hereunder and under the other Loan Documents 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
        shall not be construed as a waiver of any Default, regardless of whether
        the
        Administrative Agent or any Lender 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 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;

       

      
        
          
          

        

        
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      provided
        that no such agreement shall (i) increase the Commitment of any Lender without
        the written consent of such Lender; (ii) reduce the principal amount of any
        Loan
        or reduce the rate of interest thereon, or reduce any fees payable hereunder,
        without the written consent of each Lender affected thereby; (iii) postpone
        the
        scheduled date of payment of the principal amount of any Loan, or any interest
        thereon, or reduce the amount of, waive or excuse any such payment, or postpone
        the scheduled date of expiration of any Commitment, without the written consent
        of each Lender affected thereby; (iv) change Section 2.16(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 (or Lenders of any Class) 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 (or each Lender of
        such
        Class, if applicable); (vi) change any provisions of any Loan Document in
        a
        manner that by its terms adversely affects the rights in respect of payments
        or
        Collateral of Lenders holding Loans of any Class differently from those holdings
        Loans of any other Class, without the written consent of Lenders holding
        a
        majority in interest of the outstanding Loans and unused Commitments of each
        affected Class; (vii) release all or substantially all the Collateral from
        the
        Liens of the Security Documents without the consent of each Lender; or (viii)
        amend, modify or waive any condition precedent set forth in Section 4.02
        with
        respect to the making of Loans of any Class, without the prior written consent
        of Lenders holding a majority in interest of the Commitments of such Class;
        provided further
        that (A)
        no such agreement shall amend, modify or otherwise affect the rights or duties
        of the Administrative Agent hereunder without the prior written consent of
        the
        Administrative Agent; and (B) any waiver, amendment or modification of this
        Agreement that by its terms affects the rights or duties under this Agreement
        of
        the Revolving Lenders (but not the Term Lenders) or the Term Lenders (but
        not
        the Revolving Lenders) may be effected by an agreement or agreements in writing
        entered into by the Borrower and the requisite percentage in interest of
        the
        affected Class of Lenders that would be required to consent thereto under
        this
        Section if such Class of Lenders were the only Class of Lenders hereunder
        at
        such time. In furtherance of clause (viii) of this Section 9.02(b), (x) any
        amendment or modification to or waiver of Section 6.12 or 6.13 of this Agreement
        and (y) any amendment or modification to or waiver of any provision of this
        Agreement or any other Loan Document at a time when any Default or Event
        of
        Default has occurred and is continuing that would have the effect of eliminating
        any such Default or Event of Default shall not be deemed to be effective
        for
        purposes of determining whether the conditions precedent set forth in Section
        4.02 to the making of any Loan of any Class have been satisfied unless the
        Lenders holding a majority in interest of the Commitments of such Class shall
        have consented to such amendment, modification or waiver, provided
        that the
        foregoing shall not be construed to affect any amendment or modification
        to any
        provision of this Agreement or any other Loan Document (other than any amendment
        or modification to Section 6.12 or 6.13 of this Agreement) if no Default
        or
        Event of Default has occurred and is continuing at the time of such amendment
        or
        modification. 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 and the Administrative Agent if (1) by the terms of such agreement
        the
        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

       

      
        
          
          

        

        
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      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 Arranger and their respective Affiliates (including
        due diligence expenses and the reasonable fees, charges and disbursements
        of
        counsel for the Administrative Agent and the Arranger) 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 the Arranger in connection with any
        evaluations of Collateral conducted by it; and (iii) all out-of-pocket expenses
        incurred by the Administrative Agent or any Lender, including the fees, charges
        and disbursements of any counsel for the Administrative Agent 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 hereunder, including all such out-of-pocket expenses
        incurred during any workout, restructuring or negotiations in respect of
        such
        Loans. 

       

      (b)    The
        Borrower shall indemnify the Administrative Agent, the Arranger 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 the use
        of the
        proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous
        Materials on or from any property owned or operated by the Borrower or any
        Subsidiary or any Environmental Liability related in any way to the Borrower
        or
        any Subsidiary 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, willful misconduct or bad faith
        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 or the Arranger under paragraph (a) or (b) of this
        Section, each Lender severally agrees to pay to the Administrative Agent
        or the
        Arranger, 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 or the Arranger in its capacity as such. 

       

      
        
          
          

        

        
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      (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, the Transactions, any Loan 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,
        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 and, to the extent expressly
        contemplated hereby, the Related Parties of each of the Agents, the Arranger
        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 Revolving
        Commitment, its Term Commitment and the Loans at the time owing to it);
provided
        that (i)
        except in the case of an assignment of a Term Commitment or a Term Loan to
        a
        Lender, an Affiliate of a Lender or an Approved Fund of any Lender, the
        Administrative Agent 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
        Commitments, the aggregate amount of the Commitments 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 (or
        $1,000,000 in the case of an assignment of a Term Lender’s Term Commitment or
        Term Loans) unless each of the Borrower and the Administrative Agent otherwise
        consent, (iv) each partial assignment by a Lender of its Revolving Commitment
        and Revolving Exposure or its Term Commitment and Term Loans shall be made
        as an
        assignment of a proportionate part of all the assigning Lender’s rights and
        obligations under this Agreement in respect of its Revolving Commitment and
        Revolving Exposure or its Term Commitment and Term Loans, as the case may
        be,
        (v) 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 (vi) 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

       

      
        
          
          

        

        
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      and
        be
        continuing or (B) in connection with the initial syndication of the 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
        2.13, 2.14, 2.15 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 California 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 Commitments of, and principal amount of
        the
        Loans 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 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 and any Lender
        at any
        reasonable time and from time to time upon reasonable prior notice.


       

      (d)    Upon
        its
        receipt of a duly completed Assignment and Assumption executed by an assigning
        Lender and an assignee, the assignee’s completed Administrative Questionnaire
        (unless the assignee shall already be a Lender hereunder), the processing
        and
        recordation fee referred to in paragraph (b) of this Section and any written
        consent to such assignment required by paragraph (b) of this Section, the
        Administrative Agent shall accept such Assignment and Assumption and record
        the
        information contained therein in the Register. No assignment shall be effective
        for purposes of this Agreement unless it has been recorded in the Register
        as
        provided in this paragraph. 

       

      (e)    Any
        Lender may, without the consent of the Borrower or the Administrative Agent,
        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 Revolving Commitment, its Term Commitment
        and
        the 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
        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

       

      
        
          
          

        

        
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      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 2.13, 2.14 and 2.15 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
        2.16(c)
        as though it were a Lender. 

       

      (f)    
A
        Participant shall not be entitled to receive any greater payment under Section
        2.13 or 2.15 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 2.15 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 2.15(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 or 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 Section 9.04(b) concerning assignments. 

       

      (h)    Notwithstanding
        anything to the contrary contained herein, any Lender (a “Granting
        Lender”)
        may
        grant to a special purpose funding vehicle (an “SPC”),
        identified as such in writing from time to time by the Granting Lender to
        the
        Administrative Agent and the Borrower, the option to provide to the Borrower
        all
        or any part of any Loan that such Granting Lender would otherwise be obligated
        to make to the Borrower pursuant to this Agreement; provided
        that (i)
        nothing herein shall constitute a commitment by any SPC to make any Loan
        and
        (ii) if an SPC elects not to exercise such option or otherwise fails to provide
        all or any part of such Loan, the Granting Lender shall be obligated to make
        such Loan pursuant to the terms hereof. The making of a Loan by an SPC shall
        utilize the Commitment of the Granting Lender to the same extent, and as
        if,
        such Loan were made 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

       

      
        
          
          

        

        
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      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
        (i)
        with notice to, but without the prior written consent of, the Borrower and
        the
        Administrative Agent and without paying any processing fee therefor, assign
        all
        or a portion of its interests in any Loans 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 and (ii) disclose on a
        confidential basis consistent with the provisions of Section 9.12 any non-public
        information relating to its Loans 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, regardless of any investigation made by any such other party or on
        its
        behalf and notwithstanding that any Agent 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 and so
        long
        as any Commitment has not expired or terminated. The provisions of Sections
        2.13, 2.14, 2.15 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
        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 Agents and the Arranger 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. 

       

      
        
          
          

        

        
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      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, upon any amount becoming due and payable
        by the
        Borrower hereunder (whether at the stated maturity, by acceleration or
        otherwise), to set off and apply any and all deposits (general or special,
        time
        or demand, provisional or final) at any time held and other obligations at
        any
        time owing by such Lender or Affiliate to or for the credit or the account
        of
        the Borrower against any of and all the obligations of the Borrower now or
        hereafter existing under this Agreement held by such Lender, irrespective
        of
        whether or not such Lender shall have made any demand under this Agreement
        and
        although such obligations may be unmatured. The rights of each Lender under
        this
        Section are in addition to other rights and remedies (including other rights
        of
        setoff) which such Lender may have. 

       

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

       

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

       

      (b)    The
        Borrower hereby irrevocably and unconditionally submits, for itself and its
        property, to the nonexclusive jurisdiction of the Supreme Court of the State
        of
        New York sitting in New York County and of the United States District Court
        of
        the Southern District of New York, and any appellate court from any thereof,
        in
        any action or proceeding arising out of or relating to any Loan Document,
        or for
        recognition or enforcement of any judgment, and each of the parties hereto
        hereby irrevocably and unconditionally agrees that all claims in respect
        of any
        such action or proceeding may be heard and determined in such New York State
        court 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
        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

       

      
        
          
          

        

        
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      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 and the Lenders agrees to maintain the confidentiality
        of the Information (as defined below), except that Information may be disclosed
        (a) to its and its Affiliates’ directors, officers, employees and agents,
        including accountants, auditors, legal counsel and other advisors (it being
        understood that the Persons to whom such disclosure is made will be informed
        of
        the confidential nature of such Information and instructed to keep such
        Information confidential), (b) to the extent requested by any regulatory
        authority, (c) to the extent required by applicable laws or regulations or
        by
        any subpoena or similar legal process, (d) to any other party to this Agreement,
        (e) in connection with the exercise of any remedies hereunder or any suit,
        action or proceeding relating to this Agreement or any other Loan Document
        or
        the enforcement of rights hereunder, (f) subject to an agreement containing
        provisions substantially the same as those of this Section, to (i) any assignee
        of or Participant in, or any prospective assignee of or Participant in, any
        of
        its rights or obligations under this Agreement or (ii) any actual or prospective
        counterparty (or its advisors) to any swap or derivative transaction relating
        to
        the Borrower and its obligations, (g) with the consent of the Borrower or
        (h) to
        the extent such Information (i) becomes publicly available other than as
        a
        result of a breach of this Section or (ii) becomes available to any Agent
        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
        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, together with all fees, charges and other amounts
        which are treated as interest on such Loan 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 in accordance with applicable law, the rate of interest
        payable in respect of such Loan hereunder,

       

      
        
          
          

        

        
          71

          
            

          

        

        
          
          

        

      

       

      together
        with all Charges payable in respect thereof, shall be limited to the Maximum
        Rate and, to the extent lawful, the interest and Charges that would have
        been
        payable in respect of such Loan but were not payable as a result of the
        operation of this Section shall be cumulated and the interest and Charges
        payable to such Lender in respect of other Loans or periods shall be increased
        (but not above the Maximum Rate therefor) until such cumulated amount, together
        with interest thereon at the Federal Funds Effective Rate to the date of
        repayment, shall have been received by such Lender.

       

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

       

      [REMAINDER
        OF PAGE INTENTIONALLY LEFT BLANK]

       

      
        
          
          

        

        
          72

          
            

          

        

        
          
          

        

      

       

      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.

    

     

     

    
      	 	
              UNISOURCE
                ENERGY CORPORATION

               

               

            
	 	
              By:

            	/s/
              Kevin P. Larson
	 	 	
              Name:  
                

            	
              Kevin P. Larson

            
	 	 	Title:	Sr.
              Vice President, CFO and
              Treasurer 
	 	 	
               

            


    

    
       

      
        	 	
                UNION
                  BANK OF CALIFORNIA, N.A., as

                Administrative
                  Agent and as a Lender

                 

                 

              
	 	
                By:

              	 /s/
                Kevin M. Zitar
	 	 	
                Name:  
                  

              	
                 Kevin
                  M. Zitar

              
	 	 	Title:	 Vice
                President
	 	 	
                 

              


      

       

      
        
          
          

        

        
          
            S-1

            
              Signature
                Page to UniSource Energy Corporation Credit Agreement

            

          

          
            

          

        

        
          
          

        

      

       

      
        
          
            	 	
                    THE
                      BANK OF NEW YORK, as Co-

                    Syndication
                      Agent and as a Lender

                     

                     

                  
	 	
                    By:

                  	 /s/
                    John-Paul Marotta
	 	 	
                    Name:  
                      

                  	
                    John-Paul
                      Marotta

                  
	 	 	Title:	 Managing
                    Director
	 	 	
                     

                  


          

           

          
            
              
              

            

            
              
                S-2

                
                  Signature
                    Page to UniSource Energy Corporation Credit Agreement

                

              

              
                

              

            

            
              
              

            

          

        

         

        
          
            
              	 	
                      JPMORGAN
                        CHASE BANK, N.A., as Co-

                      Syndication
                        Agent and as a Lender

                       

                       

                    
	 	
                      By:

                    	 /s/
                      Nancy R. Barwig
	 	 	
                      Name:  
                        

                    	
                      Nancy
                        R. Barwig

                    
	 	 	Title:	 Vice
                      President
	 	 	
                       

                    


            

             

          

          
            
              
              

            

            
              
                S-3

                
                  Signature
                    Page to UniSource Energy Corporation Credit Agreement

                

              

              
                

              

            

            
              
              

            

          

           

          
            
              
                	 	
                        WELLS
                          FARGO BANK, NATIONAL

                        ASSOCIATION,
                          as Co-Documentation Agent and

                        as
                          a Lender

                         

                         

                      
	 	
                        By:

                      	 /s/
                        Clyde Gossert
	 	 	
                        Name:  
                          

                      	
                        Clyde
                          Gossert

                      
	 	 	Title:	 Vice
                        President
	 	 	
                         

                      


              

               

            

            
              
                
                

              

              
                
                  S-4

                  
                    Signature
                      Page to UniSource Energy Corporation Credit Agreement

                  

                

                
                  

                

              

              
                
                

              

            

             

            
              
                
                  	 	
                          ABN
                            AMRO BANK N.V., as Co-Documentation

                          Agent
                            and as a Lender

                           

                           

                        
	 	
                          By:

                        	 /s/
                          James L. Moyes
	 	 	
                          Name:  
                            

                        	
                          James
                            L. Moyes

                        
	 	 	Title:	 Managing
                          Director
	 	 	
                           

                        
	 	 	 


                

                
                  
                    
                      
                        	 	
                                By:

                              	 /s/
                                Todd D. Vaubel
	 	 	
                                Name:  
                                  

                              	
                                Todd
                                  D. Vaubel

                              
	 	 	Title:	 Assistant
                                Vice President
	 	 	
                                 

                              


                      

                       

                      
                        
                          
                          

                        

                        
                          
                            S-5

                            
                              Signature
                                Page to UniSource Energy Corporation Credit Agreement

                            

                          

                          
                            

                          

                        

                        
                          
                          

                        

                      

                    

                     

                    
                      
                        
                          	 	
                                  COBANK,
                                    ACB, as a Lender

                                   

                                   

                                
	 	
                                  By:

                                	 /s/
                                  John Guilds
	 	 	
                                  Name:  
                                    

                                	
                                  John
                                    Guilds

                                
	 	 	Title:	 Vice
                                  President
	 	 	
                                   

                                


                        

                         

                        
                          
                            
                            

                          

                          
                            
                              S-6

                              Signature
                                Page to UniSource Energy Corporation Credit Agreement

                            

                            
                              

                            

                          

                          
                            
                            

                          

                        

                         

                        
                          
                            
                              
                                	 	
                                        CREDIT
                                          SUISSE (as successor to CREDIT

                                        SUISSE
                                          FIRST BOSTON, acting through its

                                        Cayman
                                          Islands Branch), as a Lender

                                         

                                         

                                      
	 	
                                        By:

                                      	 /s/
                                        David Dodd
	 	 	
                                        Name:  
                                          

                                      	
                                        David
                                          Dodd

                                      
	 	 	Title:	 Vice
                                        President
	 	 	
                                         

                                      
	 	 	 


                              

                              
                                
                                  
                                    
                                      	 	
                                              By:

                                            	 /s/
                                              Shaheen Malik
	 	 	
                                              Name:  
                                                

                                            	
                                              Shaheen
                                                Malik

                                            
	 	 	Title:	 Associate
	 	 	
                                               

                                            


                                    

                                     

                                    
                                      
                                        
                                        

                                      

                                      
                                        
                                          S-7

                                          
                                            Signature
                                              Page to UniSource Energy Corporation
                                              Credit Agreement

                                          

                                        

                                        
                                          

                                        

                                      

                                      
                                        
                                        

                                      

                                    

                                     

                                     

                                    
                                      
                                        
                                          
                                            	 	
                                                    WACHOVIA
                                                      BANK, NATIONAL

                                                    ASSOCIATION,
                                                      as a Lender

                                                     

                                                     

                                                  
	 	
                                                    By:

                                                  	 /s/
                                                    Paul Pritchett
	 	 	
                                                    Name:  
                                                      

                                                  	
                                                    Paul
                                                      Pritchett

                                                  
	 	 	Title:	 Vice
                                                    President
	 	 	
                                                     

                                                  


                                          

                                           

                                          
                                            
                                              
                                              

                                            

                                            
                                              
                                                S-8

                                                
                                                  Signature
                                                    Page to UniSource Energy Corporation
                                                    Credit Agreement