Document:

<PAGE>

                                                                    Exhibit 4.04
================================================================================

                                CREDIT AGREEMENT

                                      AMONG

                       PUBLIC SERVICE COMPANY OF COLORADO;

                          KEYBANK NATIONAL ASSOCIATION,
            AS ADMINISTRATIVE AGENT, BOOK MANAGER AND LEAD ARRANGER;

                                       AND

                  THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO

                           CLOSING DATE: JUNE 24, 2003

================================================================================

                          $300,000,000 CREDIT FACILITY

================================================================================

<PAGE>

                                CREDIT AGREEMENT

                            Dated as of June 24, 2003

Public Service Company of Colorado, a Colorado corporation; the Banks, as
defined below and KeyBank National Association, a national banking association
having its principal office in Cleveland, Ohio, as administrative agent, book
manager and lead arranger for the Banks agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

SECTION 1.1 DEFINITIONS.

For all purposes of this Agreement, except as otherwise expressly provided or
unless the context otherwise requires, the terms defined in this Article have
the meanings assigned to them in this Article, and include the plural as well as
the singular.

         "Accounting Practices Change" means any change in the Borrower's
accounting practices that is permitted or required under the standards of the
Financial Accounting Standards Board.

         "Acquisition Target" means any Person becoming a Subsidiary of the
Borrower after the date hereof; any Person that is merged into or consolidated
with the Borrower or any Subsidiary of the Borrower after the date hereof; or
any Person with respect to whom all or a substantial part of that Person's
assets are acquired by the Borrower or any Subsidiary of the Borrower after the
date hereof.

         "Act" means the Securities Act of 1933, as amended.

         "Additional Bank" means a financial institution that becomes a Bank
pursuant to the procedures set forth in Section 9.1.

         "Agent-Related Persons" means the Agent (including any successor
agent), together with its Affiliates, and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.

         "Advance" means an advance by the Banks to the Borrower pursuant to
Article II.

         "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person. A Person shall be deemed to control another Person if the
controlling Person owns 25% or more of the voting securities (or other ownership
interests) of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.

         "Agent" means KeyBank acting in its capacity as administrative agent
for itself and the other Banks hereunder.

<PAGE>

         "Agreement" means this Credit Agreement, as it may be amended, modified
or restated from time to time in accordance with Section 9.2.

         "Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Prime Rate for such day and (ii) the sum of the
Federal Funds Effective Rate for such day plus 1/2% per annum.

         "Arranger" means KeyBank, in its capacity as lead arranger and sole
book manager.

         "Assignment Agreement" has the meaning set forth in Section 9.1.

         "Authorizing Order" means any order of the PUC or any other regulatory
body having jurisdiction over the Borrower or the Parent authorizing and/or
restricting the indebtedness that may be created from time to time hereunder
(whether on account of Advances or otherwise) or under the Pledged Securities.

         "Banks" means KeyBank, acting on its own behalf and not as the Agent,
each of the undersigned banks and any financial institution that becomes a Bank
pursuant to the procedures set forth in Section 9.1, collectively.

         "Borrower" means Public Service Company of Colorado, a Colorado
corporation and a party to this Agreement.

         "Borrowing" means a borrowing under Article II consisting of Advances
made to the Borrower at the same time by each of the Banks severally.

         "Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Rate Fundings, a day (other than a Saturday or Sunday)
on which banks generally are open in New York for the conduct of substantially
all of their commercial lending activities, interbank wire transfers can be made
on the Fedwire system and dealings in United States dollars are carried on in
the London interbank market and (ii) for all other purposes, a day (other than a
Saturday or Sunday) on which banks generally are open in New York for the
conduct of substantially all of their commercial lending activities and
interbank wire transfers can be made on the Fedwire system.

         "Capitalized Lease" means any lease that in accordance with GAAP should
be capitalized on the balance sheet of the lessee thereunder.

         "Change of Control" means, with respect to any corporation, either (i)
the acquisition by any "person" or "group" (as those terms are used in Sections
13(d) and 14(d) of the Exchange Act) of beneficial ownership (as defined in
Rules 13d-3 and 13d-5 of the SEC, except that a Person shall be deemed to have
beneficial ownership of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 25% or more of the then-outstanding voting
capital stock of such corporation; or (ii) a change in the composition of the
board of directors of such corporation or any corporate parent of such
corporation such that continuing directors cease to constitute more than 50% of
such board of directors. As used in this definition, "continuing directors"
means, as of any date, (i) those members of the board of directors of the
applicable corporation who

                                       2
<PAGE>

assumed office prior to such date, and (ii) those members of the board of
directors of the applicable corporation who assumed office after such date and
whose appointment or nomination for election by that corporation's shareholders
was approved by a vote of at least 50% of the directors of such corporation in
office immediately prior to such appointment or nomination.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute thereto.

         "Commitment" means, with respect to each Bank, that Bank's commitment
to make Advances pursuant to Article II.

         "Commitment Amount" means, with respect to each Bank, the amount set
forth opposite that Bank's name in Exhibit A or on any Assignment Agreement.

         "Commitment Termination Date" means 30 days after the Effective Date,
or any earlier date of termination in whole of the Commitments pursuant to
Section 7.2.

         "Compliance Certificate" means a certificate in substantially the form
of Exhibit C, or such other form as the Borrower and the Banks may from time to
time agree upon in writing, executed by the chief financial officer or treasurer
of the Borrower, (i) setting forth relevant facts in reasonable detail the
computations as to whether or not the Borrower is in compliance with the
requirements set forth in Sections 6.7 and 6.8 (ii) stating that the financial
statements delivered therewith have been prepared in accordance with GAAP,
subject, in the case of interim financial statements, to year-end audit
adjustments, and (iii) stating whether or not such officer has knowledge of the
occurrence of any Default or Event of Default hereunder not theretofore reported
or remedied and, if so, stating in reasonable detail the facts with respect
thereto.

         "Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, and all other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States of America or
other applicable jurisdictions from time to time in effect affecting the rights
of creditors generally.

         "Debt Securities" means any debt issued by any Person consisting of
bonds, debentures, senior or subordinated notes or other debt securities, in
exchange for cash.

         "Default" means an event that, with the giving of notice, the passage
of time or both, would constitute an Event of Default.

         "EBIT" means, with respect to any period:

         (i)      (A) the after-tax net income of the Borrower and its
                  Subsidiaries for such period, determined on a consolidated
                  basis in accordance with GAAP, excluding (B) non-operating
                  gains and losses (including extraordinary or unusual gains and
                  losses, gains and losses from discontinuance of operations,
                  gains and losses arising from the sale of assets other than
                  inventory, and other non-recurring gains and losses)

                                       3
<PAGE>

         plus

         (ii)     the sum of the following to the extent deducted in arriving at
                  the after-tax net income determined in clause (i)(A) of this
                  definition (but without duplication for any item):

                  (A)      Interest Expense, and

                  (B)      income tax expense of the Borrower and its
                           Subsidiaries.

         "Effective Date" means the first date on or after the date hereof on
which all conditions set forth in Section 3.1 have been satisfied.

         "Eligible Lender" means (a) a financial institution organized under the
laws of the United States, or any state thereof, and having a combined capital
and surplus of at least $250,000,000; (b) a commercial bank organized under the
laws of any other country which is a member of the Organization for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined capital and surplus of at least $250,000,000, provided that
such bank is acting through a branch or agency located in the United States; or
(c) a person controlled by, controlling, or under common control with any entity
identified in clause (a) or (b) above.

         "Environmental Law" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1802 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Section 1252 et seq., the Clean Water Act, 33
U.S.C. Section 1321 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq.,
and any other federal, state, county, municipal, local or other statute, law,
ordinance or regulation which may relate to or deal with human health or the
environment, all as may be from time to time amended.

         "Equity Securities" of any Person means (a) all common stock, preferred
stock, participations, shares, partnership interests or other equity interests
in such Person (regardless of how designated and whether or not voting or
non-voting) and (b) all warrants, options and other rights to acquire any of the
foregoing, other than convertible debt securities which have not been converted
into common stock, preferred stock, participations, shares, partnership
interests or other equity interests in any such Person.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "ERISA Affiliate" means any trade or business (whether or not
incorporated) that is, along with the Borrower, a member of a controlled group
of corporations or a controlled group of trades or businesses, as described in
sections 414(b) and 414(c), respectively, of the Code.

         "Eurodollar Base Rate" means, with respect to a Eurodollar Rate Funding
for the relevant Interest Period, the applicable British Bankers' Association
Interest Settlement Rate for deposits in U.S. dollars appearing on Reuters
Screen FRBD as of 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, and having a maturity equal to such Interest
Period, provided that (i) if Reuters Screen FRBD is not available to the Agent
for any reason, the

                                       4
<PAGE>

applicable Eurodollar Base Rate for the relevant Interest Period shall instead
be the applicable British Bankers' Association Interest Settlement Rate for
deposits in U.S. dollars as reported by any other generally recognized financial
information service as of 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period, and having a maturity equal to such
Interest Period, and (ii) if no such British Bankers' Association Interest
Settlement Rate is available to the Agent, the applicable Eurodollar Base Rate
for the relevant Interest Period shall instead be the rate determined by the
Agent to be the rate at which KeyBank or one of its Affiliate banks offers to
place deposits in U.S. dollars with first-class banks in the London interbank
market at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period, in the approximate amount of KeyBank's
relevant Eurodollar Rate Funding and having a maturity equal to such Interest
Period.

         "Eurodollar Rate" means, with respect to a Eurodollar Rate Funding for
the relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar
Base Rate applicable to such Interest Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Interest Period,
plus (ii) the Eurodollar Rate Margin.

         "Eurodollar Rate Funding" means any Borrowing, or any portion of the
principal balance of the Advances, bearing interest at a Eurodollar Rate.

         "Eurodollar Rate Margin" means a percentage, determined as set forth in
Section 2.6.

         "Event of Default" has the meaning specified in Section 7.1.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

         "Existing Credit Facility" means that certain Credit Agreement, in the
amount of $350,000,000, dated as of May 16, 2003, by and among the Borrower,
Bank One, N.A., as Administrative Agent, Wells Fargo Bank, National Association,
as Syndication Agent, and the other financial institutions party thereto.

         "Excluded Taxes" has the meaning specified in Section 2.17.

         "Facility Termination Date" means June 23, 2004.

         "Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. on such
day on such transactions received by the Agent from three Federal funds brokers
of recognized standing selected by the Agent in its sole discretion.

         "Fee Letter" means the separate agreement dated as of the Effective
Date between the Borrower and the Agent, setting forth the terms of certain fees
to be paid by the Borrower to the Agent for the Agent's own behalf.

                                       5
<PAGE>

         "First Collateral Trust Securities" means securities issued pursuant to
the terms of the First Collateral Trust Securities Indenture.

         "First Collateral Trust Securities Indenture" means the Indenture dated
as of October 1, 1993 as amended or supplemented from time to time, from the
Borrower to U.S. Bank Trust National Association (formerly, First Trust of New
York, National Association), as successor trustee to Morgan Guaranty Trust
Company of New York.

         "First Mortgage Bond Indenture" means the Indenture dated as of
December 1, 1939 from the Borrower to U.S. Bank Trust National Association, as
successor trustee thereunder, as amended or supplemented from time to time.

         "First Mortgage Bonds" means bonds issued pursuant to the terms of the
First Mortgage Bond Indenture.

         "Floating Rate" means, for any day, a rate per annum equal to (i) the
Alternate Base Rate for such day plus (ii) the Floating Rate Margin, in each
case changing when and as the Alternate Base Rate changes.

         "Floating Rate Funding" means any Borrowing, or any portion of the
principal balance of the Advances, bearing interest at the Floating Rate.

         "Floating Rate Margin" means a percentage, determined as set forth in
Section 2.6.

         "Funded Debt" of any Person means (without duplication) (i) all
indebtedness of such Person for borrowed money; (ii) the deferred and unpaid
balance of the purchase price owing by such Person on account of any assets or
services purchased (other than trade payables and other accrued liabilities
incurred in the ordinary course of business that are not overdue by more than
180 days unless being contested in good faith) if such purchase price is (A) due
more than nine months from the date of incurrence of the obligation in respect
thereof or (B) evidenced by a note or a similar written instrument; (iii) all
Capitalized Lease obligations; (iv) all indebtedness secured by a Lien on any
property owned by such Person, whether or not such indebtedness has been assumed
by such Person or is nonrecourse to such Person; (v) notes payable and drafts
accepted representing extensions of credit whether or not representing
obligations for borrowed money (other than such notes or drafts for the deferred
purchase price of assets or services to the extent such purchase price is
excluded from clause (ii) above); (vi) indebtedness evidenced by bonds, notes or
similar written instrument; (vii) the face amount of all letters of credit and
bankers' acceptances issued for the account of such Person, and without
duplication, all drafts drawn thereunder (other than such letters of credit,
bankers' acceptances and drafts for the deferred purchase price of assets or
services to the extent such purchase price is excluded from clause (ii) above);
(viii) net obligations of such Person under Swap Contracts which constitute
interest rate agreements or currency agreements; (ix) guaranty obligations of
such Person with respect to indebtedness for borrowed money of another Person
(including Affiliates); (x) all Off-Balance Sheet Liabilities of such Person;
and (xi) in the case of the Borrower, any amounts due under the Trust Preferred
Securities; provided, however, that in no event shall any calculation of Funded
Debt of the Borrower include (y) deferred taxes, or (z) so long as the Pledged
Securities

                                       6
<PAGE>

are held by the Agent pursuant to this Agreement and have not been sold or
otherwise disposed of by foreclosure, any obligation of the Borrower under the
Pledged Securities.

         "GAAP" means generally accepted accounting principles as in effect from
time to time applied on a basis consistent with the accounting practices applied
in the financial statements of the Borrower referred to in Section 4.5, except
for changes concurred in by the Borrower's independent public accountants and
disclosed in the Borrower's financial statements or notes thereto.

         "Governmental Authority" means (a) any international, foreign, federal,
state, county or municipal government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality, central bank or public body, or (c) any court,
administrative tribunal or public utility commission.

         "Hazardous Substance" means any asbestos, urea-formaldehyde,
polychlorinated biphenyls ("PCBs"), nuclear fuel or material, chemical waste,
radioactive material, explosives, known carcinogens, petroleum products and
by-products and other dangerous, toxic or hazardous pollutants, contaminants,
chemicals, materials or substances listed or identified in, or regulated by, any
Environmental Law.

         "Indentures" means the First Collateral Trust Securities Indenture and
the First Mortgage Bond Indenture.

         "Interest Coverage Ratio" means, as of the end of any fiscal quarter of
the Borrower, the ratio of (i) EBIT during the 4-quarter period ending on that
quarter-end, to (ii) Interest Expense during such period.

         "Interest Expense" means, with respect to any period, the aggregate
interest expense (including capitalized interest) of the Borrower and its
Subsidiaries (determined on a consolidated basis) for such period, including but
not limited to the interest portion of any Capitalized Lease and interest
expenses associated with Trust Preferred Securities; provided, however, that the
foregoing shall be adjusted to reflect only the net effect of any interest rate
swap, interest hedging transaction or other similar arrangement entered into by
the Borrower or any Subsidiary to reduce or eliminate variations in its interest
expenses.

         "Interest Period" means, with respect to any Advance bearing interest
at a Eurodollar Rate, a period of one, two or three months beginning on a
Business Day, as elected by the Borrower.

         "Investment Company Act" means the Investment Company Act of 1940, as
amended.

         "KeyBank" means KeyBank National Association, a national banking
association having its principal office in Cleveland, Ohio, in its individual
capacity, and its successors.

         "Laws" or "Law" means all international, foreign, federal, state and
local statutes, treaties, rules, guidelines, regulations, ordinances, codes and
administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof,

                                       7
<PAGE>

and all applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental Authority,
in each case whether or not having the force of law.

         "Level Status" means Level I, Level II, Level III, Level IV or Level V,
each as determined pursuant to Section 2.6.

         "Lien" means any mortgage, deed of trust, lien, pledge, security
interest or other charge or encumbrance, of any kind whatsoever, including but
not limited to the interest of the lessor or titleholder under any Capitalized
Lease, title retention contract or similar agreement.

         "Loan Documents" means this Agreement, the Notes and the Pledged
Securities, if issued pursuant to Section 7.3.

         "Material Adverse Change" means a material adverse change in the
business, condition (financial or otherwise), or operations of the Borrower and
its Subsidiaries taken as a whole.

         "Material Part of the Assets" means assets with a net book value in
excess of 10% of the total assets of the Borrower and its Subsidiaries on a
consolidated basis as determined in accordance with GAAP, as shown on the most
recent balance sheet of the Borrower and its Subsidiaries available as of the
date of the determination.

         "Moody's" means Moody's Investors Service, Inc.

         "Moody's Rating" shall mean the rating assigned by Moody's to the
Borrower's senior unsecured long-term debt.

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

         "Note" has the meaning set forth in Section 2.1.

         "Obligations" means each and every debt, liability and obligation of
every type and description arising under any of the Loan Documents which the
Borrower may now or at any time hereafter owe to any Bank or the Agent, whether
such debt, liability or obligation now exists or is hereafter created or
incurred, whether it is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or sole, joint,
several or joint and several, including but not limited to principal of and
interest on the Notes and all fees due under this Agreement, the Fee Letter or
any Loan Documents and the obligation to issue, execute and deliver the Pledged
Securities pursuant to Section 7.3.

         "Off-Balance Sheet Liability" of a Person means (i) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (ii) any liability under any Sale and Leaseback
Transaction which is not a Capitalized Lease and (iii) all Synthetic Lease
Obligations of such Person.

         "Operating Lease" of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee.

                                       8
<PAGE>

         "Organizational Documents" means, (i) with respect to any corporation,
the articles of incorporation and bylaws of such corporation, (ii) with respect
to any partnership, the partnership agreement of such partnership, (iii) with
respect to any limited liability company, the articles of organization and
operating agreement of such company, and (iv) with respect to any entity, any
and all other shareholder, partner or member control agreements and similar
organizational documents relating to such entity.

         "Outstandings" means, at any time, an amount equal to the aggregate
principal balance of the Advances then outstanding.

         "Outstandings Percentage" means, at any time, the ratio (expressed as a
percentage) of the aggregate Outstandings to the aggregate Commitment Amounts.

         "Parent" means Xcel Energy Inc., a Minnesota corporation.

         "Participating Affiliate" means, (a) with respect to any Bank, (i) an
Affiliate of such Bank or (ii) any entity (whether a corporation, partnership,
trust or otherwise) that is engaged in making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit in the ordinary course
of its business and is administered or managed by a Bank or an Affiliate of such
Bank and (b) with respect to any Bank that is a fund which invests in bank loans
and similar extensions of credit, any other fund that invests in bank loans and
similar extensions of credit and is managed by the same investment advisor as
such Bank or by an Affiliate of such investment advisor.

         "Payment Demand" means a written notice given by the Agent to the
Trustee stating that the principal of the Pledged Securities has become due and
payable and specifying the amount of funds required to make such payment.

         "Percentage" means, with respect to each Bank, the ratio of (i) that
Bank's Commitment Amount, to (ii) the aggregate Commitment Amounts of all of the
Banks. For purposes of this definition only, following the Commitment
Termination Date, each Bank's Commitment Amount shall be deemed to be the
principal balance outstanding of that Bank's Note.

         "Permitted Swap Obligations" means all obligations (contingent or
otherwise) of the Borrower or any Subsidiary thereof existing or arising under
Swap Contracts, provided that each of the following criteria is satisfied: (a)
such obligations are (or were) entered into by such Person in the ordinary
course of business for the purpose of directly mitigating risks associated with
liabilities, commitments or assets held or to be held by such Person or its
Subsidiaries, changes in the value of securities issued by such Person or its
Subsidiaries in conjunction with a securities repurchase program not otherwise
prohibited hereunder, and not for purposes of speculation or taking a "market
view;" and (b) such Swap Contracts do not contain any provision ("walk-away"
provision) exonerating the non-defaulting party from its obligations to make
payments on outstanding transactions to the defaulting party.

         "Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.

                                       9
<PAGE>

         "Plan" means an employee benefit plan established or maintained by the
Borrower or any Subsidiary or ERISA Affiliate and covered by Title IV of ERISA.

         "Pledged Securities" means those certain Securities (as defined in the
First Collateral Trust Securities Indenture) to be issued in favor of the Agent
for the benefit of Banks under the First Collateral Trust Securities Indenture
in accordance with the terms of Section 7.3 hereof.

         "Pledged Securities Deliverables" means the following, each of which is
to be delivered to the Agent concurrently with, and as a condition precedent to,
issuance and delivery of the Pledged Securities pursuant to Section 7.3: (i) all
required certificates, covenants, consents, and approvals from all requisite
Governmental Authorities required to authenticate and deliver the Pledged
Securities; (ii) a Pledged Securities Compliance Certificate executed by the
Chief Financial Officer or Treasurer or Chief Executive Officer of the Borrower
in the form of Exhibit G attached hereto; and (iii) a legal opinion of counsel
to the Borrower, reasonably satisfactory to the Agent, that the Pledged
Securities are duly authorized and valid and enforceable in accordance with
their terms.

         "Pledged Securities Order" means that certain Order of the Commission
Granting Application In Part, adopted by the PUC on March 26, 2003, as Decision
No. C03-0306, relating to the Borrower's issuance of Collateral Securities (as
defined in the Pledged Securities Order), Short-Term Debt Securities (as defined
in the Pledged Securities Order) and Non-collateral Securities (as defined in
the Pledged Securities Order).

         "Pledged Securities Shortfall" means the aggregate principal amount of
the Outstandings less the aggregate amount of the Pledged Securities.

         "Prepayment Proceeds" means cash proceeds from any issuance of Equity
Securities or Debt Securities of the Borrower, net of reasonable out-of-pocket
transaction fees and expenses, including without limitation legal and accounting
fees and expenses, other professional fees and expenses, recording tax expenses
and commissions (including investment banking fees).

         "Prime Rate" means a rate per annum equal to the prime rate of interest
announced by KeyBank (which is not necessarily the lowest rate charged to any
customer), from time to time, changing when and as said prime rate changes. Such
prime rate is a rate set by KeyBank based upon various factors including
KeyBank's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. Any change in such prime rate
announced by KeyBank shall take effect at the opening of business on the day
specified in the public announcement of such change If KeyBank ceases to
establish or publish a prime rate, the applicable Alternate Base Rate thereafter
shall be instead the prime rate reported in The Wall Street Journal (or the
average prime rate if a high and a low prime rate are therein reported).

         "PSCo 8-3/4% First Mortgage Bonds" means the Borrower's 8-3/4% First
Mortgage Bonds, in an outstanding principal amount of $144,840,000, issued
pursuant to the First Mortgage Bond Indenture bearing interest at 8-3/4%, with a
maturity date of March 1, 2022.

         "PSCo Capital Trust I Securities" means the 7.60% Trust Originated
Preferred Securities issued by PSCo Capital Trust I.

                                       10
<PAGE>

         "PUC" means the Public Utilities Commission of the State of Colorado.

         "PUHCA" has the meaning set forth in Section 4.16.

         "Related First Mortgage Bonds" means the First Mortgage Bonds on the
basis of which the Pledged Securities are issued and which, upon issuance of the
Pledged Securities, will be held by the trustee under the First Collateral Trust
Securities Indenture.

         "Reportable Event" means (i) a "reportable event", described in Section
4043 of ERISA and the regulations issued thereunder, in respect of any Plan,
(ii) a withdrawal from any Plan, as described in Section 4063 of ERISA, (iii) an
action to terminate a Plan for which a notice is required to be filed under
Section 4041 of ERISA, (iv) any other event or condition that could reasonably
be expected to constitute grounds for termination by the Pension Benefit
Guaranty Corporation of, or the appointment by the appropriate United States
District Court of a trustee to administer, any Plan, or (v) a complete or
partial withdrawal from a Multiemployer Plan as described in Sections 4203 and
4205 of ERISA.

         "Required Banks" means (i) in the case where there are two (2) or fewer
Banks, an aggregate Percentage of 100%; or (ii) in the case where there are more
than two (2) Banks, an aggregate Percentage of at least 66.67% (including, in
both cases, where relevant, Additional Banks).

         "Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.

         "Restricted Subsidiary" means a Subsidiary any of whose debts,
liabilities or obligations (i) have been guarantied by the Borrower, (ii) with
respect to which the Borrower is in any other manner obligated for the payment
of money or otherwise to provide financial support, or (iii) are secured in
whole or in part by any property of the Borrower.

         "S&P" means Standard & Poors Ratings Group, a division of McGraw-Hill
Corporation.

         "S&P Rating" shall mean the rating assigned by S&P to the Borrower's
senior unsecured long-term debt.

         "SEC" means the Securities and Exchange Commission.

         "Sale and Leaseback Transaction" means any arrangement, directly or
indirectly, with any Person whereby a seller or transferor shall sell or
otherwise transfer any real or personal property and concurrently therewith
lease, or repurchase under an extended purchase contract, conditional sales or
other title retention agreement, the same or substantially similar property.

         "Solvent" means, with respect to any Person, that as of the date of
determination (i) the fair market value of the property of such Person is (A)
greater than the total liabilities (including contingent liabilities) of such
Person, and (B) not less than the amount that will be required to pay the
probable liabilities on such Person's debts as they come due, considering all
financing alternatives and potential asset sales reasonably available to such
Person; (ii) such Person's

                                       11
<PAGE>

capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (iv) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that would reasonably be expected to become an
actual or matured liability.

         "Subsidiary" means (i) any corporation of which more than 50% of the
outstanding shares of capital stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
shall have or might have voting power by reason of the happening of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries, (ii) any partnership of which more than 50% of the partnership
interest therein are directly or indirectly owned by the Borrower, by the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries, and (iii) any limited liability company or other form of business
organization the effective control of which is held by the Borrower, the
Borrower and one or more other Subsidiaries, or by one or more other
Subsidiaries.

         "Swap Contracts" means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap or
option, bond, note or bill option, interest rate option, forward foreign
exchange transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other similar
transaction (including any option to enter into any of the foregoing) or any
combination of the foregoing, and, unless the context otherwise clearly
requires, any master agreement relating to or governing any or all of the
foregoing.

         "Synthetic Lease Obligation" means the monetary obligation of a Person
under (i) a so-called synthetic or off-balance sheet or tax retention lease or
(ii) an agreement for the use or possession of property creating obligations
that do not appear on the balance sheet of such Person but which, upon the
insolvency or bankruptcy of such Person, would be characterized as indebtedness
of such Person (without regard to accounting treatment). The amount of Synthetic
Lease Obligations of any Person under any such lease or agreement shall be the
amount which would be shown as a liability on a balance sheet of such Person
prepared in accordance with GAAP if such lease or agreement were accounted for
as a Capitalized Lease.

         "Tangible Net Worth" means shareholders' equity (including preferred
stock), less intangible assets included in calculating such shareholders'
equity, all determined in accordance with GAAP. For purposes of the foregoing
calculation, intangible assets shall include but not be limited to the value of
patents, trademarks, trade names, copyrights, licenses, premiums paid on
indebtedness, good will, prepaid expenses, deferred charges and treasury stock.
Tangible Net Worth with respect to the Borrower shall at all times be determined
with respect to the Borrower and its Subsidiaries on a consolidated basis.

                                       12
<PAGE>

         "Total Capital" means the sum of (A) stockholders' equity (which is the
sum of common stock, premium on common stock and retained earnings and which
excludes the Trust Preferred Securities to the extent included in Funded Debt),
and (B) Funded Debt, all determined with respect to the Borrower and its
Subsidiaries on a consolidated basis in accordance with GAAP.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.

         "Trust Preferred Securities" means any preferred securities issued by a
Trust Preferred Securities Subsidiary, where such preferred securities have the
following characteristics:

                  (i)      such Trust Preferred Securities Subsidiary lends
         substantially all of the proceeds from the issuance of such preferred
         securities to the Borrower or a wholly-owned direct or indirect
         Subsidiary of the Borrower in exchange for subordinated debt issued by
         the Borrower or such wholly-owned direct or indirect Subsidiary,
         respectively;

                  (ii)     such preferred securities contain terms providing for
         the deferral of interest payments corresponding to provisions providing
         for the deferral of interest payments on the subordinated debt; and

                  (iii)    the Borrower or a wholly-owned direct or indirect
         Subsidiary of the Borrower (as the case may be) makes periodic interest
         payments on the subordinated debt, which interest payments are in turn
         used by the Trust Preferred Securities Subsidiary to make corresponding
         payments to the holders of such preferred securities.

         "Trust Preferred Securities Subsidiary" means any Delaware business
trust (or similar entity) (i) all of the common equity interest of which is
owned (either directly or indirectly through one or more wholly-owned
Subsidiaries of the Borrower) at all times by the Borrower, (ii) that has been
formed for the purpose of issuing Trust Preferred Securities and (iii)
substantially all of the assets of which consist at all times solely of
subordinated debt issued by the Borrower or a wholly-owned direct or indirect
Subsidiary of the Borrower (as the case may be) and payments made from time to
time on such subordinated debt.

         "Trustee" means U.S. Bank Trust National Association, as successor
trustee under the First Collateral Trust Securities Indenture, or any successor
trustee thereunder.

         "Welfare Plan" means a "welfare plan" as defined in Section 3(1) of
ERISA.

SECTION 1.2 TIMES.

All references to times of day in this Agreement shall be references to New
York, New York time unless otherwise specifically provided.

SECTION 1.3 ACCOUNTING TERMS AND DETERMINATIONS.

Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP; provided that in the event of any Accounting Practices
Change, then the Borrower's compliance with the covenants set forth

                                       13
<PAGE>

in Section 6.7 and 6.8 shall be determined on the basis of generally accepted
accounting principles in effect immediately before giving effect to the
Accounting Practices Change, until such covenants are amended in a manner
satisfactory to the Borrower and the Required Banks in accordance with Section
10.13 hereof.

                                   ARTICLE II
                          AMOUNT AND TERMS OF THE LOANS

SECTION 2.1 COMMITTED ADVANCES.

Each Bank agrees, severally but not jointly, on the terms and subject to the
conditions hereinafter set forth, to make Advances to the Borrower from time to
time during the thirty (30) day period beginning on the Effective Date and
ending on the Commitment Termination Date in an aggregate amount not to exceed
at any time outstanding that Bank's Commitment Amount. Within the limits of each
Bank's Commitment Amount and the thirty (30) day draw period, the Borrower may
borrow (solely for the purposes set forth in Section 5.10) and prepay pursuant
to Sections 2.10 and 2.11. The Advances made by each Bank under this Section 2.1
shall be evidenced by and repayable with interest in accordance with a single
promissory note of the Borrower (each, a "Note") payable to the order of that
Bank, substantially in the form of Exhibit B hereto, dated the date hereof. Each
Advance shall bear interest on the unpaid principal amount thereof from the date
thereof until paid as set forth in Section 2.3.

SECTION 2.2 PROCEDURE FOR MAKING ADVANCES.

Each Borrowing under Section 2.1 shall occur following written notice from the
Borrower to the Agent or telephonic request from any person purporting to be
authorized to request Advances on behalf of the Borrower. Each such notice or
request shall specify (i) the date of the requested Borrowing, (ii) the amount
thereof, and (iii) if any portion of such Borrowing will bear interest at a
Eurodollar Rate, the Interest Period selected by the Borrower with respect
thereto. Such notice or request must be received by the Agent not later than
10:00 a.m. on the day on which such Borrowing is to occur or, if all or any
portion of the Borrowing will bear interest at a Eurodollar Rate, not later than
three Business Days prior to the date on which such Borrowing is to occur.
Concurrent with any such notice or request, the Borrower shall deliver to the
Agent in writing (which may be by facsimile transmission) the certificate
required by Section 3.2(b). Upon receiving a request for a Borrowing under
Section 2.1, and in any event not later than 1:30 p.m. on the date that the
requested Borrowing is to occur, or, if the requested Borrowing is to bear
interest at a Eurodollar Rate, the close of business on the day that the request
is received, the Agent will notify the Banks of the amount of the requested
Borrowing, the amount of each Bank's Advance with respect thereto, and, if
applicable, the fact that the Borrower has elected a Eurodollar Rate and the
Interest Period selected by the Borrower. Upon fulfillment of the applicable
conditions set forth in Article III, each Bank shall remit its Percentage of the
requested Borrowing to the Agent in immediately available funds. So long as a
Bank receives notice of the requested Borrowing prior to 1:30 p.m. on the date
that the requested Borrowing is to occur, or, if the requested Borrowing is to
bear interest at a Eurodollar Rate, the close of business on the day that the
request is received, that Bank will make its Advance with respect to

                                       14
<PAGE>

that Borrowing available to the Agent by wire transfer of immediately available
funds to the Agent not later than 4:00 p.m. on the date called for in such
notice. Prior to the close of business on the day of the requested Borrowing,
the Agent shall disburse such funds by crediting the same to the Borrower's
demand deposit account maintained with the Agent or in such other manner as the
Agent and the Borrower may from time to time agree. The Agent shall have no
obligation to disburse the requested Borrowing if any condition set forth in
Article III has not been satisfied on the day of the requested Borrowing. The
initial Borrowing shall be in the amount of $50,000,000 or an integral multiple
of $1,000,000 greater than $50,000,000. Each subsequent Borrowing shall be in
the amount of $10,000,000 or an integral multiple of $1,000,000 greater than
$10,000,000. The Borrower shall promptly confirm each telephonic request for an
Advance by executing and delivering an appropriate confirmation certificate to
the Agent. However, the Borrower shall be obligated to repay all Advances for
which it actually received the moneys (including but not limited to all Advances
the proceeds of which were deposited in any account of the Borrower) or in
respect of which the Agent reasonably believed the person requesting the same to
be authorized to do so, notwithstanding the fact that the person requesting the
same was not in fact authorized so to do. Any request for an Advance shall be
deemed to be a representation that (i) the representations and warranties in
Article IV are true and correct on and as of the date of such Advance (except to
the extent such representation or warranty specifically relates to an earlier
date); and (ii) no event has occurred and is continuing, or would result from
such Advance, which constitutes a Default or an Event of Default.

SECTION 2.3 INTEREST.

                  (a)      Each Advance shall bear interest on the unpaid
         principal amount thereof from the date thereof until paid as set forth
         in this Section 2.3.

                  (b)      Unless the Borrower elects a Eurodollar Rate pursuant
         to this Section, the principal balance of each Advance shall bear
         interest at the Floating Rate.

                  (c)      At the election of the Borrower, which may be
         exercised from time to time, the Borrower may request in writing or by
         telephone that a Eurodollar Rate be applicable for the portion of the
         outstanding principal balance of the Advances (including any Advance
         requested or to be requested) and for the Interest Period indicated by
         the Borrower in its request. The portion of the outstanding balance of
         the Advances for which a Eurodollar Rate is requested (i) must be in
         the amount (as to all Advances combined) of $5,000,000 or an integral
         multiple of $1,000,000 greater than $5,000,000, and (ii) if such
         request relates to Advances already outstanding, must, on the first day
         of the applicable Interest Period, either (1) bear interest at the
         Floating Rate, or (2) bear interest at a Eurodollar Rate with respect
         to which the Interest Period expires on such first day. In no event may
         the Borrower select an Interest Period extending beyond the Facility
         Termination Date. A request for a Eurodollar Rate (i) must be received
         by the Agent before 10:00 a.m. on the day three Business Days before
         the first day of the proposed Interest Period (and the Agent shall give
         the Banks prompt notice thereof), and (ii) may not be rescinded by the
         Borrower after such request has been made. Subject to the terms and
         conditions set forth herein, the applicable Eurodollar Rate shall
         (subject to fluctuations in the applicable Eurodollar Rate Margin) be
         the interest rate applicable for the proposed Interest Period to the
         portion of the outstanding principal balance of the

                                       15
<PAGE>

         Advances to which the Eurodollar Rate request related. At the
         termination of such Interest Period, the interest rate applicable to
         the portion of the principal balance of the Advances to which the
         Eurodollar Rate request was applicable shall revert to the Floating
         Rate unless a new Eurodollar Rate request is made by the Borrower in
         accordance with this Agreement. Notwithstanding anything to the
         contrary in this Section, (i) the Agent shall have no obligation to
         permit the application of a Eurodollar Rate for any Interest Period if
         any Bank, in its sole discretion, determines that deposits in amounts
         equal to the requested amount and maturing at the end of the proposed
         Interest Period are not readily available to such Bank from major banks
         in the London interbank market, and (ii) without the consent of the
         Required Banks, the Agent will not permit the application of a
         Eurodollar Rate for any Interest Period if a Default or Event of
         Default has occurred and is continuing when the request for the
         Eurodollar Rate is made. Absent manifest error, the records of the
         Agent shall be conclusive evidence as to the amount of the Advances
         bearing interest at a Eurodollar Rate, the applicable Eurodollar Rate
         and the date on which the Interest Period applicable to such Eurodollar
         Rate expires.

SECTION 2.4 LIMITATION OF OUTSTANDINGS.

In no event shall the aggregate Outstandings at any time exceed the aggregate
amount of the Commitment Amounts.

SECTION 2.5 PRINCIPAL AND INTEREST PAYMENT DATES.

                  (a)      Interest. Interest accruing on the principal balance
         of the Floating Rate Advances shall be due and payable on the last day
         of each month beginning with the month in which the first Advance is
         made and on the Facility Termination Date. Interest accruing at a
         Eurodollar Rate shall be due and payable on the last day of the
         applicable Interest Period and on the Facility Termination Date.

                  (b)      Principal. The principal balance of the Advances
         shall be due and payable in full on the Facility Termination Date.

SECTION 2.6 LEVEL STATUS AND MARGINS.

                  (a)      The Borrower's Level Status shall be determined on
         the basis of the S&P Rating and Moody's Rating on the close of business
         on such date, in accordance with the following table:

                                       16
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                   LEVEL I            LEVEL II           LEVEL III         LEVEL IV           LEVEL V
------------------------------------------------------------------------------------------------------------
<S>             <C>                <C>                <C>               <C>                <C>
S&P             A- or better       BBB+ or better,    BBB or better,    BBB- or better,    Less than BBB-
                                   but less than A-   but less than     but less than BBB
                                                      BBB+
------------------------------------------------------------------------------------------------------------
MOODY'S         A3 or better       Baa1 or better,    Baa2 or better,   Baa3 or better,    Less than Baa3
                                   but less than A3   but less than     but less than
                                                      Baa1              Baa2
------------------------------------------------------------------------------------------------------------
</TABLE>

          If the S&P Rating and Moody's Rating differ such that they do not fall
          within a single column in the table set forth above, (i) if the
          applicable columns are adjacent to each other, the Level Status in
          effect shall be based on the rightmost of the applicable columns, (ii)
          if the applicable columns are separated by a single column, the Level
          Status in effect shall be based on the column between those two
          columns, and (iii) if the applicable columns are separated by two or
          more columns, the Level Status in effect shall be based on the column
          to the immediate left of the rightmost applicable column.

                  (b)      In making the determinations under paragraph (a):

                  (i)      If either S&P or Moody's changes the meaning or
                           designation for its ratings referenced in paragraph
                           (a), the criteria for Level Status in the table in
                           paragraph (a) shall be adjusted in such manner as the
                           Required Banks may reasonably determine to correspond
                           with the applicable rating designations used by S&P
                           or Moody's, as the case may be, in effect on the date
                           hereof.

                  (ii)     If either S&P or Moody's, but not both of them,
                           ceases to rate the Borrower's senior unsecured debt,
                           the determination in paragraph (a) shall be made on
                           the basis of the rating accorded by whichever one
                           continues to rate such debt.

                  (iii)    If neither S&P nor Moody's rates the Borrower's
                           senior unsecured debt, the Borrower shall be deemed
                           to be at Level Status V.

                  (c)      The Floating Rate Margin and Eurodollar Rate Margin
         at any time shall be determined from time to time on the basis of the
         Borrower's Level Status, in accordance with the following table:

                                       17
<PAGE>

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
                       LEVEL I          LEVEL II         LEVEL III       LEVEL IV         LEVEL V
---------------------------------------------------------------------------------------------------------
<S>                    <C>              <C>              <C>             <C>              <C>
FLOATING RATE               0%                0%              0%           0.125%          0.650%
MARGIN
---------------------------------------------------------------------------------------------------------
EURODOLLAR RATE          1.00%            1.125%           1.25%           1.625%           2.50%
MARGIN
---------------------------------------------------------------------------------------------------------
</TABLE>

                  (d)      Upon the occurrence of any Event of Default, and so
         long as such Event of Default continues without written waiver thereof
         by the Banks, a default increment equal to 200 basis points (2.00%)
         shall be added to the Floating Rate Margin and Eurodollar Rate Margin
         (the "Default Rate"). Inclusion of such default increment in
         calculating the Floating Rate Margin and Eurodollar Rate Margin shall
         not be deemed a waiver or excuse of any such Event of Default.

SECTION 2.7 FACILITY FEES.

                  (a)      The Borrower shall pay to the Agent, for the benefit
         of the Banks (for the account of each Bank in accordance with its
         Percentage), a facility fee as follows:

                           (i)      On the Effective Date, the sum of $300,000.

                           (ii)     So long as any Advances remain outstanding
                                    on the date that is ninety (90) days from
                                    the Effective Date, the sum of $600,000.

                           (iii)    So long as any Advances remain outstanding,
                                    on the date that is one hundred eighty (180)
                                    days from the Effective Date, the sum of
                                    $375,000.

                           (iv)     So long as any Advances remain outstanding,
                                    on the date that is two hundred seventy
                                    (270) days from the Effective Date, the sum
                                    of $750,000.

                  (b)      So long as any Advances remain outstanding on a date
         specified in Section 2.7 (a)(ii) through 2.7 (a)(iv), respectively
         (each a "Facility Fee Accrual Date"), the specified fee in respect of
         such Facility Fee Accrual Date set forth in this Section shall be due
         and payable one (1) Business Day after each such Facility Fee Accrual
         Date, regardless of the amount of the outstanding Advances. Each
         portion of the facility fee specified in Section 2.7(a) shall be fully
         earned on its respective Facility Fee Accrual Date and shall be
         non-refundable.

SECTION 2.8 OTHER FEES.

The Borrower shall pay to the Agent for the Agent's own account and not for the
benefit of the Banks, certain additional fees in the amounts set forth in the
Fee Letter.

                                       18
<PAGE>

SECTION 2.9 TERMINATION OF THE COMMITMENT.

The Commitments shall terminate on the Commitment Termination Date and the Banks
shall have no further obligation to make additional Advances.

SECTION 2.10 VOLUNTARY PREPAYMENTS.

The Borrower may prepay the Advances in whole or in part, without penalty or
premium, at any time and from time to time; provided that (i) any prepayment by
the Borrower hereunder shall be applied pro rata to the prepayment of each
Bank's Advances, (ii) any prepayment of the full amount of the Advances shall
include accrued interest thereon, (iii) any prepayment of any portion of the
principal balance of any Advances which, at the time of such prepayment, bears
interest at a Eurodollar Rate shall be accompanied by compensation as specified
in Section 2.16(b), and (iv) each prepayment of the Advances (other than
prepayment of the Advances in full) shall be in the principal amount of
$10,000,000 or integral multiples of $1,000,000 in excess thereof. Each partial
prepayment of principal on the Advances shall be applied, first, to that portion
of such Advances bearing interest at the Floating Rate, and, second, to that
portion of such Advances bearing interest at a Eurodollar Rate.

SECTION 2.11 MANDATORY PREPAYMENTS.

In the event the Borrower issues any Equity Securities or any Debt Securities
after the Effective Date (excluding loans made under the Existing Credit
Facility or any intercompany loans, advances or capital contributions by an
Affiliate of the Borrower), the Borrower shall use the Prepayment Proceeds to
prepay, to the extent of such Prepayment Proceeds, the Advances. Such payment
shall be made within one (1) Business Day of the closing of such Equity
Securities or Debt Securities issuance. Any prepayment of any portion of the
principal balance of any Advances pursuant to this Section 2.11, which, at the
time of such prepayment, bears interest at a Eurodollar Rate shall be
accompanied by compensation as specified in Section 2.16(b).

SECTION 2.12 COMPUTATION OF INTEREST AND FEES.

All interest on Floating Rate Fundings accruing based on the Prime Rate will be
calculated based on the actual days elapsed in a year of 365 or 366 days, as the
case may be. All other interest and all fees hereunder shall be computed on the
basis of actual number of days elapsed in a year of 360 days.

SECTION 2.13 PAYMENTS.

                  (a)      Except as otherwise provided herein, all payments by
         the Borrower or any Bank hereunder shall be made to the Agent at the
         location designated by the Agent not later than the due date for such
         payment. All payments shall be made in immediately available funds in
         lawful money of the United States of America. All payments by the
         Borrower shall be made without condition or deduction for any
         counterclaim, defense, recoupment or setoff.

                  (b)      Upon satisfaction of any applicable terms and
         conditions set forth herein, the Agent shall promptly make any amounts
         received by the Agent due to any Bank in

                                       19
<PAGE>

         accordance with the prior subsection, available in like funds as
         received, by wire transfer as specified by such Bank.

                  (c)      Unless the Borrower or any Bank has notified the
         Agent prior to the date any payment to be made by it is due that it
         does not intend to remit such payment, the Agent may, in its sole and
         absolute discretion, assume that the Borrower or Bank, as the case may
         be, has timely remitted such payment and may, in its sole and absolute
         discretion and in reliance thereon, make available such payment to the
         Person entitled thereto. If such payment was not in fact remitted to
         the Agent in immediately available funds, then:

                  (i)      if the Borrower failed to make such payment, each
                           Bank shall forthwith on demand repay to the Agent the
                           amount of such assumed payment made available to such
                           Bank, together with interest thereon in respect of
                           each day from and including the date such amount was
                           made available by the Agent to such Bank to the date
                           such amount is repaid to the Agent at the Federal
                           Funds Effective Rate; and

                  (ii)     if any Bank failed to make such payment, the Agent
                           shall be entitled to recover such corresponding
                           amount on demand from such Bank. If such Bank does
                           not pay such corresponding amount forthwith upon the
                           Agent's demand therefor, the Agent promptly shall
                           notify the Borrower, and the Borrower shall pay such
                           corresponding amount to the Agent. The Agent also
                           shall be entitled to recover interest on such
                           corresponding amount in respect of each day from the
                           date such corresponding amount was made available by
                           the Agent to the Borrower to the date such
                           corresponding amount is recovered by the Agent, (A)
                           from such Bank at a rate per annum equal to the daily
                           Federal Funds Effective Rate, and (B) from the
                           Borrower, at a rate per annum equal to the interest
                           rate applicable to such Borrowing. Nothing herein
                           shall be deemed to relieve any Bank from its
                           obligation to fulfill its Commitment or to prejudice
                           any rights which the Agent or the Borrower may have
                           against any Bank as a result of any default by such
                           Bank hereunder.

                  (d)      If the Agent or any Bank is required at any time to
         return to the Borrower, or to a trustee, receiver, liquidator,
         custodian, or any official under any proceeding under Debtor Relief
         Laws, any portion of a payments made by the Borrower, each Bank shall,
         on demand of the Agent, return its share of the amount to be returned,
         plus interest thereon from the date of such demand to the date such
         payment is made at a rate per annum equal to the daily Federal Funds
         Effective Rate.

                  (e)      The Borrower agrees that the amount shown on the
         books and records of each Bank as being the principal balance of that
         Bank's Obligations, if any, shall be prima facie evidence of such
         principal balance.

                  (f)      The Borrower hereby authorizes the Agent to charge
         against the Borrower's account with the Agent an amount equal to the
         accrued interest and fees from

                                       20
<PAGE>

         time to time due and payable to the Agent and the Banks under this
         Agreement, or (at the Banks' option) to effect a Borrowing in such
         amount, all without receipt of any request for such charge or
         Borrowing.

SECTION 2.4 PAYMENT ON NONBUSINESS DAYS.

Whenever any payment to be made under this Agreement shall be stated to be due
on a day other than a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in each case be
included in the computation of payment of interest on such Obligations or the
fees hereunder, as the case may be.

SECTION 2.15 USE OF ADVANCES.

The proceeds of each Borrowing shall be used by the Borrower solely to pay the
Borrower's existing obligations under the PSCo 8-3/4% First Mortgage Bonds and
the PSCo Capital Trust I Securities.

SECTION 2.16 INCREASED COSTS OR REDUCTION OF YIELD.

In addition to any interest payable on Advances made hereunder and any fees or
other amounts payable hereunder, the Borrower agrees:

                  (a)      If at any time after the date hereof any adoption of
         or change in any applicable law, rule or regulation or the
         interpretation or administration thereof by any Governmental Authority
         (including, without limitation, Regulation D of the Federal Reserve
         Board):

                  (i)      shall subject any Bank to any tax, duty or other
                           charges with respect to this Agreement, or shall
                           materially change the basis of taxation of payments
                           to any Bank of the principal of or interest on any
                           portion of the principal balance of that Bank's
                           Advances bearing interest at a Eurodollar Rate
                           (except for the imposition of or changes in the rate
                           of Excluded Taxes); or

                  (ii)     shall impose or deem applicable or increase any
                           reserve, special deposit or similar requirement
                           against assets of, deposits with or for the account
                           of, or credit extended by any Bank (other than
                           reserves and assessments described in the definition
                           of "Reserve Requirement" and taken into account in
                           determining the applicable Eurodollar Rate) because
                           of any portion of the principal balance of that
                           Bank's Advances bearing interest at a Eurodollar Rate
                           and the result of any of the foregoing would be to
                           increase the cost to that Bank of making or
                           maintaining any such portion or to reduce any sum
                           received or receivable by that Bank with respect to
                           such portion;

         then, within 30 days after demand by any Bank the Borrower shall pay
         that Bank such additional amount or amounts as will compensate that
         Bank for such increased cost or reduction. A Bank shall not make demand
         hereunder unless that Bank is generally

                                       21
<PAGE>

         imposing such increased costs on its similarly situated customers. No
         Bank may demand such compensation more than 90 days following the end
         of the Interest Period with respect to which such demand is made;
         provided, however, that the foregoing shall in no way limit the right
         of any Bank to demand compensation to the extent that such compensation
         relates to the retroactive application of any law, rule or regulation
         if such demand is made within 90 days after the adoption of or change
         in such law, rule or regulation. A certificate in reasonable detail of
         that Bank setting forth the basis for the determination of such
         additional amount or amounts shall be promptly submitted by that Bank
         to the Borrower and shall, in the absence of manifest error, be
         conclusive and binding as to such amount or amounts.

                  (b)      The Borrower shall also compensate any Bank, upon
         written request by that Bank (which request shall set forth the basis
         for requesting such amounts), for all losses and expenses in respect of
         any interest or other consideration paid by that Bank to lenders of
         funds borrowed by it or deposited with it to maintain any portion of
         the principal balance of the Advances at a Eurodollar Rate which that
         Bank may sustain to the extent not otherwise compensated for hereunder
         and not mitigated by the reemployment of such funds if any prepayment
         of any such portion occurs on a date that is not the expiration date of
         the relevant Interest Period or if a Borrowing or prepayment in whole
         or in part of an Advance bearing interest at a Eurodollar Rate fails to
         occur. A certificate as to any such loss or expense (including
         calculations, in reasonable detail, showing how that Bank computed such
         loss or expense) shall be promptly submitted by that Bank to the
         Borrower and shall, in the absence of manifest error, be conclusive and
         binding as to the amount thereof. Such loss or expense may be computed
         as though that Bank acquired deposits in the London interbank market to
         fund that portion of the principal balance whether or not that Bank
         actually did so.

SECTION 2.17 ILLEGALITY.

If any Bank determines that any Laws have made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Bank to make,
maintain or fund Eurodollar Rate Loans, or materially restricts the authority of
such Bank to purchase or sell, or to take deposits of, United States Dollars in
the applicable offshore United States dollar market, or to determine or charge
interest rates based upon the Eurodollar Rate, then, on notice thereof by Bank
to the Borrower through the Agent, any obligation of such Bank to make
Eurodollar Rate Loans shall be suspended until Bank notifies the Agent and the
Borrower that the circumstances giving rise to such determination no longer
exist. Upon receipt of such notice, the Borrower shall, upon demand from such
Bank (with a copy to the Agent), either prepay or convert, at the Borrower's
option, all Eurodollar Rate Loans of such Bank, either on the last day of the
Interest Period thereof, if Bank may lawfully continue to maintain such
Eurodollar Rate Loans to such day, or immediately, if Bank may not lawfully
continue to maintain such Eurodollar Rate Loans.

SECTION 2.18 TAXES.

                  (a)      All payments made by the Borrower to the Agent or any
         Bank (herein any "Payee") under or in connection with this Agreement or
         the Notes shall be made without any setoff or other counterclaim, and
         free and clear of and without deduction for or on

                                       22
<PAGE>

         account of any present or future taxes now or hereafter imposed by any
         governmental or other authority, except to the extent that such
         deduction or withholding is compelled by law. As used herein, the term
         "Taxes" shall include all income, excise and other taxes of whatever
         nature (other than taxes based on or measured by the net income of the
         Payee (or franchise taxes in lieu thereof) and imposed by the
         government or other authority of the country, state or political
         subdivision in which such Payee is incorporated or in which its
         principal executive office or the office through which the Payee is
         acting is located ("Excluded Taxes") as well as all levies, imposts,
         duties, charges, or fees of whatever nature. If the Borrower is
         compelled by law to make any such deductions or withholdings it will:

                  (i)      pay to the relevant authorities the full amount
                           required to be so withheld or deducted;

                  (ii)     except to the extent that such deduction or
                           withholding results from a breach by any Payee of the
                           representations and covenants contained in Section
                           2.17(b) or the relevant Assignment Agreement pay such
                           additional amounts (including, without limitation,
                           any penalties, interest or expenses) as may be
                           necessary in order that the net amount received by
                           each Payee after such deductions or withholdings
                           (including any required deduction or withholding on
                           such additional amounts) shall equal the amount such
                           Payee would have received had no such deductions or
                           withholdings been made; and

                  (iii)    promptly forward to the Agent (for delivery to such
                           Payee) an official receipt or other documentation
                           reasonably satisfactory to the Agent evidencing such
                           payment to such authorities.

                  (b)      If any Taxes otherwise payable by the Borrower
         pursuant to Section 2.17(a) are directly asserted against any Payee,
         such Payee may pay such Taxes and the Borrower promptly shall reimburse
         such Payee to the full extent otherwise required by such paragraph. The
         obligations of the Borrower under this Section 2.17 shall survive any
         termination of this Agreement. Each Bank by its execution of this
         Agreement represents (and each additional Bank by its execution of any
         Assignment Agreement pursuant to Section 9.1 shall be deemed to
         represent) to each other Bank, the Agent and the Borrower that if such
         Bank is organized under the laws of any jurisdiction other than the
         United States or any state thereof, such Bank has furnished to the
         Agent and the Borrower either U.S. Internal Revenue Service Form
         W-8BEN, or U.S. Internal Revenue Service Form W-8ECI, as applicable
         (wherein such Bank claims entitlement to complete exemption from U.S.
         Federal withholding tax on all interest payments hereunder).

                  (c)      The amount that the Borrower shall be required to pay
         to any Bank pursuant to Sections 2.17(a) or 2.17(b) shall be reduced by
         the amount of any offsetting tax benefit which such Bank receives as a
         result of the Borrower's payment to the relevant authorities as
         reasonably determined by such Bank; provided, however, that (i) such
         Bank shall be the sole judge of the amount of such tax benefit and the
         date on which it is received, (ii) no Bank shall be obliged to disclose
         information regarding its tax

                                       23
<PAGE>

         affairs or tax computations, (iii) nothing herein shall interfere with
         a Bank's right to manage its tax affairs in whatever manner it sees
         fit, and (iv) if such Bank shall subsequently determine that it has
         lost the benefit of all or a portion of such tax benefit, the Borrower
         shall promptly remit to such Bank the amount certified by such Bank to
         be the amount necessary to restore such Bank to the position it would
         have been in if no payment had been made pursuant to this Section
         2.17(c).

                  (d)      If the U.S. Internal Revenue Service or any other
         Governmental Authority of the United States or any other country or any
         political subdivision thereof asserts a claim that the Agent or the
         Borrower did not properly withhold tax from amounts paid to or for the
         account of any Bank (because the appropriate form was not delivered or
         properly completed, because such Bank failed to notify the Agent or the
         Borrower of a change in circumstances which rendered its exemption from
         withholding ineffective, or for any other reason), such Bank shall
         indemnify the Agent or the Borrower, as applicable, fully for all
         amounts paid, directly or indirectly, by the Agent or the Borrower, as
         applicable, as tax, withholding therefor, or otherwise, including
         penalties and interest, and including taxes imposed by any jurisdiction
         on amounts payable to the Agent or the Borrower, as applicable, under
         this subsection, together with all costs and expenses related thereto
         (including attorneys fees and time charges of attorneys for the Agent
         or the Borrower, as applicable, which attorneys may be employees of the
         Agent or the Borrower, as applicable). The obligations of the Bank
         under this Section 2.17(d) shall survive the payment of the Obligations
         and termination of this Agreement.

SECTION 2.19 CAPITAL ADEQUACY.

If any Bank determines at any time that its Return has been reduced as a result
of any Capital Adequacy Rule Change, that Bank may require the Borrower to pay
it the amount necessary to restore its Return to what it would have been had
there been no Capital Adequacy Rule Change. For purposes of this Section:

                  (a)      "Return", for any period, means the percentage
         determined by dividing (i) the sum of interest and ongoing fees earned
         by a Bank under this Agreement during such period, by (ii) the average
         capital that Bank is required to maintain during such period as a
         result of its being a party to this Agreement, as determined by that
         Bank based upon its total capital requirements and a reasonable
         attribution formula that takes account of the Capital Adequacy Rules
         then in effect. Return may be calculated for each calendar quarter and
         for the shorter period between the end of a calendar quarter and the
         date of termination in whole of this Agreement.

                  (b)      "Capital Adequacy Rule" means any law, rule,
         regulation or guideline regarding capital adequacy that applies to any
         Bank, or the interpretation thereof by any governmental or regulatory
         authority. Capital Adequacy Rules include rules requiring financial
         institutions to maintain total capital in amounts based upon
         percentages of outstanding loans, binding loan commitments and letters
         of credit.

                  (c)      "Capital Adequacy Rule Change" means any change in
         any Capital Adequacy Rule occurring after the date of this Agreement,
         but the term does not include

                                       24
<PAGE>

         any changes in applicable requirements that at the date hereof are
         scheduled to take place under the existing Capital Adequacy Rules or
         any increases in the capital that any Bank is required to maintain to
         the extent that the increases are required due to a regulatory
         authority's assessment of the financial condition of that Bank.

                  (d)      "Bank" includes (but is not limited to) the Banks, as
         defined elsewhere in this Agreement; any Bank hereunder; any
         participant in the loans made hereunder (to the extent provided in
         Section 9.2 only); and any bank holding company with respect to any of
         the foregoing.

The initial notice sent by a Bank shall be sent as promptly as practicable after
that Bank learns that its Return has been reduced, shall include a demand for
payment of the amount necessary to restore that Bank's Return for the quarter in
which the notice is sent and, if applicable, the preceding quarter, and shall
state in reasonable detail the cause for the reduction in its Return and its
calculation of the amount of such reduction. Thereafter, that Bank may send a
new notice with respect to each calendar quarter setting forth the calculation
of the reduced Return for that quarter and including a demand for payment of the
amount necessary to restore its Return for that quarter. In such event, the
Borrower shall pay the Bank such amount within 30 days after demand by such
Bank. A Bank's calculation in any such notice shall be conclusive and binding
absent demonstrable error. A Bank shall not make demand hereunder unless that
Bank is generally imposing such increased costs on its similarly situated
customers. No Bank may demand any compensation hereunder more than 45 days
following the end of the quarter for which compensation is sought.

SECTION 2.20 MANDATORY ASSIGNMENT OF BANK'S INTEREST.

If any Bank delivers to the Borrower a demand for compensation pursuant to
Section 2.16(a) or a demand for payment pursuant to Section 2.17 or 2.18 or if
at any time the long-term unenhanced credit rating of any Bank falls below Baa2
from Moody's or below BBB from S&P or if such Bank is no longer rated by S&P or
Moody's, the Borrower may (so long as no Default or Event of Default has
occurred and is continuing) at its expense require such Bank to assign, in whole
and in accordance with Section 9.1 (including the execution of an Assignment
Agreement and all other applicable documents, and the payment of any fees
required under Section 9.1), all of its rights and obligations hereunder and
under such Bank's Note, including but not limited to such Bank's Commitment, to
an Eligible Lender identified by the Borrower and willing to become a Bank
hereunder. Such Bank may be an existing Bank hereunder. Notwithstanding the
foregoing, the Borrower may not compel the resignation of any Bank as the Agent
except as provided in Section 8.12.

                                   ARTICLE III
                              CONDITIONS PRECEDENT

SECTION 3.1 INITIAL CONDITIONS PRECEDENT.

The obligation of the Banks to make any Advance is subject to the condition
precedent that the Agent shall have received on or before the day of the first
Advance (and, in any event, not later than June 25, 2003) all of the following,
in form and substance satisfactory to each Bank:

                                       25
<PAGE>

                  (a)      This Agreement, duly executed by the Borrower, the
         Agent and each of the Banks.

                  (b)      The Notes, dated the date hereof, properly executed
         on behalf of the Borrower.

                  (c)      A certificate of the secretary or an assistant
         secretary of the Borrower (i) certifying that the execution, delivery
         and performance of the Loan Documents and other documents contemplated
         hereunder have been duly approved by all necessary action of the Board
         of Directors of the Borrower, and attaching true and correct copies of
         the applicable resolutions granting such approval, (ii) certifying that
         attached to such certificate are true and correct copies of the
         Organizational Documents of the Borrower, together with such copies,
         and (iii) certifying the names of the officers of the Borrower that are
         authorized to sign the Loan Documents and other documents contemplated
         hereunder, together with the true signatures of such officers.

                  (d)      The Fee Letter, properly executed on behalf of the
         Borrower.

                  (e)      A certificate of good standing of the Borrower from
         the State of Colorado, dated not more than twenty days before such
         date.

                  (f)      Copies of order(s) of the PUC approving the
         execution, delivery and performance by the Borrower of this Agreement
         and the other Loan Documents to which it is a party and the
         transactions contemplated hereby and thereby.

                  (g)      Signed copies of opinions of counsel for the
         Borrower, addressed to the Banks in substantially the forms of Exhibit
         D hereto.

                  (h)      All fees required to be paid as of the date hereof
         under this Agreement or the Fee Letter or any other agreement.

SECTION 3.2 CONDITIONS PRECEDENT TO ALL ADVANCES.

The obligation of the Banks to make any Advance (including the initial Advance)
shall be subject to the further conditions precedent that on the date of such
Advance:

                  (a)      The representations and warranties contained in
         Article IV are correct on and as of the date of such Advance as though
         made on and as of such date, except to the extent that such
         representations and warranties relate solely to an earlier date.

                  (b)      The Borrower has delivered to the Agent a certificate
         in the form of Exhibit F hereto, duly executed by the chief financial
         officer, treasurer, secretary, assistant secretary, general counsel or
         deputy general counsel of the Borrower, specifically confirming the
         Borrower's legal authority to obtain such Advance and that the proceeds
         of any Advance shall be used solely to pay the PSCo 8-3/4% First
         Mortgage Bonds and the PSCo Capital Trust I Securities.

                                       26
<PAGE>

                  (c)      No event has occurred and is continuing, or would
         result from such Advance, which constitutes a Default or an Event of
         Default.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Banks as follows:

SECTION 4.1 CORPORATE EXISTENCE AND POWER.

The Borrower and its Subsidiaries are each corporations duly incorporated,
validly existing and in good standing under the laws of their respective
jurisdictions of incorporation, and are each duly licensed or qualified to
transact business in all jurisdictions where the character of the property owned
or leased or the nature of the business transacted by them makes such licensing
or qualification necessary, except where the failure to be so licensed or
qualified (i) will not permanently preclude the Borrower or any Subsidiary from
maintaining any material action in any such jurisdiction even though such action
arose in whole or in part during the period of such failure, and (ii) will not
result in any other Material Adverse Change. The Borrower has all requisite
power and authority, corporate or otherwise, to conduct its business, to own its
properties and to execute, deliver, and perform all of its obligations under,
the Loan Documents and the Indentures.

SECTION 4.2 AUTHORIZATION OF BORROWING; NO CONFLICT AS TO LAW OR AGREEMENTS.

                  (a)      The execution, delivery and performance by the
         Borrower of the Loan Documents, the borrowings from time to time
         hereunder and the consummation of the transactions herein and therein
         contemplated, have been duly authorized by all necessary corporate
         action and do not and will not (i) require any consent or approval of
         the stockholders of the Borrower, or any authorization, consent,
         approval, order, filing, registration or qualification by or with any
         governmental department, commission, board, bureau, agency or
         instrumentality, domestic or foreign, other than those consents
         described in Schedule 4.2, each of which has been obtained and is in
         full force and effect, (ii) violate any provision of any law, rule or
         regulation (including, without limitation, Regulation X of the Board of
         Governors of the Federal Reserve System and Section 7 of the Exchange
         Act or any regulation promulgated thereunder) or of any order, writ,
         injunction or decree presently in effect having applicability to the
         Borrower or of the Organizational Documents of the Borrower, (iii)
         result in a breach of or constitute a default under any indenture or
         loan or credit agreement or any other material agreement, lease or
         instrument to which the Borrower or any Subsidiary is a party or by
         which it or its properties may be bound or affected, or (iv) result in,
         or require, the creation or imposition of any Lien or other charge or
         encumbrance of any nature (other than the Liens created under this
         Agreement, the First Collateral Trust Securities Indenture and the
         First Mortgage Bond Indenture) upon or with respect to any of the
         properties now owned or hereafter acquired by the Borrower or any
         Subsidiary.

                                       27
<PAGE>

                  (b)      The PUC has issued its Authorizing Orders authorizing
         the issuance of the Pledged Securities, the Related First Mortgage
         Bonds and the incurrence by the Borrower of the Obligations under this
         Agreement.

SECTION 4.3 LEGAL AGREEMENTS.

This Agreement, the other Loan Documents, the Related First Mortgage Bonds, if
issued, and the Indentures constitute the legal, valid and binding obligations
of the Borrower enforceable against the Borrower in accordance with their
respective terms, except to the extent that such enforcement may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally or by general equitable principles. Without limiting the
generality of the foregoing, as of the Pledged Securities Delivery Date, the
Pledged Securities will be (i) duly issued, executed and delivered by the
Borrower; (ii) duly authenticated by the Trustee, and (iii) entitled to the
benefits provided by the First Collateral Trust Securities Indenture. On the
Pledged Securities Delivery Date, the Related First Mortgage Bonds will be (i)
duly issued, executed and delivered by the Borrower; (ii) duly authenticated by
the trustee under the First Mortgage Bond Indenture and (iii) entitled to the
benefits provided by the First Mortgage Bond Indenture.

SECTION 4.4 SUBSIDIARIES.

Schedule 4.4 hereto is a complete and correct list of all Subsidiaries as of the
date of this Agreement and of the percentage of the ownership of the Borrower or
any other Subsidiary in each as of the date of this Agreement. The Borrower has
no Restricted Subsidiaries as of the date hereof except as designated on
Schedule 4.4. Except as otherwise indicated in that Schedule, all shares of each
Subsidiary owned by the Borrower or by any such other Subsidiary are validly
issued and fully paid and nonassessable.

SECTION 4.5 FINANCIAL CONDITION; OTHER INFORMATION.

The Borrower has heretofore furnished to the Banks the audited consolidated
financial statements of the Borrower and its Subsidiaries for the year ended and
as of December 31, 2002 and the unaudited consolidated financial statements of
the Borrower and its Subsidiaries for the quarter ended and as of March 31,
2003. Those financial statements fairly present in all material respects the
financial condition of the Borrower on the dates thereof and the results of its
operations and cash flows for the periods then ended, and were prepared in
accordance with GAAP as then in effect. The information, exhibits and reports
furnished by the Borrower to the Agent and the Banks, taken as a whole, in
connection with the negotiation of or compliance with the Loan Documents did not
contain any material misstatement of fact or omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.

SECTION 4.6 ADVERSE CHANGE.

There has been no Material Adverse Change since March 31, 2003.

                                       28
<PAGE>

SECTION 4.7 LITIGATION.

Except as set forth in Schedule 4.7, there are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or any Subsidiary or the properties of the Borrower or any
Subsidiary before any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which could reasonably
be expected to effect a Material Adverse Change. Other than any liability
incident to any litigation, arbitration or proceeding which could not reasonably
be expected to have a Material Adverse Effect, the Borrower has no material
contingent obligations not provided for or disclosed in the financial statements
referred to in Section 4.5.

SECTION 4.8 HAZARDOUS SUBSTANCES.

Except as set forth in Schedule 4.8, to the best of the Borrower's knowledge
after reasonable inquiry, (i) neither the Borrower nor any Subsidiary or other
Person has ever caused or permitted any Hazardous Substance to be disposed of
on, under or at any real property which is operated by the Borrower or any
Subsidiary or in which the Borrower or any Subsidiary has any interest, except
to the extent that such disposal can not reasonably be expected to result in a
Material Adverse Change; and (ii) no such real property has ever been used
(either by the Borrower or by any Subsidiary or other Person) as a dump site or
permanent or temporary storage site for any Hazardous Substance in a manner that
could reasonably be expected to result in a Material Adverse Change.

SECTION 4.9 REGULATION U.

Neither the Borrower nor any Subsidiary is engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advance will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.

SECTION 4.10 TAXES.

The Borrower and its Subsidiaries have each paid or caused to be paid to the
proper authorities when due all federal, state and local taxes required to be
withheld and paid by them. The Borrower and its Subsidiaries have each filed all
federal, state and local tax returns which to the knowledge of the officers of
the Borrower or any Subsidiary are required to be filed, and the Borrower and
its Subsidiaries have each paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment received by
it to the extent such taxes have become due, other than taxes whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings and for which the Borrower or applicable Subsidiary has provided
adequate reserves in accordance with GAAP.

SECTION 4.11 BURDENSOME RESTRICTIONS.

Neither the Borrower nor any Subsidiary is a party to or bound by any agreement,
or subject to any restriction in any Organizational Document, or any requirement
of law, which would reasonably be expected to effect a Material Adverse Change.

                                       29
<PAGE>

SECTION 4.12 TITLES AND LIENS.

The Borrower or one of its Subsidiaries has good title to each of the properties
and assets material to the operations of the Borrower and its Subsidiaries,
taken as a whole, which it purports to own or which are reflected as owned on
its books and records, and the Borrower has good and valid title to all real and
fixed property and leasehold rights described or enumerated in the First
Collateral Trust Securities Indenture and in the First Mortgage Bond Indenture
(except, in each case, such properties as have been released from the Lien
thereof in accordance with the terms thereof), in each case free and clear of
all Liens and encumbrances, except for Liens and encumbrances permitted by
Section 6.1 and covenants, restrictions, rights, easements and minor
irregularities in title which do not materially interfere with the business or
operations of the Borrower and its Subsidiaries taken as a whole.

SECTION 4.13 ERISA.

No Plan will have an accumulated funding deficiency (as such term is defined in
Section 302 of ERISA) in excess of $50,000,000 as of the last day of the most
recent fiscal year of such Plan ended prior to the date hereof, and no liability
to the Pension Benefit Guaranty Corporation or the Internal Revenue Service in
excess of such amount has been, or is expected by the Borrower or any Subsidiary
or ERISA Affiliate to be, incurred with respect to any Plan that could become a
liability of the Borrower or any Subsidiary.

SECTION 4.14 SECURITIES LAW MATTERS.

                  (a)      If the Pledged Securities are issued and delivered
         pursuant to this Agreement and the First Collateral Trust Securities
         Indenture, the Pledged Securities will not be of the same class (within
         the meaning of Rule 144A under the Act) as securities which are listed
         on a national securities exchange registered under Section 6 of the
         Exchange Act or quoted in a U.S. automated inter-dealer quotation
         system.

                  (b)      The Borrower is subject to Section 13 or 15(d) of the
         Exchange Act.

                  (c)      Neither the Borrower, nor any person acting on its
         behalf, has offered or sold (nor will offer or sell prior to any
         delivery of the Pledged Securities to the Agent) the Pledged Securities
         by means of any general solicitation or general advertising within the
         meaning of Rule 502(c) under the Act.

                  (d)      The offer, issuance and delivery of the Securities
         (as defined in the First Collateral Trust Securities Indenture)
         delivered in connection with the execution and delivery of the Existing
         Credit Agreement was made under restrictions and other circumstances
         reasonably designed not to affect the status of the offer, issuance and
         delivery of the Pledged Securities contemplated by this Agreement as a
         transaction exempt from the registration provisions of the Act.

                  (e)      The issuance and delivery of the Pledged Securities
         as contemplated by this Agreement will be exempt from the registration
         requirements of the Act, and neither the Borrower nor any authorized
         agent acting on its behalf will take any action hereafter that would
         cause the loss of such exemption.

                                       30
<PAGE>

                  (f)      Except in respect of Securities (as defined in the
         First Collateral Trust Securities Indenture) delivered in connection
         with the execution and delivery of the Existing Credit Agreement,
         within the six months preceding the date of any delivery of the Pledged
         Securities to the Agent, neither the Borrower nor any other person
         acting on behalf of the Borrower will have offered or sold to any
         person any Pledged Securities, or any securities of the same or a
         similar class as the Pledged Securities, other than the Pledged
         Securities delivered to the Agent hereunder. The Borrower will take
         reasonable precautions designed to insure that any offer or sale,
         direct or indirect, in the United States or to any U.S. person (as
         defined in Rule 902 under the Act) of any Pledged Securities or any
         substantially similar security issued by the Borrower, within six
         months subsequent to any delivery of the Pledged Securities to the
         Agent, is made under restrictions and other circumstances reasonably
         designed not to affect the status of the offer and sale of the Pledged
         Securities contemplated by this Agreement as a transaction exempt from
         the registration provisions of the Act.

                  (g)      No registration of the Pledged Securities under the
         Act is required for the offer and sale of the Pledged Securities to the
         Agent, if so offered and sold, in the manner contemplated by this
         Agreement.

SECTION 4.15 INVESTMENT COMPANY ACT.

The Borrower is not, and after giving effect to the offer and sale of the
Pledged Securities, will not be an "investment company," as such term is defined
in the Investment Company Act.

SECTION 4.16 PUBLIC UTILITY HOLDING COMPANY ACT.

The Borrower is subject to the Public Utility Holding Company Act of 1935, as
amended ("PUHCA"), as a "subsidiary" of a registered "holding company" within
the meaning of PUHCA. However, the transactions contemplated by this Agreement
are exempt from any requirement for SEC approval under PUHCA.

SECTION 4.17 INDENTURE.

                  (a)      On the date hereof, the aggregate principal amount of
         Securities (as defined in the First Collateral Trust Securities
         Indenture) outstanding under the First Collateral Trust Securities
         Indenture (excluding the Pledged Securities) is $1,793,250,000; and the
         aggregate principal amount of the First Mortgage Bonds outstanding
         under the First Mortgage Bond Indenture (excluding bonds issued to
         secure securities under the First Collateral Trust Securities
         Indenture) is $374,340,000.

                  (b)      There has been no discharge of the First Collateral
         Trust Securities Indenture or of the First Mortgage Bond Indenture with
         respect to the Borrower.

                  (c)      Substantially all of the property, whether real,
         personal or mixed, of the electric utility business of the Borrower is
         subject to the Liens of the First Collateral Trust Securities
         Indenture. Substantially all of the property, whether real, personal or
         mixed, of the Borrower is subject to the Lien of the First Mortgage
         Bond Indenture.

                                       31
<PAGE>

                  (d)      True and complete copies of all amendments and
         supplements to and restatements of the First Collateral Trust
         Securities Indenture and First Mortgage Bond Indenture have been
         delivered to counsel for the Agent.

                  (e)      The supplemental indentures to the First Collateral
         Trust Securities Indenture and the First Mortgage Bond Indenture to be
         entered into in connection with the delivery of the Pledged Securities
         and the Related First Mortgage Bonds will not be required to be
         qualified under the Trust Indenture Act and, in connection with the
         issuance and delivery of the Pledged Securities to the Agent as
         contemplated by this Agreement, the First Collateral Trust Securities
         Indenture and the First Mortgage Bond Indenture will not be required to
         be qualified under the Trust Indenture Act.

SECTION 4.18 SOLVENCY.

The Borrower is and, upon the drawing of any Advance will be, Solvent.

SECTION 4.19 SWAP OBLIGATIONS.

Neither the Borrower nor any of its Subsidiaries has incurred any outstanding
obligations under any Swap Contracts, other than Permitted Swap Obligations.

SECTION 4.20 INSURANCE.

The properties of the Borrower and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Borrower, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Borrower and such Subsidiaries operate.

SECTION 4.21 COMPLIANCE WITH LAWS.

Except as disclosed in Schedule 4.22, the Borrower and its Subsidiaries have
complied in all material respects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof having jurisdiction over the conduct of
their respective businesses or the ownership of their respective properties,
assets and rights.

                                    ARTICLE V
                      AFFIRMATIVE COVENANTS OF THE BORROWER

So long as any Note shall remain unpaid or any Obligations shall be outstanding,
the Borrower will comply with the following requirements, unless the Required
Banks shall otherwise consent in writing:

SECTION 5.1 FINANCIAL STATEMENTS; OTHER NOTICES.

The Borrower will deliver to the Agent and each Bank:

                                       32
<PAGE>

                  (a)      As soon as available, and in any event within 100
         days after the end of each fiscal year of the Borrower, a copy of the
         annual audit report of the Borrower and its Subsidiaries prepared by
         nationally recognized independent certified public accountants, which
         annual report shall include the balance sheet of the Borrower and its
         Subsidiaries as at the end of such fiscal year and the related
         statements of income, shareholders' equity and cash flows of the
         Borrower and its Subsidiaries for the fiscal year then ended, all
         presented on a consolidated basis in reasonable detail and all prepared
         in accordance with GAAP.

                  (b)      As soon as available and in any event within 55 days
         after the end of each of the first three quarters of each fiscal year
         of the Borrower, a balance sheet of the Borrower and its Subsidiaries
         as at the end of such quarter and related statements of earnings and
         cash flows of the Borrower and its Subsidiaries for such quarter and
         for the year to date, in reasonable detail and prepared on a
         consolidated basis in accordance with GAAP, subject to year-end
         adjustments.

                  (c)      Concurrent with the delivery of any financial
         statements under paragraph (a) or (b), a Compliance Certificate, duly
         executed by the chief financial officer or treasurer of the Borrower.

                  (d)      Promptly following the issuance of any Authorizing
         Order, a favorable opinion of counsel to the Borrower, in form and
         substance reasonably acceptable to the Agent, addressed to the Agent
         and the Banks, advising the Agent and the Banks of such issuance,
         stating the restrictions, if any, that such Authorizing Order imposes
         on the Borrower's ability to obtain Borrowings hereunder, and attaching
         a copy of such Authorizing Order.

                  (e)      Promptly after the sending or filing thereof, copies
         of all regular and periodic financial reports which the Borrower or any
         Subsidiary shall file with the SEC or any national securities exchange.

                  (f)      Immediately after the commencement thereof, notice in
         writing of all litigation and of all proceedings before any
         governmental or regulatory agency affecting the Borrower or any
         Restricted Subsidiary of the type described in Section 4.7 or which
         seek a monetary recovery against the Borrower or any Restricted
         Subsidiary combined in excess of $50,000,000.

                  (g)      As promptly as practicable (but in any event not
         later than five Business Days) after an officer of the Borrower obtains
         knowledge of the occurrence of any Default or Event of Default, notice
         of such occurrence, together with a detailed statement by a responsible
         officer of the Borrower of the steps being taken by the Borrower to
         cure the effect of such event.

                  (h)      Promptly upon becoming aware of any Reportable Event
         or the occurrence of any prohibited transaction (as defined in Section
         4975 of the Code or Section 406 of ERISA) in connection with any Plan
         or any trust created thereunder which could reasonably be expected to
         result in a liability to the Borrower or any Subsidiary in excess

                                       33
<PAGE>

         of $50,000,000, a written notice specifying the nature thereof, what
         action the Borrower has taken, is taking or proposes to take with
         respect thereto, and, when known, any action taken or threatened by the
         Internal Revenue Service, the Pension Benefit Guaranty Corporation or
         the Department of Labor with respect thereto.

                  (i)      Promptly upon their receipt, copies of (a) all
         notices received by the Borrower, any Restricted Subsidiary or ERISA
         Affiliate of the Pension Benefit Guaranty Corporation's intent to
         terminate any Plan or to have a trustee appointed to administer any
         Plan, and (b) all notices received by the Borrower, any Restricted
         Subsidiary or any ERISA Affiliate from a Multiemployer Plan concerning
         the imposition or amount of withdrawal liability imposed pursuant to
         Section 4202 of ERISA, which withdrawal liability individually or in
         the aggregate exceeds $50,000,000.

                  (j)      All notices required to be delivered under Section
         10.23.

                  (k)      Promptly after it obtains knowledge of any such
         change, notice (by telephone, followed by written notice transmitted
         promptly thereafter in accordance with Section 10.4) of any change in
         the Moody's Rating or the S&P Rating, together with the details
         thereof, and of any announcement by S&P or Moody's that its rating is
         "under review" or that any such rating has been placed on a
         "CreditWatch List"(R) or "watch list" or that any similar action has
         been taken by such rating agency.

                  (l)      Such other information respecting the financial
         condition and results of operations of the Borrower or any Subsidiary
         as any Bank may from time to time reasonably request.

SECTION 5.2 BOOKS AND RECORDS; INSPECTION AND EXAMINATION.

The Borrower will keep, and will cause each Subsidiary to keep, accurate books
of record and account for itself in which true and complete entries will be made
in accordance with GAAP. Upon request of any Applicable Party, as defined below,
the Borrower will, and will cause each Subsidiary to, give any representative of
such Applicable Party access to, and permit such representative to examine, copy
or make extracts from, any and all books, records and documents in its
possession (except to the extent that such access is restricted by law or by a
bona fide non-disclosure agreement not entered into primarily for the purpose of
evading the requirements of this Section), to inspect any of its properties
(subject to such physical security requirements as the Borrower or the
applicable Subsidiary may require) and to discuss its affairs, finances and
accounts with any of its principal officers, all at such times during normal
business hours, upon reasonable notice, and as often as such Applicable Party
may reasonably request. As used in this Section 5.2, "Applicable Party" means
(i) so long as any Event of Default has occurred and is continuing, the Agent or
any Bank, and (ii) at all other times, the Agent. The provisions of this Section
5.2 shall in no way preclude any Bank from discussing the general affairs,
finances and accounts of the Borrower with any of its principal officers at such
times during normal business hours and as often as may be agreed to between the
Borrower and such Bank.

                                       34
<PAGE>

SECTION 5.3 COMPLIANCE WITH LAWS.

The Borrower will, and will cause each Subsidiary to, comply with the
requirements of applicable laws and regulations, the noncompliance with which
would effect a Material Adverse Change and to conduct its and cause each
Subsidiary to conduct its operations and keep and maintain its property in
material compliance with all Environmental Laws.

SECTION 5.4 PAYMENT OF TAXES AND OTHER CLAIMS.

The Borrower will, and will cause each Subsidiary to, pay or discharge, when
due, (a) all taxes, assessments and governmental charges levied or imposed upon
it or upon its income or profits, or upon any properties belonging to it, prior
to the date on which penalties attach thereto, (b) all federal, state and local
taxes required to be withheld by it, and (c) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien or charge
upon any properties of the Borrower or any Subsidiary; provided, that neither
the Borrower nor any Subsidiary shall be required to pay any such tax,
assessment, charge or claim (i) whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which the Borrower or
such Subsidiary has provided adequate reserves in accordance with GAAP or (ii)
where failure to pay such tax, assessment, charge or claim could not reasonably
be expected to result in a liability in excess of $10,000,000.

SECTION 5.5 MAINTENANCE OF PROPERTIES.

The Borrower will keep and maintain, and will cause each Subsidiary to keep and
maintain, all of its properties necessary or useful in its business in good
condition, repair and working order; provided, however, that nothing in this
Section shall prevent the Borrower or any Subsidiary from discontinuing the
operation and maintenance of, or disposing of, any of its properties if (i) (A)
such discontinuance or disposition is, in the reasonable judgment of the
Borrower or that Subsidiary, desirable in the conduct of its business, and (B)
no Default or Event of Default exists at the time of, or will be caused by, such
discontinuance or disposition, or (ii) such discontinuance or disposition
relates to obsolete or worn-out property.

SECTION 5.6 INSURANCE.

The Borrower will, and will cause each Restricted Subsidiary to, obtain and
maintain insurance with insurers reasonably believed by the Borrower or such
Restricted Subsidiary to be responsible and reputable, in such amounts and
against such risks as is usually carried by companies in similar circumstances
engaged in similar business and owning similar properties in the same general
areas in which the Borrower or that Restricted Subsidiary operates.

SECTION 5.7 PRESERVATION OF CORPORATE EXISTENCE.

The Borrower will, and will cause each Restricted Subsidiary to, preserve and
maintain its corporate existence and all of its rights, privileges and
franchises; provided, however, that neither the Borrower nor any Restricted
Subsidiary shall be required to preserve any of its rights, privileges and
franchises or to maintain its corporate existence if (i) its Board of Directors
shall reasonably determine that the preservation or maintenance thereof is no
longer desirable in the conduct of the business of the Borrower or that
Restricted Subsidiary, and (ii) no Default or

                                       35
<PAGE>

Event of Default exists upon, or will be caused by, the termination of such
right, privilege, franchise or existence; provided, further, that in no event
shall the foregoing be construed to permit the Borrower to terminate its
corporate existence.

SECTION 5.8 DELIVERY OF INFORMATION.

At any time when the Borrower is not subject to Section 13 or 15(d) of the
Exchange Act, for the benefit of holders from time to time of Pledged
Securities, the Borrower agrees to furnish at its expense, upon request, to
holders of Pledged Securities and prospective purchasers of securities
information satisfying the requirements of subsection (d)(4)(i) of Rule 144A
under the Act.

SECTION 5.9 PLEDGED SECURITIES CAPACITY.

The Borrower shall at all times between the Effective Date through and including
the Pledged Securities Delivery Date (as defined in Section 7.3) maintain
authority under the Pledged Securities Order and any other order of the PUC or
any Governmental Authority to issue (i) Collateral Securities (as defined in the
Pledged Securities Order) in the form of First Collateral Trust Bonds secured by
related First Mortgage Bonds in an amount at least equal to the lesser of
$180,000,000 and the amount of the Outstandings and (ii) an aggregate amount of
Short-Term Debt Securities (as defined in the Pledged Securities Order) and
Non-collateral Securities (as defined in the Pledged Securities Order) in the
form of First Collateral Trust Bonds secured by related First Mortgage Bonds in
an amount equal to the amount by which the Outstandings (after giving effect to
any prepayment pursuant to Section 2.11 from the Prepayment Proceeds of such
Debt Securities offering) exceed $180,000,000.

SECTION 5.10 USE OF PROCEEDS.

The Borrower will use the proceeds of the Advances solely to pay Borrower's
obligations under the PSCo 8-3/4% First Mortgage Bonds and the PSCo Capital
Trust I Securities. The Borrower will not, nor will it permit any Subsidiary to,
use any of the proceeds for any other purpose.

                                   ARTICLE VI
                               NEGATIVE COVENANTS

So long as any Note shall remain unpaid or any Obligations shall be outstanding,
the Borrower agrees that, without the prior written consent of the Required
Banks:

SECTION 6.1 LIENS.

The Borrower will not create, incur, assume or suffer to exist any Lien on any
of its assets, now owned or hereafter acquired, and will not permit any
Subsidiary to create, incur, assume or suffer to exist any Lien on any of such
Subsidiary's assets, now owned or hereafter acquired, relating to any
indebtedness of such Subsidiary with respect to which the Borrower has any
obligation for the payment of money; excluding, however, from the operation of
the foregoing:

                  (a)      Liens for taxes or assessments or other governmental
         charges to the extent not required to be paid by Section 5.4.

                                       36
<PAGE>

                  (b)      Materialmen's, merchants', carriers' worker's,
         repairer's, or other like liens arising in the ordinary course of
         business to the extent not required to be paid by Section 5.4.

                  (c)      Pledges or deposits to secure obligations under
         worker's compensation laws, unemployment insurance, social security and
         other similar laws, or to secure the performance of bids, tenders,
         contracts (other than for the repayment of borrowed money) or leases or
         to secure statutory obligations or surety or appeal bonds, or to secure
         indemnity, performance or other similar bonds in the ordinary course of
         business.

                  (d)      Zoning restrictions, easements, licenses,
         restrictions on the use of real property or minor irregularities in
         title thereto, which do not materially impair the use of such property
         in the operation of the business of the Borrower and its Subsidiaries
         taken as a whole or the value of such property for the purpose of such
         business.

                  (e)      Purchase money Liens upon or in property acquired
         after the date hereof, provided that (i) such Lien is created not later
         than the 90th day following the acquisition or completion of
         construction of such property by the Borrower or its applicable
         Subsidiary, and (ii) no such Lien extends or shall extend to or cover
         any property of the Borrower or its Subsidiaries other than the
         property then being acquired, fixed improvements then or thereafter
         erected thereon and improvements and modifications thereto necessary to
         maintain such properties in working order.

                  (f)      Liens granted by any Acquisition Target prior to the
         acquisition by the Borrower or any Subsidiary of any interest in such
         Acquisition Target or its assets, so long as (i) such Lien was granted
         by the Acquisition Target prior to such acquisition and not in
         contemplation thereof, and (ii) no such Lien extends to any assets of
         the Borrower or any Subsidiary other than the assets of the Acquisition
         Target and improvements and modifications thereto necessary to maintain
         such properties in working order or, in the case of an asset transfer,
         the assets so acquired by the Borrower or the applicable Subsidiary and
         improvements and modifications thereto.

                  (g)      Liens (other than those described in subsection (e))
         securing any indebtedness for borrowed money in existence on the date
         hereof and listed in Schedule 6.1 hereto.

                  (h)      Liens created under or in connection with this
         Agreement, the First Collateral Trust Securities Indenture and the
         First Mortgage Bond Indenture.

                  (i)      Liens permitted under the First Collateral Trust
         Securities Indenture and the First Mortgage Bond Indenture as such
         indentures exist on the date hereof, without regard to any waiver,
         amendment, modification or restatement thereof.

                  (j)      Liens securing any refinancing of indebtedness
         secured by the Liens described in paragraphs (e), (f) and (g), so long
         as the amount of such indebtedness secured by any such Lien does not
         exceed the amount of such refinanced indebtedness immediately prior to
         the refinancing and Liens do not extend to assets other than those
         encumbered prior to such refinancing and improvements and modifications
         thereto.

                                       37
<PAGE>

                  (k)      Liens granted by any Subsidiary of the Borrower in
         favor of the Borrower or any wholly-owned Subsidiary of the Borrower.

                  (l)      Liens not otherwise described in this Section 6.1, so
         long as the aggregate amount of indebtedness secured by all such Liens
         does not at any time exceed 10% of the Tangible Net Worth of the
         Borrower and its Subsidiaries.

SECTION 6.2 SALE OF ASSETS.

The Borrower will not, and will not permit any Subsidiary to, sell, lease,
assign, transfer or otherwise dispose of all or a Material Part of the Assets of
the Borrower and its Subsidiaries (whether in one transaction or in a series of
transactions) to any other Person other than (i) in the ordinary course of
business, (ii) dispositions of property no longer used or useful in the business
of the Borrower or any Subsidiary and (iii) dispositions of assets the net
proceeds of which are invested or re-invested, or held in cash or
cash-equivalents for reinvestment, in other energy-related assets; provided,
however, that a wholly-owned Subsidiary of the Borrower may sell, lease, or
transfer all or a substantial part of its assets to the Borrower or another
wholly-owned Subsidiary of the Borrower, and the Borrower or such other
wholly-owned Subsidiary, as the case may be, may acquire all or substantially
all of the assets of the Subsidiary so to be sold, leased or transferred to it
and any such sale, lease or transfer shall not be included in determining if the
Borrower and/or its Subsidiaries disposed of a Material Part of its Assets.
Notwithstanding the foregoing, the operating agreement between TRANSLink
Transmission Co., LLC and the Borrower shall not be treated as a disposition for
the purposes of this Section 6.2.

SECTION 6.3 CONSOLIDATION AND MERGER.

The Borrower will not consolidate with or merge into any Person, or permit any
other Person to merge into it, or acquire (in a transaction analogous in purpose
or effect to a consolidation or merger) all or substantially all of the assets
of any other Person; provided, however, that the restrictions contained in this
Section shall not apply to or prevent the consolidation or merger of any Person
with, or a conveyance or transfer of its assets to, the Borrower so long as (i)
no Default or Event of Default exists at the time of, or will be caused by, such
consolidation, merger, conveyance or transfer, and (ii) the Borrower shall be
the continuing or surviving corporation.

SECTION 6.4 HAZARDOUS SUBSTANCES.

The Borrower will not, and will not permit any Subsidiary to, cause or permit
any Hazardous Substance to be disposed of in any manner, or on, under or at any
real property which is operated by the Borrower or any Subsidiary or in which
the Borrower or any Subsidiary has any interest, if such disposition could
reasonably be expected to result in a Material Adverse Change.

SECTION 6.5 RESTRICTIONS ON NATURE OF BUSINESS.

The Borrower will not engage in any line of business materially different from
that presently engaged in by the Borrower.

                                       38
<PAGE>

SECTION 6.6 TRANSACTIONS WITH AFFILIATES.

The Borrower will not (i) make any loan or capital contribution to, or any other
investment in, any Affiliate or make any other cash transfer to any Affiliate of
the Borrower or (ii) enter into any transaction or series of transactions,
whether or not in the ordinary course of business, with any officer, director,
shareholder, Affiliate (other than a Subsidiary) of the Borrower; provided,
however, that the foregoing shall not prohibit any of the following:

                  (a)      Transactions made upon fair and reasonable terms no
         less favorable to the Borrower than would obtain, taking into account
         all facts and circumstances, in a comparable arm's-length transaction
         with a Person not an officer, director, shareholder or Affiliate of the
         Borrower.

                  (b)      Dividends to the Parent.

                  (c)      Transactions with Affiliates which transactions are
         subject to the jurisdiction of the Federal Energy Regulatory Commission
         ("FERC"), the SEC or the PUC.

                  (d)      Allocation of taxes, tax benefits and tax credits in
         accordance with the restrictions and requirements of PUHCA.

                  (e)      Contributions of capital to Subsidiaries.

                  (f)      Any investment in TRANSLink Transmission Co., LLC
         ("TRANSLink") or any operating agreement between TRANSLink and the
         Borrower and/or its Subsidiaries, complying with the requirements of
         FERC Order No. 2000.

SECTION 6.7 RATIO OF FUNDED DEBT TO TOTAL CAPITAL.

The Borrower will not at any time permit its ratio of total Funded Debt to Total
Capital, determined on a consolidated basis with respect to the Borrower and its
Subsidiaries as at the end of each fiscal quarter of the Borrower, to be greater
than 0.60 to 1.

SECTION 6.8 INTEREST COVERAGE RATIO.

The Borrower will not at any time permit its Interest Coverage Ratio, determined
as of the end of each fiscal quarter of the Borrower, to be less than 2.75 to 1.

                                   ARTICLE VII
                     EVENTS OF DEFAULT, RIGHTS AND REMEDIES

SECTION 7.1 EVENTS OF DEFAULT.

"Event of Default", wherever used herein, means any one of the following events:

                  (a)      Default in the payment of any principal of any
         Advance when it becomes due and payable.

                                       39
<PAGE>

                  (b)      Default in the payment of any interest on any
         Obligations or any fees required under Section 2.7 when the same become
         due and payable and the continuance of such default for five (5)
         Business Days.

                  (c)      Failure to (i) deliver the Pledged Securities and the
         Pledged Securities Deliverables or (ii) make any prepayment on the
         Advances when and as required under Section 7.3.

                  (d)      Default in the performance, or breach, of any
         covenant or agreement on the part of the Borrower contained in Article
         VI hereof (other than Section 6.4).

                  (e)      Default in the performance, or breach, of any
         covenant or agreement of the Borrower in this Agreement or any other
         Loan Document (including but not limited to Section 6.4, but excluding
         any other covenant or agreement a default in whose performance or whose
         breach is elsewhere in this Section specifically dealt with), and the
         continuance of such default or breach for a period of 30 days after the
         Agent, at the request of any Bank, has given notice to the Borrower
         specifying such default or breach and requiring it to be remedied.

                  (f)      Any representation or warranty made by the Borrower
         in this Agreement or any other Loan Document or by the Borrower (or any
         of its officers) in any certificate, instrument, or statement
         contemplated by or made or delivered pursuant to or in connection with
         this Agreement, shall prove to have been incorrect in any material
         respect when made.

                  (g)      The Borrower or the Parent shall assert that any Loan
         Documents or any Pledged Securities (if any) are unenforceable in
         accordance with their terms; or the principal amount outstanding under
         the Pledged Securities, if pledged, shall at any time be less than the
         Outstandings.

                  (h)      A default in the payment when due (after giving
         effect to any applicable grace period) of principal or interest with
         respect to any indebtedness or any Swap Contract of the Borrower or any
         Subsidiary (other than the Obligations) if the aggregate amount of all
         such indebtedness as to which such payment defaults exist is not less
         than $50,000,000.

                  (i)      A default (other than a default described in
         paragraph (g)) under any bond, debenture, note or other evidence of
         indebtedness or any Swap Contract of the Borrower or any Subsidiary
         (other than the Obligations) or under any indenture or other instrument
         under which any such evidence of indebtedness has been issued or by
         which it is governed and the expiration of the applicable period of
         grace, if any, specified in such evidence of indebtedness, indenture or
         other instrument if the effect of such default is to cause or to permit
         the holder of such indebtedness (or trustee or agent on behalf of such
         holder) to cause such indebtedness to come due prior to its stated
         maturity or is to cause or to permit the counterparty in respect of
         such Swap Contract to elect an early termination date in respect of
         such Swap Contract; provided, however, that no Event of Default shall
         be deemed to have occurred under this paragraph if the aggregate amount

                                       40
<PAGE>

         owing as to all such indebtedness and Swap Contracts as to which such
         defaults have occurred and are continuing is less than $50,000,000;
         provided further that if such default shall be cured by the Borrower or
         such Subsidiary, or waived by the holders of such indebtedness or
         counterparties in respect of such Swap Contracts, in each case prior to
         the commencement of any action under Section 7.2 and as may be
         permitted by such evidence of indebtedness, indenture, other instrument
         or Swap Contract, then the Event of Default hereunder by reason of such
         default shall be deemed likewise to have been thereupon cured or
         waived.

                  (j)      The Borrower or any Restricted Subsidiary shall be
         adjudicated a bankrupt or insolvent, or admit in writing its inability
         to pay its debts as they mature, or make an assignment for the benefit
         of creditors; or the Borrower or any Restricted Subsidiary shall apply
         for or consent to the appointment of any receiver, trustee, or similar
         officer for it or for all or any substantial part of its property; or
         such receiver, trustee or similar officer shall be appointed without
         the application or consent of the Borrower or such Restricted
         Subsidiary, and such appointment shall continue undischarged for a
         period of 60 days; or the Borrower or any Restricted Subsidiary shall
         institute (by petition, application, answer, consent or otherwise) any
         proceeding relating to it under the Debtor Relief Laws or any such
         proceeding shall be instituted (by petition, application or otherwise)
         against the Borrower or any Restricted Subsidiary and shall continue
         undischarged for 60 days; or any judgment, writ, warrant of attachment
         or execution or similar process shall be issued or levied against a
         substantial part of the property of the Borrower or any Restricted
         Subsidiary and such judgment, writ, or similar process shall not be
         released, vacated, stayed or fully bonded within 60 days after its
         issue or levy.

                  (k)      A petition shall be filed by the Borrower or any
         Restricted Subsidiary under the Debtor Relief Laws naming the Borrower
         or that Restricted Subsidiary as debtor; or an involuntary petition
         shall be filed against the Borrower or any Restricted Subsidiary under
         the Debtor Relief Laws, and such petition shall not have been dismissed
         within 60 days after such filing; or an order for relief shall be
         entered in any case under the Debtor Relief Laws naming the Borrower or
         any Restricted Subsidiary as debtor.

                  (l)      The Parent shall cease to own 100% of all classes of
         capital stock of the Borrower; or a Change of Control shall occur with
         respect to the Parent.

                  (m)      The rendering against the Borrower or any Subsidiary
         of a final judgment, decree or order for the payment of money if the
         amount of such judgment, decree or order, together with the amount of
         all other such judgments, decrees and orders then outstanding, less (in
         each case) the portion thereof covered by insurance proceeds, is
         greater than $50,000,000 and if such judgment, decree or order remains
         unsatisfied and in effect for any period of 30 consecutive days without
         a stay of execution.

                  (n)      Any Plan shall have been terminated as a result of
         which the Borrower or any Subsidiary or ERISA Affiliate has incurred an
         unfunded liability in excess of $50,000,000; or a trustee shall have
         been appointed by an appropriate United States District Court to
         administer any Plan, or the Pension Benefit Guaranty Corporation shall
         have instituted proceedings to terminate any Plan or to appoint a
         trustee to administer any

                                       41
<PAGE>

         Plan and in either case such action could reasonably be expected to
         result in liability to the Borrower or any Subsidiary in excess of
         $50,000,000, or withdrawal liability in excess of $50,000,000 shall
         have been asserted against the Borrower or any Subsidiary or ERISA
         Affiliate by a Multiemployer Plan; or the Borrower or any Subsidiary or
         ERISA Affiliate shall have incurred any joint and several liability to
         the Pension Benefit Guaranty Corporation, the Internal Revenue Service
         or the Department of Labor, or the Borrower or any Subsidiary shall
         have incurred any other liability to the Pension Benefit Guaranty
         Corporation, the Internal Revenue Service or the Department of Labor in
         excess of $50,000,000 with respect to any Plan; or any Reportable Event
         that the Required Banks may determine in good faith could reasonably be
         expected to constitute grounds for the termination of any Plan by the
         Pension Benefit Guaranty Corporation, for the appointment by the
         appropriate United States District Court of a trustee to administer any
         Plan or for the imposition of withdrawal liability with respect to a
         Multiemployer Plan, and which, in any such case, could reasonably be
         expected to result in liability to the Borrower or any Subsidiary or
         any ERISA Affiliate in excess of $50,000,000 shall have occurred and be
         continuing 30 days after written notice to such effect shall have been
         given to the Borrower by the Banks.

                  (o)      Any Authorizing Order or other governmental license
         or other permission necessary for the maintenance of Obligations
         outstanding or the conduct of the Borrower's business substantially as
         presently conducted shall be suspended or revoked or shall fail to be
         renewed upon expiration.

                  (p)      Any court, government or governmental agency shall
         condemn, seize or otherwise appropriate, or take custody or control of,
         all or any Material Part of the Assets of the Borrower and its
         Subsidiaries.

SECTION 7.2 RIGHTS AND REMEDIES.

Upon the occurrence of an Event of Default or at any time thereafter until such
Event of Default is waived by the Required Banks or cured, the Agent may, with
the consent of the Required Banks, and shall, upon the request of the Required
Banks, exercise any or all of the following rights and remedies:

                  (a)      The Agent may, by notice to the Borrower, declare the
         Commitments to be terminated, whereupon the same shall forthwith
         terminate.

                  (b)      The Agent may, by notice to the Borrower, declare the
         entire unpaid principal amount of the Obligations then outstanding, all
         interest accrued and unpaid thereon, and all other Obligations payable
         under this Agreement to be forthwith due and payable, whereupon the
         Obligations, all such accrued interest and all such amounts shall
         become and be forthwith due and payable, without presentment, demand,
         protest or further notice of any kind, all of which are hereby
         expressly waived by the Borrower.

                  (c)      The Banks may, without notice to the Borrower and
         without further action, apply any and all money owing by any Bank to
         the Borrower to the payment of the Obligations then outstanding,
         including accrued interest. For purposes of this

                                       42
<PAGE>

         paragraph (d), "Bank" means the Banks, as defined elsewhere in this
         Agreement, and any participant in the loans made hereunder; provided,
         however, that each such participant, by exercising its rights under
         this paragraph (d), agrees that it shall be obligated under Section
         8.17 with respect to such payment as if it were a Bank for purposes of
         that Section.

                  (d)      The Agent may exercise and enforce all rights and
         remedies available to it in respect of the Pledged Securities.

                  (e)      The Agent and the Banks may exercise any other rights
         and remedies available to them by law or agreement.

Notwithstanding the foregoing, upon the occurrence of an Event of Default
described in Section 7.1(j) hereof (whether or not such Event of Default also
arises under Section 7.1(i) hereof), the Commitments shall terminate and the
entire unpaid principal amount of the Notes then outstanding, all interest
accrued and unpaid thereon, and all other amounts payable under this Agreement
shall be immediately due and payable without presentment, demand, protest or
notice of any kind.

SECTION 7.3 PROVISIONS REGARDING PLEDGED SECURITIES.

         (a) Pledged Securities. In the event that all outstanding Obligations
are not paid in full on or before the date that is one hundred twenty (120) days
after the Effective Date (the "Pledged Securities Delivery Date"), the Borrower
covenants and agrees that, for the purpose of providing security for the payment
of the principal of the Advances, it will issue, execute and deliver to the
Agent on the Pledged Securities Delivery Date (i) Pledged Securities in an
aggregate principal amount equal to the aggregate Outstandings; and (ii) the
Pledged Securities Deliverables. Notwithstanding the foregoing, in the event
that the Borrower does not have lawful authority to issue, execute and deliver
Pledged Securities to the Agent in an amount equal to the aggregate amount of
the Outstandings, then, on the Pledged Securities Delivery Date, the Borrower
shall prepay the Advances to the extent of any Pledged Securities Shortfall
(subject to any compensation due the Agent and/or Banks as specified in Section
2.16(b)) and deliver to the Agent (x) Pledged Securities in an aggregate
principal amount equal to the aggregate Outstandings after giving effect to such
prepayment; and (y) the Pledged Securities Deliverables.

         The Pledged Securities shall mature on the Facility Termination Date,
except that upon the occurrence of an Event of Default pursuant to Section
7.1(a) or (b) or any other Event of Default that results in an acceleration of
the outstanding principal amount of any Notes, the Pledged Securities shall be
redeemable in whole or in part upon receipt by the Trustee and the Borrower of a
written demand (a "Redemption Demand") from the Agent specifying a date (the
"Demand Redemption Date") (which may be the date of receipt by Borrower of the
Redemption Demand) stating that there has been such an Event of Default and
demanding redemption of the Pledged Securities to the extent of the amount of
the accelerated principal amount of the Notes. The Pledged Securities shall
otherwise contain terms substantially similar to the terms of those Securities
(as defined in the First Collateral Trust Securities Indenture) issued and
delivered in connection with the execution and delivery by Borrower of the
Existing Credit Agreement.

                                       43
<PAGE>

         Notwithstanding the foregoing, (x) without the prior written consent of
the Agent, the Borrower shall make no payment with respect to the Pledged
Securities at any time while any Advance remains outstanding, and (y) the Agent
shall not demand payment of the Pledged Securities from any obligor thereunder
prior to the occurrence of an Event of Default.

         On the date which is thirty (30) days after the maturity of the Pledged
Securities, the Trustee may conclusively presume that the obligation of the
Borrower to pay principal on the Pledged Securities as the same shall have come
due and payable shall have been fully satisfied and discharged unless and until
the Trustee shall have received a Payment Demand from the Agent stating that the
principal of Pledged Securities has become due and payable and specifying the
amount of funds required to make such payment. Notwithstanding anything to the
contrary contained herein, the aggregate amount actually due on the Pledged
Securities shall not exceed the aggregate principal amount of the Advances.

         (b) Effect of Termination or Reduction of Outstandings. Upon any
reduction or termination of the Outstandings, the Pledged Securities shall be
deemed satisfied and discharged as to the reduced or terminated portion of the
Outstandings, as and to the extent provided in the Pledged Securities.

         (c) Voting Restrictions. The Agent's rights to vote or consent under
the First Collateral Trust Securities Indenture in respect of the Pledged
Securities shall be restricted as and to the extent provided in the Pledged
Securities.

         (d) Restrictions on Transfer of Bonds. The Pledged Securities are not
transferable except to a successor to the Agent under this Agreement.

         (e) Securities Act Representation. Each of the Agent and the Banks
represents to the Borrower that it is an "accredited investor" within the
meanings of Rule 501(a) of Regulation D and is acquiring its interest in the
Pledged Securities hereunder as security for the Obligations and not with a view
to any sale or distribution thereof within the meaning of the Act.

                                  ARTICLE VIII
                                    THE AGENT

SECTION 8.1 APPOINTMENT; NATURE OF RELATIONSHIP.

KeyBank is hereby appointed by each of the Banks as its contractual
representative (herein referred to as the "Agent") hereunder and under each
other Loan Document, and each of the Banks irrevocably authorizes the Agent to
act as the contractual representative of such Bank with the rights and duties
expressly set forth herein and in the other Loan Documents. The Agent agrees to
act as such contractual representative upon the express conditions contained in
this Article VIII. Notwithstanding the use of the defined term "Agent," it is
expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Bank by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Banks with only those duties as are expressly set forth in this Agreement
and the other Loan Documents. In its capacity as the Banks' contractual
representative, the Agent (i) does not hereby assume any fiduciary duties to any
of the Banks, (ii) is a "representative" of the Banks within the meaning of
Section 9-105 of the Uniform

                                       44
<PAGE>

Commercial Code and (iii) is acting as an independent contractor, the rights and
duties of which are limited to those expressly set forth in this Agreement and
the other Loan Documents. Each of the Banks hereby agrees to assert no claim
against the Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Bank hereby waives.

SECTION 8.2 POWERS.

The Agent shall have and may exercise such powers under the Loan Documents as
are specifically delegated to the Agent by the terms of each thereof, together
with such powers as are reasonably incidental thereto. The Agent shall have no
implied duties to the Banks, or any obligation to the Banks to take any action
thereunder except any action specifically provided by the Loan Documents to be
taken by the Agent. The Agent shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects with reasonable
care.

SECTION 8.3 GENERAL IMMUNITY.

Neither the Agent nor any of its directors, officers, agents or employees shall
be liable to the Borrower, the Banks or any Bank for any action taken or omitted
to be taken by it or them hereunder or under any other Loan Document or in
connection herewith or therewith except to the extent such action or inaction is
determined in a final non-appealable judgment by a court of competent
jurisdiction to have arisen from the gross negligence or willful misconduct of
such Person.

SECTION 8.4 NO RESPONSIBILITY FOR LOANS, RECITALS, ETC.

Neither the Agent nor any of its directors, officers, agents or employees shall
be responsible for or have any duty to ascertain, inquire into, or verify (a)
any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (b) the performance or observance of any of
the covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information directly
to each Bank; (c) the satisfaction of any condition specified in Article III,
except receipt of items required to be delivered solely to the Agent; (d) the
existence or possible existence of any Default or Event of Default; (e) the
validity, enforceability, effectiveness, sufficiency or genuineness of any Loan
Document or any other instrument or writing furnished in connection therewith,
or (f) the financial condition of the Borrower or of any of the Borrower's
Subsidiaries. The Agent shall have no duty to disclose to the Banks information
that is not required to be furnished by the Borrower to the Agent at such time,
but is voluntarily furnished by the Borrower to the Agent (either in its
capacity as the Agent or in its individual capacity). No Agent-Related Person
shall be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any other Loan Document, or to inspect the properties,
books or records of the Borrower or any of the Borrower's Subsidiaries or
Affiliates.

SECTION 8.5 ACTION ON INSTRUCTIONS OF BANKS.

The Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance with written
instructions signed by the

                                       45
<PAGE>

Required Banks (or, when expressly required hereunder, all of the Banks), and
such instructions and any action taken or failure to act pursuant thereto shall
be binding on all of the Banks. The Banks hereby acknowledge that the Agent
shall be under no duty to take any discretionary action permitted to be taken by
it pursuant to the provisions of this Agreement or any other Loan Document
unless it shall be requested in writing to do so by the Required Banks. The
Agent shall be fully justified in failing or refusing to take any action
hereunder and under any other Loan Document unless it shall first be indemnified
to its satisfaction by the Banks pro rata against any and all liability, cost
and expense that it may incur by reason of taking or continuing to take any such
action.

SECTION 8.6 EMPLOYMENT OF AGENTS AND COUNSEL.

The Agent may execute any of its duties as the Agent hereunder and under any
other Loan Document by or through employees, agents, and attorneys-in-fact and
shall not be answerable to the Banks, except as to money or securities received
by it or its authorized agents, for the default or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The Agent shall be
entitled to advice of counsel concerning the contractual arrangement between the
Agent and the Banks and all matters pertaining to the Agent's duties hereunder
and under any other Loan Document.

SECTION 8.7 RELIANCE ON DOCUMENTS; COUNSEL.

The Agent shall be entitled to rely upon any Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document believed by it to be
genuine and correct and to have been signed or sent by the proper person or
persons, and, in respect to legal matters, upon the opinion of counsel selected
by the Agent, which counsel may be employees of the Agent.

SECTION 8.8 AGENT'S REIMBURSEMENT AND INDEMNIFICATION.

The Banks agree to reimburse and indemnify the Agent ratably in proportion to
their respective Commitments (or, if the Commitments have been terminated, in
proportion to their Commitments immediately prior to such termination) (i) for
any amounts not reimbursed by the Borrower for which the Agent is entitled to
reimbursement by the Borrower under the Loan Documents, (ii) for any other
expenses incurred by the Agent on behalf of the Banks, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan
Documents (including, without limitation, for any expenses incurred by the Agent
in connection with any dispute between the Agent and any Bank or between two or
more of the Banks) and (iii) for any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever which may be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out of the Loan Documents or
any other document delivered in connection therewith or the transactions
contemplated thereby (including, without limitation, for any such amounts
incurred by or asserted against the Agent in connection with any dispute between
the Agent and any Bank or between two or more of the Banks), or the enforcement
of any of the terms of the Loan Documents or of any such other documents,
provided that (i) no Bank shall be liable for any of the foregoing to the extent
any of the foregoing is found in a final non-appealable judgment by a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct

                                       46
<PAGE>

of the Agent and (ii) any indemnification required pursuant to Section 2.17(d)
shall, notwithstanding the provisions of this Section 8.8, be paid by the
relevant Bank in accordance with the provisions thereof. The obligations of the
Banks under this Section 8.8 shall survive payment of the Obligations and
termination of this Agreement.

SECTION 8.9 NOTICE OF DEFAULT.

The Agent shall not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default, except with respect to defaults in the payment
of principal, interest and fees required to be paid to the Agent for the account
of Banks, unless the Agent shall have received written notice from a Bank or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". The Agent will
notify Banks of its receipt of any such notice. The Agent shall take such action
with respect to such Default or Event of Default as may be directed by Required
Banks in accordance with Article VII; provided, however, that unless and until
the Agent has received any such direction, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of Banks.

SECTION 8.10 RIGHTS AS A BANK.

In the event the Agent is a Bank, the Agent shall have the same rights and
powers hereunder and under any other Loan Document with respect to its
Commitment and its Advances as any Bank and may exercise the same as though it
were not the Agent, and the term "Bank" or "Banks" shall, at any time when the
Agent is a Bank, unless the context otherwise indicates, include the Agent in
its individual capacity. The Agent and its Affiliates may accept deposits from,
lend money to, and generally engage in any kind of trust , debt, equity or other
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Borrower or any of its Subsidiaries in which the
Borrower or such Subsidiary is not restricted hereby from engaging with any
other Person. The Agent, in its individual capacity, is not obligated to remain
a Bank.

SECTION 8.11 BANK CREDIT DECISION; DISCLOSURE OF INFORMATION BY AGENT.

Each Bank acknowledges that no Agent-Related Person has made any representation
or warranty to it, and that no act by the Agent hereinafter taken, including any
consent to and acceptance of any assignment or review of the affairs of the
Borrower and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank as to any matter, including
whether Agent-Related Persons have disclosed material information in their
possession. Each Bank, including any Bank by assignment, represents to the Agent
that it has, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower and
its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such

                                       47
<PAGE>

documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to Banks by the Agent herein, the
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, prospects, operations,
property, financial and other condition or creditworthiness of the Borrower or
any of its Subsidiaries which may come into the possession of any Agent-Related
Person.

SECTION 8.12 SUCCESSOR AGENT.

The Agent may resign at any time by giving written notice thereof to the Banks
and the Borrower, such resignation to be effective upon the appointment of a
successor Agent or, if no successor Agent has been appointed, forty-five days
after the retiring Agent gives notice of its intention to resign. The Agent may
be removed at any time with or without cause by written notice received by the
Agent from the Required Banks, such removal to be effective on the date
specified by the Required Banks. Upon any such resignation or removal, the
Required Banks shall have the right to appoint, on behalf of the Borrower and
the Banks, a Bank as a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks within thirty days after the resigning Agent's
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Borrower and the Banks, a successor Agent. Notwithstanding the
foregoing, (i) the Agent may at any time without the consent of any Bank and
with the consent of the Borrower, not to be unreasonably withheld or delayed,
appoint any of its Affiliates which is a commercial bank as a successor Agent
hereunder and (ii) so long as no Event of Default exists, no successor Agent may
be appointed without the prior written consent of the Borrower, not to be
unreasonably withheld or delayed. If the Agent has resigned or been removed and
no successor Agent has been appointed, the Banks may perform all the duties of
the Agent hereunder and the Borrower shall make all payments in respect of the
Obligations to the applicable Bank and for all other purposes shall deal
directly with the Banks. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000. Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning or removed Agent. Upon the effectiveness of the resignation or removal
of the Agent, the resigning or removed Agent shall be discharged from its duties
and obligations hereunder and under the Loan Documents. After the effectiveness
of the resignation or removal of an Agent, the provisions of this Article VIII
shall continue in effect for the benefit of such Agent in respect of any actions
taken or omitted to be taken by it while it was acting as the Agent hereunder
and under the other Loan Documents. In the event that there is a successor to
the Agent by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 8.12, then the term "Prime Rate" as used in
this Agreement shall mean the prime rate, base rate or other analogous rate of
the new Agent.

                                       48
<PAGE>

SECTION 8.13 DELEGATION TO AFFILIATES.

The Borrower and the Banks agree that the Agent may delegate any of its duties
under this Agreement to any of its Affiliates. Any such Affiliate (and such
Affiliate's directors, officers, agents and employees) which performs duties in
connection with this Agreement shall be entitled to the same benefits of the
indemnification, waiver and other protective provisions to which the Agent is
entitled under Articles VIII and X.

SECTION 8.14 DISTRIBUTION OF PAYMENTS AND PROCEEDS.

                  (a)      After deduction of any costs of collection as
         hereinafter provided, the Agent shall remit to each Bank that Bank's
         Percentage of all payments of principal, interest and facility fees
         payable under Section 2.7 that are received by the Agent under the Loan
         Documents. Each Bank's interest in the Loan Documents shall be payable
         solely from payments, collections and proceeds actually received by the
         Agent under the Loan Documents; and the Agent's only liability to the
         Banks hereunder shall be to account for each Bank's Percentage of such
         payments, collections and proceeds in accordance with this Agreement.
         If the Agent is ever required for any reason to refund any such
         payments, collections or proceeds, each Bank will refund to the Agent,
         upon demand, its Percentage of such payments, collections or proceeds,
         together with its Percentage of interest or penalties, if any, payable
         by the Agent in connection with such refund. The Agent may, in its sole
         discretion, make payment to the Banks in anticipation of receipt of
         payment from the Borrower. If the Agent fails to receive any such
         anticipated payment from the Borrower, each Bank shall promptly refund
         to the Agent, upon demand, any such payment made to it in anticipation
         of payment from the Borrower, together with interest for each day on
         such amount until so refunded at a rate equal to the Federal Funds
         Effective Rate for each such day.

                  (b)      Notwithstanding the foregoing, if any Bank has
         wrongfully refused to fund its Percentage of any Borrowing or other
         Advance as required hereunder, or if the principal balance of any
         Bank's Note is for any other reason less than its Percentage of the
         aggregate principal balances of the Notes then outstanding, the Agent
         may remit all payments received by it to the other Banks until such
         payments have reduced the aggregate amounts owed by the Borrower to the
         extent that the aggregate amount owing to such Bank hereunder is equal
         to its Percentage of the aggregate amount owing to all of the Banks
         hereunder. The provisions of this paragraph are intended only to set
         forth certain rules for the application of payments, proceeds and
         collections in the event that a Bank has breached its obligations
         hereunder and shall not be deemed to excuse any Bank from such
         obligations.

SECTION 8.15 EXPENSES.

All payments, collections and proceeds received or effected by the Agent may be
applied, first, to pay or reimburse the Agent for all costs, expenses, damages
and liabilities at any time incurred by or imposed upon the Agent in connection
with this Agreement or any other Loan Document (including but not limited to all
reasonable attorney's fees, foreclosure expenses and advances made to protect
the security of collateral, if any, but excluding any costs, expenses, damages
or

                                       49
<PAGE>

liabilities arising from the gross negligence or willful misconduct of the
Agent). If the Agent does not receive payments, collections or proceeds from the
Borrower or its properties sufficient to cover any such costs, expenses, damages
or liabilities within 30 days after their incurrence or imposition, each Bank
shall, upon demand, remit to the Agent its Percentage of the difference between
(i) such costs, expenses, damages and liabilities, and (ii) such payments,
collections and proceeds.

SECTION 8.16 PAYMENTS RECEIVED DIRECTLY BY BANKS.

If any Bank or other holder of a Note shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of offset or otherwise) on
account of principal of or interest on any Note other than through distributions
made in accordance with Section 8.2, such Bank or holder shall promptly give
notice of such fact to the Agent and shall purchase from the other Banks or
holders such participations in the Notes held by them as shall be necessary to
cause the purchasing Bank or holder to share the excess payment or other
recovery ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter recovered from
such purchasing Bank or holder, the purchase shall be rescinded and the
purchasing Bank restored to the extent of such recovery (but without interest
thereon).

SECTION 8.17 AGENT NOT OFFERING BONDS.

Each Bank acknowledges that neither the Agent's taking possession of the Pledged
Securities, nor its exercise of remedies with respect to the Pledged Securities
and subsequent distribution of proceeds thereunder, constitutes or will
constitute an offer of any security, a solicitation of an offer to buy any
security, or a placement of any security.

                                   ARTICLE IX
                         ASSIGNMENTS AND PARTICIPATIONS

SECTION 9.1 ASSIGNMENTS.

                  (a)      Any Bank may, at any time, assign a portion of its
         Obligations and Commitment to an Eligible Lender (an "Applicant") on
         any date (the "Adjustment Date") selected by such Bank subject to the
         terms and provisions of this Section 9.1. The aggregate principal
         amount of the Obligations and Commitment so assigned in any assignment
         shall be $5,000,000 or an integral multiple of $1,000,000 in excess of
         $5,000,000, and the assigning Bank shall retain at least $5,000,000 of
         such Obligations and Commitment for its own account; provided, however,
         that the foregoing restriction shall not apply to a Bank assigning its
         entire Obligations and Commitment to the Applicant. Any Bank proposing
         an assignment hereunder shall give notice of such assignment to the
         Agent and the Borrower at least ten Business Days prior to such
         assignment (unless the Agent consents to a shorter period of time).
         Such notice shall specify the identity of such Applicant and the
         Percentage which it proposes that such Applicant acquire (which
         Percentage shall be the same for the Commitment and the Note held by
         the assigning Bank). Any assignment hereunder may be made only with the
         prior written consent of the Agent and the Borrower; provided, however,
         that (i) in no event

                                       50
<PAGE>

         shall such consent be unreasonably withheld, and (ii) the consent of
         the Borrower shall not be required if a Default or Event of Default has
         occurred and is continuing at the time of such assignment.

                  (b)      Subject to the prior written consent of the Agent and
         the Borrower (if applicable), to confirm the status of each Applicant
         as a party to this Agreement and to evidence the assignment of the
         applicable portion of the assigning Bank's Commitment, and Advances in
         accordance herewith:

                  (i)      the Borrower, such Bank, such Applicant and the Agent
                           shall, on or before the Adjustment Date, execute and
                           deliver to the Agent an Assignment Agreement
                           (provided that, if a Default or Event of Default has
                           occurred and is continuing on the applicable
                           Adjustment Date, the assignment will be effective
                           whether the Borrower signs it or not), in
                           substantially the form of Exhibit E (an "Assignment
                           Agreement"); and

                  (ii)     the Borrower will, at its own expense and in exchange
                           for the assigning Bank's Note, execute and deliver to
                           the assigning Bank a new Note, payable to the order
                           of the Applicant in an amount corresponding to the
                           applicable interest in the assigning Bank's rights
                           and obligations acquired by such Applicant pursuant
                           to such assignment, and, if the assigning Bank has
                           retained interests in such rights and obligations, a
                           new Note, payable to the order of that Bank in an
                           amount corresponding to such retained interests. Such
                           new Notes shall be in an aggregate principal amount
                           equal to the principal amount of the Note to be
                           replaced by such new Notes (or, if less, the
                           Commitment Amount of the assigning Bank prior to
                           giving effect to such assignment, unless such
                           assignment is made after the Commitment Termination
                           Date, in which case the aggregate principal amount of
                           the new Notes shall equal the outstanding principal
                           balance of the Note to be replaced by such new
                           Notes), shall be dated the effective date of such
                           assignment and shall otherwise be in the form of the
                           Note to be replaced thereby. Such new Notes shall be
                           issued in substitution for, but not in satisfaction
                           or payment of, the Note being replaced thereby; and

Upon the execution and delivery of such Assignment Agreement and such Notes, (a)
this Agreement shall deemed to be amended to the extent, and only to the extent,
necessary to reflect the addition of such Additional Bank and the resulting
adjustment of Percentages arising therefrom, (b) the assigning Bank shall be
relieved of all obligations hereunder to the extent of the reduction of all
obligations hereunder and to the extent of the reduction of such Bank's
Percentage, and (c) the Additional Bank shall become a party hereto and shall be
entitled to all rights, benefits and privileges accorded to a Bank herein and in
each other document or instrument executed pursuant hereto and subject to all
obligations of a Bank hereunder, including the right to approve or disapprove
actions which, in accordance with the terms hereof, require the approval of the
Required Banks or all Banks, and the obligations to make Advances hereunder.

                  (c)      In order to facilitate the addition of Additional
         Banks hereto, the Borrower shall (subject to the written agreement of
         any prospective Additional Bank to be subject

                                       51
<PAGE>

         to the confidentiality provisions of Section 10.1) provide all
         reasonable assistance requested by each Bank and the Agent relating
         thereto which shall not require undue effort or expense on the part of
         the Borrower, including, without limitation, the furnishing of such
         written materials and financial information regarding the Borrower as
         any Bank or the Agent may reasonably request and the participation by
         officers of the Borrower in a meeting or teleconference call with any
         Applicant upon the reasonable request upon reasonable notice of any
         Bank or the Agent.

                  (d)      Without limiting any other provision hereof:

                  (i)      each Bank shall have the right at any time upon
                           written notice to the Borrower and the Agent (but
                           without requiring the consent of the Borrower or the
                           Agent) to sell, assign, transfer, or negotiate all or
                           any part of its Commitment, Advances, Notes, and
                           other rights and obligations under this Agreement and
                           the Loan Documents to one or more Affiliates of such
                           Bank, provided that, unless consented to by the
                           Borrower and the Agent (which consent shall not be
                           unreasonably withheld), no such sale, assignment,
                           transfer or negotiation of Commitment shall relieve
                           the transferring Bank from its obligations (to the
                           extent such Affiliate does not fulfill its
                           obligations) hereunder; and

                  (ii)     each Bank shall have the right at any time upon
                           written notice to the Borrower and the Agent (but
                           without requiring the consent of the Borrower or the
                           Agent) to sell, assign, transfer, or negotiate all or
                           any part of its Commitment, Advances, Notes, and
                           other rights and obligations under this Agreement and
                           the Loan Documents to one or more Banks, and any such
                           sale, assignment, transfer or negotiation shall
                           relieve the transferring Bank from its obligations
                           hereunder to the extent of the obligations so
                           transferred (except, in any event, to the extent that
                           the Borrower, any other Bank or the Agent has rights
                           against such transferring Bank as a result of any
                           default by such transferring Bank under this
                           Agreement);

provided, however, that any partial sale, assignment, transfer or negotiation
pursuant to this Section shall be pro rata as to all of the Commitment,
Obligations and Advances transferred.

                  (e)      Simultaneous with any assignment under this Section,
         the Bank making such assignment shall pay the Agent a transfer fee in
         the amount of $3,500.

                  (f)      Notwithstanding anything to the contrary contained
         herein, any Bank (a "Granting Bank") may grant to a special purpose
         funding vehicle (an "SPC") of such Granting Bank, identified as such in
         writing from time to time by the Granting Bank to the Agent and the
         Borrower, the option to provide to the Borrower all or any part of any
         Advance that such Granting Bank would otherwise be obligated to make to
         the applicable Borrower pursuant to this Agreement; provided that (i)
         nothing herein shall constitute a commitment by any SPC to make any
         Advance, (ii) if an SPC elects not to exercise such option or otherwise
         fails to provide all or any part of such Advance, the Granting Bank

                                       52
<PAGE>

         shall be obligated to make such Advance pursuant to the terms hereof,
         (iii) such Granting Bank's other obligations under this Agreement shall
         remain unchanged, (iv) such Granting Bank shall remain solely
         responsible to the other parties hereto for the performance of such
         obligations, and (v) the Borrower, the Agent and the other Banks shall
         continue to deal solely and directly with such Granting Bank in
         connection with such Granting Bank's rights and obligations under this
         Agreement (including any rights and obligations assigned to such SPC).
         The making of an Advance by an SPC hereunder shall be deemed to utilize
         the Commitment of the applicable Granting Bank to the same extent, and
         as if, such Advance were made by such Granting Bank. 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 applicable Granting Bank). All notices hereunder to any
         Granting Bank or the related SPC, and all payments in respect of the
         Obligations due to such Granting Bank or the related SPC, shall be made
         to such Granting Bank. In addition, each Granting Bank shall vote as a
         Bank hereunder without giving effect to any assignment under this
         paragraph (f), and no SPC shall have any vote as a Bank under this
         Agreement for any purpose. 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 senior indebtedness of any
         SPC, it will not institute against, or join any other person in
         instituting against, such SPC any bankruptcy, reorganization,
         arrangement, insolvency or liquidation proceedings under the laws of
         the United States or any State thereof. In addition, notwithstanding
         anything to the contrary contained in this Section 9.1, any SPC may (i)
         with notice to, but without the prior written consent of, the Borrower
         or the Agent and without paying any transfer fee therefor, assign all
         or a portion of its interests in its right to repayment of any Advances
         to its Granting Bank or to any financial institutions providing
         liquidity and/or credit support to or for the account of such SPC to
         fund the Advances made by such SPC or to support the securities (if
         any) issued by such SPC to fund such Advances and (ii) disclose on a
         confidential basis, to the extent such disclosure would be permitted
         under Section 10.1 as if such SPC were a Bank, any non-public
         information relating to its Advances to any rating agency, commercial
         paper dealer or provider of any surety, guarantee or credit or
         liquidity enhancement to such SPC. No amendment to this paragraph (f)
         that affects the rights of an SPC that has made an advance hereunder
         shall be effective without the consent of such SPC.

                  (g)      Notwithstanding any other provision of this
         Agreement, any Bank may at any time create a security interest in all
         or any portion of its rights under this Agreement and that Bank's Note
         in favor of any Federal Reserve Bank in accordance with Regulation A of
         the Board of Governors of the Federal Reserve System.

SECTION 9.2 PARTICIPATIONS.

Each Bank may grant participations in a portion of its Advances and Commitments
to any Eligible Lender, upon prior written notice to the Agent but without the
consent of the Agent or the Borrower, but only so long as the principal amount
of the participation so granted is no less than $5,000,000 (or, if the
participant is a Participating Affiliate, no less than $1,000,000). No holder of
any such participation, other than an Affiliate of such Bank, shall be entitled
to require

                                       53
<PAGE>

such Bank to take or omit to take any action hereunder, except that such Bank
may agree with such participant that such Bank will not, without such
participant's consent, agree to any action described in paragraph (a) of Section
10.3. No Bank shall, as between the Borrower and such Bank, be relieved of any
of its obligations hereunder as a result of any such granting of a
participation. The Borrower hereby acknowledges and agrees that any participant
described in this Section will, for purposes of Sections 2.16, 2.17 and 2.18
only, be considered to be a Bank hereunder (provided that such participant shall
not be entitled to receive any more than the Bank selling such participation
would have received had such sale not taken place).

SECTION 9.3 LIMITATION ON ASSIGNMENTS AND PARTICIPATIONS.

Except as set forth in Sections 9.1 and 9.2, no Bank may assign any of its
rights or obligations under, or grant any participation in, any Loan Document or
Commitment.

                                    ARTICLE X
                                  MISCELLANEOUS

SECTION 10.1 DISCLOSURE OF INFORMATION.

The Agent and the Banks shall keep confidential (and cause their respective
officers, directors, employees, agents and representatives to keep confidential)
all information, materials and documents furnished by the Borrower and its
Subsidiaries to the Agent or the Banks (the "Disclosed Information").
Notwithstanding the foregoing, the Agent and each Bank may disclose Disclosed
Information (i) to the Agent or any other Bank; (ii) to any Affiliate of any
Bank in connection with the transactions contemplated hereby, provided that such
Affiliate has been informed of the confidential nature of such information;
(iii) to legal counsel, accountants and other professional advisors to the Agent
or such Bank; (iv) to any regulatory body having jurisdiction over any Bank or
the Agent; (v) to the extent required by applicable laws and regulations or by
any subpoena or similar legal process, or requested by any governmental agency
or authority; (vi) to the extent such Disclosed Information (A) becomes publicly
available other than as a result of a breach of this Agreement, (B) becomes
available to the Agent or such Bank on a non-confidential basis from a source
other than the Borrower or a Subsidiary, or (C) was available to the Agent or
such Bank on a non-confidential basis prior to its disclosure to the Agent or
such Bank by the Borrower or a Subsidiary; (vii) to the extent the Borrower or
such Subsidiary shall have consented to such disclosure in writing; (viii) to
the extent reasonably deemed necessary by the Agent or any Bank in the
enforcement of the remedies of the Agent and the Banks provided under the Loan
Documents; or (ix) in connection with any potential assignment or participation
in the interest granted hereunder, provided that any such potential assignee or
participant shall have executed a confidentiality agreement imposing on such
potential assignee or participant substantially the same obligations as are
imposed on the Agent and the Banks under this Section 10.1. Furthermore, the
Borrower acknowledges and agrees that KeyBank may, after the successful
syndication of the Facility, share certain information relating to transactions
contemplated hereby with standard industry database companies (including Loan
Pricing Corporation and Standard & Poor's Leveraged Commentary & Data) in
accordance with customary industry practice.

                                       54
<PAGE>

Notwithstanding anything herein to the contrary, information subject to this
Section 10.1 shall not include, and the Agent and each Bank may disclose without
limitation of any kind, any information with respect to the "tax treatment" and
"tax structure" (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the transactions contemplated hereby and all materials of any kind
(including opinions or other tax analyses) that are provided to the Agent or
such Bank relating to such tax treatment and tax structure; provided that with
respect to any document or similar item that in either case contains information
concerning the tax treatment or tax structure of the transaction as well as
other information, this sentence shall only apply to such portions of the
document or similar item that relate to the tax treatment or tax structure of
the Advances and transactions contemplated hereby. The Borrower and its
Subsidiaries may also disclose without limitation the "tax treatment" and "tax
structure" of the transactions contemplated hereby.

SECTION 10.2 NO WAIVER; CUMULATIVE REMEDIES.

No failure or delay on the part of the Banks in exercising any right, power or
remedy under the Loan Documents shall operate as a waiver thereof; nor shall any
Bank's acceptance of payments while any Default or Event of Default is
outstanding operate as a waiver of such Default or Event of Default, or any
right, power or remedy under the Loan Documents; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The rights, remedies, powers and privileges herein or therein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law. Any decision by Agent or any Bank not to require
payment of any interest (including interest due under Section 2.6(d)), fee, cost
or other amount payable under any Loan Document or to calculate any amount
payable by a particular method on any occasion shall in no way limit or be
deemed a waiver of the Agent's or such Bank's right to require full payment
thereof, or to calculate an amount payable by another method that is not
inconsistent with this Agreement, on any other or subsequent occasion.

SECTION 10.3 AMENDMENTS, ETC.

No amendment or waiver of any provision of any Loan Document or consent to any
departure by the Borrower therefrom shall be effective unless the same shall be
in writing and signed by the Required Banks (or by the Agent with the consent or
at the request of the Required Banks), and any such waiver shall be effective
only in the specific instance and for the specific purpose for which given.
Notwithstanding the foregoing:

                  (a)      No such amendment or waiver shall be effective to do
         any of the following unless signed by each of the Banks (or by the
         Agent with the consent or at the request of each of the Banks):

                  (i)      Increase the Commitment Amount of any Bank or extend
                           the Commitment Termination Date or the Facility
                           Termination Date.

                  (ii)     Permit the Borrower to assign its rights under this
                           Agreement.

                                       55
<PAGE>

                  (iii)    Amend this Section, the definition of "Required
                           Banks" in Section 1.1, or any provision herein
                           providing for consent or other action by all Banks.

                  (iv)     Forgive any indebtedness of the Borrower arising
                           under this Agreement or the Notes, or reduce the rate
                           of interest or any fees charged under this Agreement
                           or the Notes.

                  (v)      Postpone or delay any date fixed by this Agreement or
                           any other Loan Document for any payment of principal,
                           interest, facility fees or other material amounts due
                           to the Banks (or any of them) hereunder or under any
                           other Loan Document.

                  (vi)     Modify the Borrower's obligation to deliver the
                           Pledged Securities or prepay the Advances to the
                           extent of any Pledged Securities Shortfall as and
                           when required under Section 7.3.

                  (vii)    Release the Agent's interest in any Pledged
                           Securities or amend any terms of any Pledged
                           Securities.

                  (b)      No amendment, waiver or consent shall affect the
         rights or duties of the Agent under this Agreement or any other Loan
         Document unless in writing and signed by the Agent.

                  (c)      No amendment, modification or (except as provided
         elsewhere herein) termination of this Agreement or waiver of any rights
         of the Borrower or obligations of any Bank or the Agent hereunder shall
         be effective unless the Borrower shall have consented thereto in
         writing.

No notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances.

SECTION 10.4 TRANSMISSION, NOTICE AND EFFECTIVENESS OF COMMUNICATIONS AND
SIGNATURES.

                  (a)      MODES OF DELIVERY. Except as otherwise expressly
         provided herein, all notices and other communications hereunder shall
         be in writing and shall be (i) personally delivered, (ii) transmitted
         by registered mail, postage prepaid, (iii) sent by Federal Express or
         similar expedited delivery service, or (iv) transmitted by telecopy, in
         each case addressed or transmitted by telecopy to the party to whom
         notice is being given at its address or telecopier number (as the case
         may be) as set forth in Exhibit A or in any applicable Assignment
         Agreement; or, as to each party, at such other address or telecopier
         number as may hereafter be designated in a notice by that party to the
         other party complying with the terms of this Section. All such notices
         or other communications shall be deemed to have been given on (i) the
         date received if delivered personally, (ii) five business days after
         the date of posting, if delivered by mail, (iii) the date of receipt,
         if delivered by Federal Express or similar expedited delivery service,
         or (iv) the date of transmission if delivered by telecopy, except that
         notices or requests to the Banks pursuant to any of the provisions of
         Article II shall not be effective as to any Bank until received by that
         Bank.

                                       56
<PAGE>

                  (b)      RELIANCE BY AGENT AND BANKS. The Agent and each Bank
         shall be entitled to rely and act on any communication believed by it
         in good faith to be given by or on behalf of the Borrower even if (i)
         such communications (A) were not made in a manner specified herein, (B)
         were incomplete or (C) were not preceded or followed by any other
         notice specified herein, or (ii) the terms thereof, as understood by
         the recipient, varied from any subsequent related communications
         provided for herein. The Borrower shall indemnify the Agent and the
         Banks from any loss, cost, expense or liability as a result of relying
         on any communications permitted herein.

                  (c)      EFFECTIVENESS OF FACSIMIlE DOCUMENTS AND SIGNATURES.
         Documents and agreements delivered from time to time in connection with
         the Loan Documents may be transmitted and/or signed by facsimile. The
         effectiveness of any such documents and signatures shall, subject to
         applicable Law, have the same force and effect as hardcopies with
         manual signatures and shall be binding on the Borrower and the Agent
         and the Banks. The Agent may also request that any such documents and
         signature be confirmed by a manually-signed hardcopy thereof; provided,
         however, that the failure to request or deliver any such
         manually-signed hardcopy shall not affect the effectiveness of any
         facsimile documents or signatures.

SECTION 10.5 COSTS AND EXPENSES.

The Borrower agrees (a) to pay or reimburse the Agent for all reasonable costs
and expenses incurred in connection with the development, preparation,
negotiation and execution of the Loan Documents, and the development,
preparation, negotiation and execution of any amendment, waiver, consent,
supplement or modification to, any Loan Documents, and any other documents
prepared in connection herewith or therewith, including the Commitment Letter,
dated May 27, 2003, by and between KeyBank and the Borrower (including the
attached Summary of Terms and Conditions dated May 27, 2003) and the
consummation and administration of the transactions contemplated hereby and
thereby, including all reasonable attorney fees and costs, and (b) to pay or
reimburse the Agent and each Bank for all costs and expenses incurred in
connection with any refinancing, restructuring, reorganization (including a
bankruptcy reorganization), collection and enforcement or attempted enforcement,
or preservation of any rights under any Loan Documents, and any other documents
prepared in connection herewith or therewith, or in connection with any
refinancing, or restructuring of any such documents in the nature of a "workout"
or of any insolvency or bankruptcy proceeding, including attorney fees and
costs. The foregoing costs and expenses shall include all reasonable
out-of-pocket expenses incurred by the Agent and the cost of independent public
accountants and other outside experts retained by the Agent or any Bank. Such
costs and expenses shall also include administrative costs of the Agent
reasonably attributable to the administration of the Loan Documents. Any amount
payable by the Borrower under this Section shall bear interest from the second
Business Day following the date of demand for payment at the Default Rate,
unless waived by the Agent. The agreements in this Section shall survive
repayment of all Obligations.

SECTION 10.6 INDEMNIFICATION BY BORROWER.

The Borrower hereby agrees to indemnify the Agent and the Banks and each
officer, director, employee and agent thereof (herein individually each called
an "Indemnitee" and collectively called the "Indemnitees") from and against any
and all losses, claims, damages, reasonable

                                       57
<PAGE>

expenses (including, without limitation, reasonable attorneys' fees) and
liabilities (all of the foregoing being herein called the "Indemnified
Liabilities") incurred by an Indemnitee in connection with or arising out of the
execution or delivery of this Agreement or any agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective
obligations hereunder or the use of the proceeds of any Advance hereunder
(including but not limited to any such loss, claim, damage, expense or liability
arising out of any claim that any Environmental Law has been breached with
respect to any activity or property of the Borrower), except for any portion of
such losses, claims, damages, expenses or liabilities incurred solely as a
result of the gross negligence or willful misconduct of the applicable
Indemnitee. If and to the extent that the foregoing indemnity may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. All obligations provided
for in this Section shall survive any termination of this Agreement.

SECTION 10.7 SET-OFF.

In addition to any rights and remedies of the Agent and the Banks or any
assignee or participant of any Bank or any Affiliate thereof (each, a
"Proceeding Party") provided by law, upon the occurrence and during the
continuance of any Event of Default, each Proceeding Party is authorized at any
time and from time to time, without prior notice to the Borrower, any such
notice being waived by the Borrower to the fullest extent permitted by law, to
proceed directly, by right of set-off, banker's lien, or otherwise, against any
assets of the Borrower which may be in the hands of such Proceeding Party
(including all general or special, time or demand, provisional or other deposits
and other indebtedness owing by such Proceeding Party to or for the credit or
the account of the Borrower) and apply such assets against the Obligations,
irrespective of whether such Proceeding Party shall have made any demand
therefor and although such Obligations may be unmatured. Each Bank agrees
promptly to notify the Borrower and the Agent after any such set-off and
application made by such Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application.

SECTION 10.8 SHARING OF SET-OFF.

The Agent and each Bank severally agrees that if it (or any Proceeding Party
claiming through it), through the exercise of any right of setoff, banker's lien
or counterclaim against the Borrower or otherwise, receives payment on account
of the Outstandings held by it that is ratably more than any other Bank receives
in payment on account of the Outstandings held by such other Bank, then, subject
to applicable Laws: (a) the Bank, which acting on its behalf or through any
Proceeding Party, exercises the right of setoff, banker's lien or counterclaim
or otherwise receives such payment shall purchase, and shall be deemed to have
simultaneously purchased, from the other Bank a participation in the
Outstandings held by the other Bank and shall pay to the other Bank a purchase
price in an amount so that the share of the Outstandings held by each Bank after
the exercise of the right of setoff, banker's lien or counterclaim or receipt of
payment shall be in the same proportion that existed prior to the exercise of
the right of setoff, banker's lien or counterclaim or receipt of payment; and
(b) such other adjustments and purchases of participations shall be made from
time to time as shall be equitable to ensure that all Banks share any payment
obtained in respect of the Outstandings ratably in accordance with each Bank's

                                       58
<PAGE>

share of the Outstandings immediately prior to, and without taking into account,
the payment; provided that, if all or any portion of a disproportionate payment
obtained as a result of the exercise of the right of setoff, banker's lien,
counterclaim or otherwise is thereafter recovered from the purchasing Bank by
the Borrower or any Person claiming through or succeeding to the rights of the
Borrower, the purchase of a participation shall be rescinded and the purchase
price thereof shall be restored to the extent of the recovery, but without
interest. Each Bank that purchases a participation in the Outstandings pursuant
to this Section shall from and after the purchase have the right to give all
notices, requests, demands, directions and other communications under this
Agreement with respect to the portion of the Outstandings purchased to the same
extent as though the purchasing Bank were the original owner of the Outstandings
purchased. The Borrower expressly consents to the foregoing arrangements and
agrees that any lender holding a participation in an Obligation so purchased may
exercise any and all rights of setoff, banker's lien or counterclaim with
respect to the participation as fully as if lender were the original owner of
the Obligation purchased; provided that such lender agrees to be bound by the
terms of this Section 10.8.

SECTION 10.9 USURY.

Notwithstanding anything to the contrary contained in any Loan Document, the
interest and fees paid or agreed to be paid under the Loan Documents shall not
exceed the maximum rate of non-usurious interest permitted by applicable Law
(the "Maximum Rate"). If the Agent or any Bank shall receive interest or a fee
in an amount that exceeds the Maximum Rate, the excessive interest or fee shall
be applied to the principal of the Outstandings or, if it exceeds the unpaid
principal, refunded to the Borrower. In determining whether the interest or a
fee contracted for, charged, or received by the Agent or a Bank exceeds the
Maximum Rate, such Person may, to the extent permitted by applicable law, (a)
characterize any payment that is not principal as an expense, fee, or premium
rather than interest, (b) exclude voluntary prepayments and the effects thereof,
and (c) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the contemplated term of the Obligations.

SECTION 10.10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

All representations and warranties made hereunder and in any Loan Document,
certificate or statement delivered pursuant hereto or thereto or in connection
herewith or therewith shall survive the execution and delivery thereof but shall
terminate the later of (a) when the Commitments are terminated and (b) when no
Obligations remain outstanding under any Loan Document. Such representations and
warranties have been or will be relied upon by the Agent and each Bank,
notwithstanding any investigation made by the Agent or any Bank on their behalf.

SECTION 10.11 INTEGRATION.

This Agreement, together with the other Loan Documents and any letter agreements
referred to herein, comprises the complete and integrated agreement of the
parties on the subject matter hereof and supersedes all prior agreements,
written or oral, including without limitation, the Commitment Letter, dated May
27, 2003 by and between KeyBank and the Borrower (the "Commitment Letter") and
the Term Sheet dated May 27, 2003 relating to the Commitment

                                       59
<PAGE>

Letter, on the subject matter hereof. In the event of any conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control and govern; provided that the
inclusion of supplemental rights or remedies in favor of the Agent or the Banks
in any other Loan Document shall not be deemed a conflict with this Agreement.
Each Loan Document was drafted with the joint participation of the respective
parties thereto and shall be construed neither against nor in favor of any
party, but rather in accordance with the fair meaning thereof.

SECTION 10.12 FURTHER ASSURANCES.

The Borrower shall, at its expense and without expense to the Banks or the
Agent, do, execute and deliver such further acts and documents as any Bank or
the Agent from time to time reasonably requires for the assuring and confirming
unto the Banks or the Agent of the rights hereby created.

SECTION 10.13 HEADINGS.

Section headings in this Agreement and the other Loan Documents are included for
convenience of reference only and are not part of this Agreement or the other
Loan Documents for any other purpose.

SECTION 10.14 TIME OF THE ESSENCE.

Time is of the essence of the Loan Documents.

SECTION 10.15 FOREIGN BANKS.

Each Bank that is a "foreign corporation, partnership or trust" within the
meaning of the Code, or any successor statute thereto (a "Foreign Bank") shall
deliver to the Agent, prior to receipt of any payment subject to withholding
under the Code (or after accepting an assignment of an interest herein), two
duly signed completed copies of either Form W-8BEN or any successor thereto
(relating to such Person and entitling it to a complete exemption from
withholding on all payments to be made to such Person by the Borrower pursuant
to this Agreement) or Form W-8ECI or any successor thereto (relating to all
payments to be made to such Person by the Borrower pursuant to this Agreement)
of the United States Internal Revenue Service or such other evidence
satisfactory to the Borrower and the Agent that no withholding under the federal
income tax laws is required with respect to such Person. Thereafter and from
time to time, each such Person shall (a) promptly submit to the Agent such
additional duly completed and signed copies of one of such forms (or such
successor forms as shall be adopted from time to time by the relevant United
States taxing authorities) as may then be available under then current United
States laws and regulations to avoid, or such evidence as is satisfactory to the
Borrower and the Agent of any available exemption from, United States
withholding taxes in respect of all payments to be made to such Person by the
Borrower pursuant to this Agreement, and (b) take such steps as shall not be
materially disadvantageous to it, in the reasonable judgment of such Bank, and
as may be reasonably necessary (including the re-designation of its Lending
Office) to avoid any requirement of applicable laws that the Borrower make any
deduction or withholding for taxes from amounts payable to such Person. If such
Persons fails to deliver the above forms or other documentation, then the Agent
may withhold from any interest payment to such Person

                                       60
<PAGE>

an amount equivalent to the applicable withholding tax imposed by Sections 1441
and 1442 of the Code, without reduction. If any Governmental Authority asserts
that the Agent did not properly withhold any tax or other amount from payments
made in respect of such Person, such Person shall indemnify the Agent therefor,
including all penalties and interest and costs and expenses (including
reasonable attorney fees and costs) of the Agent. The obligation of Banks under
this Section shall survive the payment of all Obligations and the resignation or
replacement of the Agent.

SECTION 10.16 NATURE OF BANK'S OBLIGATIONS.

Nothing contained in this Agreement or any other Loan Document and no action
taken by the Agent or Banks or any of them pursuant hereto or thereto may, or
may be deemed to, make Banks a partnership, an association, a joint venture or
other entity, either among themselves or with the Borrower or any Affiliate of
the Borrower. Each Bank's obligation to make any Advance pursuant hereto is
several and not joint or joint and several, and in the case of the initial
Advance only is conditioned upon the performance by all other Banks of their
obligations to make the initial Advance. A default by any Bank will not increase
the pro rata share attributable to any other Bank.

SECTION 10.17 EXECUTION IN COUNTERPARTS.

This Agreement and the other Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts of this Agreement or such other Loan
Document, as the case may be, taken together, shall constitute but one and the
same instrument.

SECTION 10.18 BINDING EFFECT, ASSIGNMENT.

The Loan Documents shall be binding upon and inure to the benefit of the the
Borrower and the Banks and their respective successors and assigns, except that
the Borrower shall not have the right to assign its rights thereunder or any
interest therein without the prior written consent of each of the Banks.

SECTION 10.19 GOVERNING LAW.

THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW
PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT
REGARD TO THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK, BUT GIVING
EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

SECTION 10.20 SEVERABILITY OF PROVISIONS.

Any provision of this Agreement which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.

                                       61
<PAGE>

SECTION 10.21 CONSENT TO JURISDICTION.

EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK, NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN
DOCUMENTS AND EACH PARTY HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT, ANY BANK TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR
ANY BANK OR ANY AFFILIATE OF THE AGENT OR ANY BANK INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.

SECTION 10.22 WAIVER OF JURY TRIAL.

THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT AND THE NOTES OR THE RELATIONSHIPS ESTABLISHED HEREUNDER.

SECTION 10.23 RECALCULATION OF COVENANTS FOLLOWING ACCOUNTING PRACTICES CHANGE.

The Borrower shall notify the Agent of any Accounting Practices Change promptly
upon becoming aware of the same. Promptly following such notice, the Borrower
and the Banks shall negotiate in good faith in order to effect any adjustments
to Sections 6.7 and 6.8 necessary to reflect the effects of such Accounting
Practices Change.

SECTION 10.24 HEADINGS.

Article and Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.

SECTION 10.25 NONLIABILITY OF BANKS.

The relationship between the Borrower on the one hand and the Banks and the
Agent on the other hand shall be solely that of borrower and lender. Neither the
Agent nor any Bank shall have any fiduciary responsibilities to the Borrower.
Neither the Agent nor any Bank undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations. The Borrower agrees that neither the

                                       62
<PAGE>

Agent nor any Bank shall have liability to the Borrower (whether sounding in
tort, contract or otherwise) for losses suffered by the Borrower in connection
with, arising out of, or in any way related to, the transactions contemplated
and the relationship established by the Loan Documents, or any act, omission or
event occurring in connection therewith, unless it is determined in a final
non-appealable judgment by a court of competent jurisdiction that such losses
resulted from the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Agent nor any Bank shall have any liability with
respect to, and the Borrower hereby waives, releases and agrees not to sue for,
any special, indirect or consequential damages suffered by the Borrower in
connection with, arising out of, or in any way related to the Loan Documents or
the transactions contemplated thereby.

                            [Signature Pages Follow]

                                       63
<PAGE>

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

                                      PUBLIC SERVICE COMPANY OF
                                      COLORADO, A COLORADO CORPORATION

                                      By /s/ Benjamin G.S. Fowke III
                                         ---------------------------------------
                                         Its Vice President & Treasurer
                                             -----------------------------------

     [Signature Page to Public Service Company of Colorado Credit Agreement]

                                      S-1
<PAGE>

                                      KEYBANK NATIONAL ASSOCIATION, AS
                                      ADMINISTRATIVE AGENT, LEAD ARRANGER, BOOK
                                      MANAGER AND AS A BANK

                                      By /s/ Keven D. Smith
                                         ---------------------------------------
                                         Its Vice President
                                             -----------------------------------

     [Signature Page to Public Service Company of Colorado Credit Agreement]

                                      S-2
<PAGE>

                                      UBS AG, CAYMAN ISLANDS BRANCH, AS A
                                      BANK

                                      By /s/
                                         ---------------------------------------
                                         Its Director
                                             -----------------------------------

                                      UBS AG, CAYMAN ISLANDS BRANCH, AS A
                                      BANK

                                      By /s/
                                         ---------------------------------------
                                         Its Associate Director
                                             -----------------------------------

     [Signature Page to Public Service Company of Colorado Credit Agreement]

                                      S-3
<PAGE>

                                      CREDIT SUISSE FIRST BOSTON, CAYMAN
                                      ISLANDS BRANCH, AS A BANK

                                      By /s/ Sarah Wu
                                         ---------------------------------------
                                         Its Vice President
                                             -----------------------------------

                                      By /s/ Jay Chall
                                         ---------------------------------------
                                         Its Director
                                             -----------------------------------

     [Signature Page to Public Service Company of Colorado Credit Agreement]

                                      S-4

<PAGE>

                                    EXHIBIT A

                        COMMITMENT AMOUNTS AND ADDRESSES

<TABLE>
<CAPTION>
                    NAME                          COMMITMENT AMOUNT               NOTICE ADDRESS
------------------------------------------        -----------------       -----------------------------
<S>                                               <C>                     <C>
Public Service Company of                                N/A              Xcel Energy Inc.
     Colorado                                                             800 Nicollet Mall, Suite 2900
                                                                          Minneapolis, MN 55402
                                                                          Attention: Mary Schell
                                                                          Telecopier: 612-215-5370
-------------------------------------------------------------------------------------------------------
KeyBank National Association, as                    $100,000,000          127 Public Square, 6th Floor
     Agent and a Bank                                                     Cleveland, OH 44114
                                                                          Attention: Kathy A. Koenig
                                                                          Telecopier: 216-689-4981
-------------------------------------------------------------------------------------------------------
UBS AG, Cayman Islands Branch,                      $100,000,000          677 Washington Boulevard
     as a Bank                                                            Stamford, CT 06901
                                                                          Attention: Marie Haddad
                                                                          Telecopier: 203-719-3888
-------------------------------------------------------------------------------------------------------
Credit Suisse First Boston, Cayman                  $100,000,000          Eleven Madison Avenue
     Islands Branch, as a Bank                                            New York, NY 10010
                                                                          Attention: Sarah Wu
                                                                          Telecopier: 212-325-8321
-------------------------------------------------------------------------------------------------------
</TABLE>

                                  Exhibit A-1

<PAGE>

                                    EXHIBIT B

                                  FORM OF NOTE
_______________________                                        ___________, 200_

FOR VALUE RECEIVED, the undersigned (the "Borrower"), hereby promises to pay to
the order of ________________ (the "Bank") on the Facility Termination Date (as
defined in the Credit Agreement referred to below) the principal amount of
___________________ ($____________), or such lesser principal amount of Advances
(as defined in the Credit Agreement referred to below) payable by Borrower to
Bank on such Facility Termination Date under that certain Credit Agreement,
dated as of June __, 2003 among Borrower, Banks from time to time party thereto,
and KeyBank National Association, as Agent, Lead Arranger and Book Manager (as
amended, restated, extended, supplemented or otherwise modified in writing from
time to time, the "Agreement;" the terms defined therein being used herein as
therein defined).

Borrower promises to pay interest on the unpaid principal amount of each Advance
from the date of such Advance until such principal amount is paid in full, at
such interest rates, and payable at such times as are specified in the Credit
Agreement.

All payments of principal and interest shall be made to the Agent for the
account of Bank in United States dollars in immediately available funds at the
Agent's designated payment office.

If any amount is not paid in full when due hereunder, such unpaid amount shall
bear interest, to be paid upon demand, from the due date thereof until the date
of actual payment (and before as well as after judgment) computed at the per
annum rate set forth in the Credit Agreement.

This Note is one of the "Notes" referred to in the Credit Agreement. Reference
is hereby made to the Credit Agreement for rights and obligations of payment and
prepayment, events of default and the right of Bank to accelerate the maturity
hereof upon the occurrence of such events. Advances made by Bank shall be
evidenced by one or more loan accounts or records maintained by Bank in the
ordinary course of business. Bank may also attach schedules to this Note and
endorse thereon the date, amount and maturity of its Advances and payments with
respect thereto.

Borrower, for itself, its successors and assigns, hereby waives diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
non-payment of this Note.

Borrower agrees to pay all collection expenses, court costs and attorney fees
and costs (whether or not litigation is commenced) which may be incurred by Bank
in connection with the collection or enforcement of this Note.

                                   Exhibit B-1

<PAGE>

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.

                                          PUBLIC SERVICE COMPANY OF
                                          COLORADO, A COLORADO CORPORATION

                                          By __________________________________

                                          Its ________________________________

                                     Exhibit B-2

<PAGE>

                                    EXHIBIT C

                             COMPLIANCE CERTIFICATE

                                              __________________________, ______

KeyBank National Association,
         for itself and as Agent under the Credit
         Agreement described below

The Banks, as defined under the Credit
          Agreement described below

                             COMPLIANCE CERTIFICATE

Ladies and Gentlemen:

         Reference is made to the Credit Agreement dated June __, 2003 among
Public Service Company of Colorado (the "Borrower"), KeyBank National
Association, as Agent, and the Banks, as defined therein (the "Credit
Agreement").

         All terms defined in the Credit Agreement and not otherwise defined
herein shall have the meanings given them in the Credit Agreement.

         This is a Compliance Certificate submitted in connection with the
Borrower's financial statements (the "Statements") as of _____________________,
_______ (the "Effective Date").

         I hereby certify to you as follows:

                           (a)      I am the _________________________ [**chief
                  financial officer/treasurer] of the Borrower, and I am
                  familiar with the financial statements and financial affairs
                  of the Borrower.

                           (b)      The Statements have been prepared in
                  accordance with GAAP, **[subject to year-end audit
                  adjustments].

                           (c)      The computations on the Annexes hereto set
                  forth the Borrower's compliance or non-compliance with the
                  requirements set forth in Section 6.7 and 6.8 as of the
                  Effective Date.

I have no knowledge of the occurrence of any Default or Event of Default, except
as set forth in the attachments, if any, hereto.

                                     Exhibit C-1

<PAGE>

                                          Very truly yours,

                                          PUBLIC SERVICE COMPANY OF COLORADO,
                                          a Colorado corporation

                                          By ___________________________________
                                             Its _______________________________

                                  Exhibit C-2

<PAGE>

                        ANNEX 1 TO COMPLIANCE CERTIFICATE

Funded Debt to Total Capital (Section 6.7)

<TABLE>
<S>                                                           <C>
1.   Funded Debt
     (a) Long-Term debt (including current maturities)        $_____________
     (b) Commercial paper and other short term debt           $_____________
     (c) Letters of Credit                                    $_____________
     (d) Net liabilities under Swap Contracts                 $_____________
     (e) Capitalized Lease Obligations                        $_____________
     (f) Off-Balance Sheet Liabilities (including Sale
         and Leaseback Transactions and Synthetic
         Lease Obligations)                                   $_____________
     (g) Trust Preferred Securities of the Borrower           $_____________
     (h) Guaranties of indebtedness of others                 $_____________
     (i) Other Funded Debt                                    $_____________
     (j) Total Funded Debt (sum of Items 1(a) through 1(i))      $______________

2.   Total Capital
     (a) Common Stock                                         $_____________
     (b) Premium on Common Stock                              $_____________
     (c) Retained Earnings                                    $_____________
     (d) Stockholder's Equity
         (sum of Items 2(a), 2(b) and 2(c)                    $_____________
     (e) Funded Debt (from Item 1(j) above)                   $_____________
     (f) Total Capital (sum of Items 2(d) and 2(e))              $______________

3.   Funded Debt to Total Capital (Ratio of Item 1(j) to
     Item 2(f))
     (not to be greater than 0.60 to 1.0)                        ______to 1.
</TABLE>

                                  Exhibit C-3

<PAGE>

                        ANNEX 2 TO COMPLIANCE CERTIFICATE

Interest Coverage Ratio (Section 6.8)

<TABLE>
<S>                                                            <C>
1.   EBIT
     (a) Consolidated Net Income                               $____________
     (b) Interest Expense (including Trust
         Preferred Securities)                                 $____________
     (c) Income Tax Expense                                    $____________

     (D) Excluding Non-operating Gains and Losses
         (net of income tax)                                   $____________
     (e) EBIT (total of (a)+(b)+(c)+or-(d))                      $_____________

2.   Interest Expense (including Trust Preferred Securities)      $_____________

3.   Interest Coverage Ratio (Ratio of Item 1(e) to
     Item 2)                                                   _______to 1.0
     (not to be greater than 2.75 to 1.0)
</TABLE>

                                  Exhibit C-4

<PAGE>

                                   EXHIBIT D

                                OPINION LETTERS

                                  Exhibit D-1

<PAGE>

                                    EXHIBIT E

                              ASSIGNMENT AGREEMENT

         This Assignment Agreement (this "Assignment Agreement") between
_______________________________ (the "Assignor") and _________________________
(the "Assignee") is dated as of ___________________, 20___. The parties hereto
agree as follows:

         1.       PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended from time
to time is herein called the "Credit Agreement") described in Item 1 of Schedule
1 attached hereto ("Schedule 1"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.

         2.       ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and assumes from the
Assignor, an interest in and to the Assignor's rights and obligations under the
Credit Agreement and the other Loan Documents, such that after giving effect to
such assignment the Assignee shall have purchased pursuant to this Assignment
Agreement the percentage interest specified in Item 3 of Schedule 1 of all
outstanding rights and obligations under the Credit Agreement and the other Loan
Documents relating to the facilities listed in Item 3 of Schedule 1. The
aggregate Commitment (or Advances, if the applicable Commitment has been
terminated) purchased by the Assignee hereunder is set forth in Item 4 of
Schedule 1.

         3.       EFFECTIVE DATE. The effective date of this Assignment
Agreement (the "Effective Date") shall be the later of the date specified in
Item 5 of Schedule 1 or two Business Days (or such shorter period agreed to by
the Agent) after this Assignment Agreement, together with any consents required
under the Credit Agreement, are delivered to the Agent. In no event will the
Effective Date occur if the payments required to be made by the Assignee to the
Assignor on the Effective Date are not made on the proposed Effective Date.

         4.       PAYMENT OBLIGATIONS. In consideration for the sale and
assignment of Advances hereunder, the Assignee shall pay the Assignor, on the
Effective Date, the amount agreed to by the Assignor and the Assignee. On and
after the Effective Date, the Assignee shall be entitled to receive from the
Agent all payments of principal, interest and fees with respect to the interest
assigned hereby. The Assignee will promptly remit to the Assignor any interest
on Advances and fees received from the Agent which relate to the portion of the
Commitment or Advances assigned to the Assignee hereunder for periods prior to
the Effective Date and not previously paid by the Assignee to the Assignor. In
the event that either party hereto receives any payment to which the other party
hereto is entitled under this Assignment Agreement, then the party receiving
such amount shall promptly remit it to the other party hereto.

         5.       RECORDATION FEE. The Assignor and Assignee each agree to pay
one-half of the recordation fee required to be paid to the Agent in connection
with this Assignment Agreement unless otherwise specified in Item 6 of Schedule
1.

         6.       REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that (i) it is the legal and

                                  Exhibit E-1

<PAGE>

beneficial owner of the interest being assigned by it hereunder, (ii) such
interest is free and clear of any adverse claim created by the Assignor and
(iii) the execution and delivery of this Assignment Agreement by the Assignor is
duly authorized. It is understood and agreed that the assignment and assumption
hereunder are made without recourse to the Assignor and that the Assignor makes
no other representation or warranty of any kind to the Assignee. Neither the
Assignor nor any of its officers, directors, employees, agents or attorneys
shall be responsible for (i) the due execution, legality, validity,
enforceability, genuineness, sufficiency or collectability of any Loan Document,
including without limitation, documents granting the Assignor and the other
Banks a security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) inspecting any of the
property, books or records of the Borrower, (vi) the validity, enforceability,
perfection, priority, condition, value or sufficiency of any collateral securing
or purporting to secure the Advances or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Advances or the Loan
Documents.

         7.       REPRESENTATIONS AND UNDERTAKINGS OF THE ASSIGNEE. The Assignee
(i) confirms that it has received a copy of the Credit Agreement, together with
copies of the financial statements requested by the Assignee and such other
documents and information as it has deemed appropriate to make its own credit
analysis and decision to enter into this Assignment Agreement, (ii) agrees that
it will, independently and without reliance upon the Agent, the Assignor or any
other Bank and based on such documents and information at it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Loan Documents, (iii) appoints and authorizes the
Agent to take such action as agent on its behalf and to exercise such powers
under the Loan Documents as are delegated to the Agent by the terms thereof,
together with such powers as are reasonably incidental thereto, (iv) confirms
that the execution and delivery of this Assignment Agreement by the Assignee is
duly authorized, (v) agrees that it will perform in accordance with their terms
all of the obligations which by the terms of the Loan Documents are required to
be performed by it as a Bank, (vi) agrees that its payment instructions and
notice instructions are as set forth in the attachment to Schedule 1, (vii)
confirms that none of the funds, monies, assets or other consideration being
used to make the purchase and assumption hereunder are "plan assets" as defined
under ERISA and that its rights, benefits and interests in and under the Loan
Documents will not be "plan assets" under ERISA, and (viii) agrees to indemnify
and hold the Assignor harmless against all losses, costs and expenses
(including, without limitation, reasonable attorneys' fees) and liabilities
incurred by the Assignor in connection with or arising in any manner from the
Assignee's nonperformance of the obligations assumed under this Assignment
Agreement. The Assignee (a) represents and warrants to the Agent and the
Borrower that under applicable law and treaties no tax will be required to be
withheld by the Agent or the Borrower with respect to any payments to be made to
the Assignee hereunder, (b) agrees to furnish (if it is organized under the laws
of any jurisdiction other than the United States or any State thereof) to the
Agent and the Borrower prior to the time that the Agent or Borrower is required
to make any payment of principal, interest or fees hereunder, duplicate executed
originals of U.S. Internal Revenue Service Form W-8ECI or W-8BEN (or appropriate
replacement forms) and agrees to provide new Forms W-8ECI or W-BEN (or
appropriate replacement forms) upon the expiration of any previously delivered
form or comparable statements in accordance with applicable U.S.

                                  Exhibit E-2

<PAGE>

law and regulations and amendments thereto, duly executed and completed by the
Assignee and (c) agrees to comply with all applicable U.S. laws and regulations
with regard to such withholding tax exemption.

         8.       GOVERNING LAW. This Assignment Agreement shall be governed by
the internal law, and not the law of conflicts, of the State of New York.

         9.       NOTICES. Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement. For the purpose
hereof, the addresses of the parties hereto (until notice of a change is
delivered) shall be the address set forth in the attachment to Schedule 1.

         10.      COUNTERPARTS; DELIVERY BY FACSIMILE. This Assignment Agreement
may be executed in counterparts. Transmission by facsimile of an executed
counterpart of this Assignment Agreement shall be deemed to constitute due and
sufficient delivery of such counterpart and such facsimile shall be deemed to be
an original counterpart of this Assignment Agreement.

         IN WITNESS WHEREOF, the duly authorized officers of the parties hereto
have executed this Assignment Agreement by executing Schedule 1 hereto as of the
date first above written.

                                  Exhibit E-3

<PAGE>

                                   SCHEDULE 1

                             TO ASSIGNMENT AGREEMENT

1.       Description and Date of Credit Agreement:

         Credit Agreement dated as of June __, 2003 among Public Service Company
                  of Colorado, the Banks named therein including the Assignor,
                  and KEYBANK NATIONAL ASSOCIATION individually and as Agent for
                  such lenders, as it may be amended from time to time.

2.       Date of Assignment Agreement:                  , 20___

3.       Amounts (As of Date of Item 2 above):

         a.       Assignee's percentage
                  of Aggregate Commitment
                  (Advances) purchased
                  under the Assignment
                  Agreement**                           ____%

         b.       Amount of Assignor's
                  Commitment purchased
                  under the Assignment
                  Agreement**                           $_____

4.       Assignee's Commitment (or Loans
         with respect to terminated
         Commitments) purchased
         hereunder:                                          $__________________

5.       Proposed Effective Date:                            ___________________

6.       Non-standard Recordation Fee
         Arrangement

                                     N/A***
                                     [Assignor/Assignee
                                     to pay 100% of fee]
                                     [Fee waived by Agent]

                                  Exhibit E-4

<PAGE>

Accepted and Agreed:

[NAME OF ASSIGNOR]                                [NAME OF ASSIGNEE]

By:_______________________________                By:___________________________
Title_____________________________                Title_________________________

                                  Exhibit E-5

<PAGE>

ACCEPTED AND CONSENTED TO****BY             ACCEPTED AND CONSENTED
                                            TO BY

PUBLIC SERVICE                              KEYBANK NATIONAL
COMPANY OF COLORADO                         ASSOCIATION, as Agent

By:_______________________________                By:___________________________
Title_____________________________                Title_________________________

**       Percentage taken to 10 decimal places

***      If fee is split 50-50, pick N/A as option

****     Delete if not required by Credit Agreement

                                  Exhibit E-6

<PAGE>

                Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT

                        ADMINISTRATIVE INFORMATION SHEET

         Attach Assignor's Administrative Information Sheet, which must
           include notice addresses for the Assignor and the Assignee
                            (Sample form shown below)

                              ASSIGNOR INFORMATION

CONTACT:

Name:___________________________              Telephone No.:____________________
Fax No.:________________________              Telex No.:________________________
                                              Answerback:_______________________

PAYMENT INFORMATION:

Name & ABA # of Destination Bank:             __________________________________
Account Name & Number for Wire Transfer:      __________________________________
                                              __________________________________

Other Instructions:_____________________________________________________________

ADDRESS FOR NOTICES FOR ASSIGNOR: ____________________________

                              ASSIGNEE INFORMATION

CREDIT CONTACT:

Name:___________________________              Telephone No.:____________________
Fax No.:________________________              Telex No.:________________________
                                              Answerback:_______________________

                                  Exhibit E-7

<PAGE>

KEY OPERATIONS CONTACTS:

Booking Installation:                                   Booking Installation:
Name:                                                   Name:
Telephone No.:                                          Telephone No.:
Fax No.:                                                Fax No.:
Telex No.:                                              Telex No.:
Answerback:                                             Answerback:

PAYMENT INFORMATION:

Name & ABA # of Destination Bank:

Account Name & Number for Wire Transfer:

Other Instructions:

ADDRESS FOR NOTICES FOR ASSIGNEE:

                                  Exhibit E-8

<PAGE>

         KEYBANK INFORMATION

         Assignee will be called promptly upon receipt of the signed agreement.

INITIAL FUNDING CONTACT:                   SUBSEQUENT OPERATIONS CONTACT:

Name: Kathy Koenig                         Name:
Telephone No.: (216) 689-4228              Telephone No.: (___)
Fax No.: (216) 689-4981                    Fax No.: (___)

INITIAL FUNDING STANDARDS:

Libor Fund 2 days after rates are set.

KEYBANK WIRE INSTRUCTIONS:                 KeyBank National Association,
                                           Cleveland, Ohio
                                           ABA # 041-001-039
                                           Credit: Specialty Loan Services
                                           Credit Account Number: 3057
                                           Ref: Public Service CO. of Colorado

ADDRESS FOR NOTICES FOR KEYBANK:

For Administrative Matters:                Attention: Kathy Koenig
                                           127 Public Square,
                                           Cleveland, Ohio 44114
                                           (216) 689-4228 (phone)
                                           (216) 689-4981 (fax)

For Credit Matters:                        Attention: Keven Smith
                                           601 108th Avenue NE
                                           Bellevue, WA 98004
                                           (425) 709-4579 (phone)
                                           (425) 709-4587 (fax)

                                  Exhibit E-9

<PAGE>

                                    EXHIBIT F

                              BORROWING CERTIFICATE

                                                 ________________________, 200__

KeyBank National Association
         for itself and as Agent under the Credit
         Agreement described below
[street]
[city, state, zip]

The Banks, as defined under the Credit
         Agreement described below

         RE: $300,000,000 PUBLIC SERVICE COMPANY OF COLORADO CREDIT FACILITY

Ladies and Gentlemen:

         Reference is made to the Credit Agreement dated June __, 2003 (together
with all amendments, modifications and restatements thereof, the "Credit
Agreement") among Public Service Company of Colorado (the "Borrower"), KeyBank
National Association, as Agent, and Banks that are parties thereto. As used
herein, terms defined in the Credit Agreement and not otherwise defined herein
have the meanings given them in the Credit Agreement.

         The Borrower has requested a Borrowing to be made under Section 2.1 of
the Credit Agreement as more specifically described on Attachment 1.

         I hereby certify to you that I am the [Chief Financial Officer]
[Treasurer] [Chief Executive Officer] [general legal counsel] of the Borrower
and I am authorized to execute and deliver this Certificate to the Agent on the
behalf of Borrower. I hereby further certify that the Borrowing requested by the
Borrower (i) has been duly authorized by the Borrower's board of directors
pursuant to its resolution dated ________________, (ii) has been duly authorized
by the Public Utilities Commission of the State of Colorado pursuant to its
order dated _______________________ [** alternate for clause (ii): does not and
will not require any authorization, consent or approval of the Public Utilities
Commission of the State of Colorado], (iii) does not and will not require any
other authorization, consent or approval by any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, other
than those that have been obtained, copies of which have been delivered to the
Agent pursuant to Section 5.1(d) and (iv) will be used solely for the purpose of
payment toward the PSCo 8-3/4% First Mortgage Bonds and the PSCo Capital Trust I
Securities.

                                  Exhibit F-1

<PAGE>

         I further certify to you that the Borrowing requested by the Borrower
complies with all applicable requirements of each board resolution and the
authorization of the Public Utilities Commission of the State of Colorado
described above, including but not limited to any applicable limitation on the
aggregate amount of debt that the Borrower may have outstanding at any one time.

                                          PUBLIC SERVICE COMPANY OF
                                          COLORADO, A COLORADO CORPORATION

                                          By____________________________________
                                            Its_________________________________

                                  Exhibit F-2

<PAGE>

                      Attachment 1 to Borrowing Certificate
Terms of Borrowing:

         1.       The Business Day of the proposed Borrowing is ____________.

         2.       The aggregate amount of the proposed Borrowing is $
                  ____________.

         3.       The proposed Borrowing is to be comprised of $_________ of
                  Advances to bear interest at the Base Rate and $_____ of
                  Advances to bear interest at the Eurodollar Rate.

         4.       The duration of the Interest Period for Advances that bear
                  interest at the Eurodollar Rate shall be ____ months.

                                  Exhibit F-3

<PAGE>

                                    EXHIBIT G

                    PLEDGED SECURITIES COMPLIANCE CERTIFICATE

                                              __________________________,_______

KeyBank National Association,
         for itself and as Agent under the Credit
         Agreement described below

The Banks, as defined under the Credit
          Agreement described below

                             COMPLIANCE CERTIFICATE

Ladies and Gentlemen:

         Reference is made to the Credit Agreement dated June __, 2003 among
Public Service Company of Colorado (the "Borrower"), KeyBank National
Association, as Agent, and the Banks, as defined therein (the "Credit
Agreement").

         All terms defined in the Credit Agreement and not otherwise defined
herein shall have the meanings given them in the Credit Agreement.

         This is a Compliance Certificate submitted in connection with the
Pledged Securities being delivered by Borrower to the Agent in accordance with
Section 7.3 of the Credit Agreement.

         I hereby certify to you as follows:

                           (a)      I am the [Chief Financial Officer]
                  [Treasurer] [Chief Executive Officer] of the Borrower. I am
                  familiar with the regulatory affairs of the Borrower as they
                  relate to issuance of securities pledged under the Indentures.
                  I am authorized to execute and deliver this Certificate to the
                  Agent on the behalf of Borrower.

                           (b)      All covenants and conditions precedent to
                  the authentication and delivery of the Pledged Securities have
                  been complied with, and there has been no change in the facts
                  and circumstances set forth in the application to the Trustee
                  for authentication of the Pledged Securities (and the
                  documents submitted therewith) from the date of such
                  application to the date hereof. All covenants and conditions
                  precedent to the authentication and delivery of the Related
                  First Mortgage Bonds have been complied with, and there has
                  been no change in the facts and circumstances set forth in the
                  application to the trustee under the First Mortgage Bond
                  Indenture for authentication of the Related First Mortgage
                  Bonds (and the documents submitted therewith) from the date of
                  such application to the date hereof.

                                  Exhibit G-1

<PAGE>

                           (c)      The issuance, execution, delivery and
                  performance by the Borrower of the Indentures, the Pledged
                  Securities and the Related First Mortgage Bonds, have been
                  duly authorized by all necessary corporate action and do not
                  and will not (i) require any consent or approval of the
                  stockholders of the Borrower, or any authorization, consent,
                  approval, order, filing, registration or qualification by or
                  with any governmental department, commission, board, bureau,
                  agency or instrumentality, domestic or foreign, other than
                  those consents described in Schedule 4.2 to the Credit
                  Agreement, each of which has been obtained and is in full
                  force and effect, (ii) violate any provision of any law, rule
                  or regulation (including, without limitation, Regulation X of
                  the Board of Governors of the Federal Reserve System and
                  Section 7 of the Exchange Act or any regulation promulgated
                  thereunder) or of any order, writ, injunction or decree
                  presently in effect having applicability to the Borrower or of
                  the Organizational Documents of the Borrower, (iii) result in
                  a breach of or constitute a default under any indenture or
                  loan or credit agreement or any other material agreement,
                  lease or instrument to which the Borrower or any Subsidiary is
                  a party or by which it or its properties may be bound or
                  affected, or (iv) result in, or require, the creation or
                  imposition of any Lien or other charge or encumbrance of any
                  nature (other than the Liens created under the Credit
                  Agreement, the First Collateral Trust Securities Indenture and
                  the First Mortgage Bond Indenture) upon or with respect to any
                  of the properties now owned or hereafter acquired by the
                  Borrower or any Subsidiary.

                           (d)      The representations set forth in Sections
                  4.3, 4.14 and 4.15 are true and correct as of the date hereof.

                           (e)      With the exception of the attached
                  exceptions to Section 4.17(a), the representations set forth
                  in Section 4.17 are true and correct as of the date hereof.

I have no knowledge of the occurrence of any Default or Event of Default, except
as set forth in the attachments, if any, hereto.

                                          Very truly yours,

                                          PUBLIC SERVICE COMPANY OF COLORADO,
                                          a Colorado corporation

                                          By____________________________________
                                             Its________________________________

                                  Exhibit G-2

<PAGE>

                                  SCHEDULE 4.2

                                    CONSENTS

The approvals or authorizations of the following regulatory bodies, depending
upon the characterization of the Borrowings under the Agreement, may be required
and have each been obtained and are in full force and effect:

         Public Utilities Commission of the State of Colorado

<PAGE>

                                  SCHEDULE 4.4

                                  SUBSIDIARIES

PSCO Capital Trust 1 (100%)*
1480 Welton, Inc. (100%)
Green and Clear Lakes Company (100%)
P.S.R. Investments, Inc. (100%)
Various ditch and water companies

*Denotes Restricted Subsidiary

<PAGE>

                                  SCHEDULE 4.7

                                   LITIGATION

1.       See disclosure regarding legal proceedings of the Borrower in (i) Note
13 to the Consolidated Financial Statements contained in the Borrower's Annual
Report on Form 10-K for the year ended December 31, 2002 filed with the SEC (the
"2002 Form 10-K") and (ii) the Borrower's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2003 filed with the SEC (the "3/31/03 Form 10-Q").

2.       The disclosure in the first paragraph under the heading Utility
Regulation - Fuel, Purchased Gas and Resource Adjustment Clauses - PSCo in Item
1 of the 2002 Form 10-K is revised to read as follows:

                  The Borrower currently has six adjustment clauses that recover
                  fuel, purchased energy and resource costs: the incentive cost
                  adjustment (the "ICA"), the interim adjustment clause (the
                  "IAC"), the air quality improvement rider, the demand side
                  management cost adjustment, the gas cost adjustment and the
                  steam cost adjustment. These adjustment clauses allow certain
                  costs to be recovered from our retail customers. For certain
                  adjustment mechanisms, the Borrower is required to file
                  applications with the CPUC for approval in advance of the
                  prospective effective dates.

         3.       A new paragraph is added to the disclosure under the heading
PSCo General Rate Case in footnote 3 to the financial statements in the 3/31/03
Form 10-Q, which reads as follows:

                  On May 29, 2003, the CPUC engaged in deliberations on the
                  settlement agreement and entered an oral decision approving
                  the settlement agreement with only minor modifications. We
                  expect the CPUC to issue its written order reflecting the
                  results of the May 29, 2003 deliberations in late June 2003.
                  We are now moving to the phase II, rate design, portion of the
                  case.

4.       The second to last sentence of the first paragraph under the heading
PSCo Fuel Adjustment Clause Proceedings is revised to read as follows:

                  PSCo is currently analyzing the testimony and will file
                  responsive testimony in June 2003.

5.       Pacific Northwest Refund Proceeding. In July 2001, the FERC ordered a
preliminary hearing to determine whether there may have been unjust and
unreasonable charges for spot market bilateral sales in the Pacific Northwest
for the period December 25, 2000 through June 20, 2001. We supplied energy to
the Pacific Northwest markets during this period and have been

<PAGE>

an active participant in the hearings. In September 2001, the presiding
administrative law judge concluded that prices in the Pacific Northwest during
the referenced period were the result of a number of factors, including the
shortage of supply, excess demand, drought and increased natural gas prices.
Under these circumstances the administrative law judge concluded that the prices
in the Pacific Northwest markets were not unreasonable or unjust and no refunds
should be ordered. Subsequent to the ruling the FERC has allowed the parties to
request additional evidence regarding the use of certain strategies and how they
may have impacted the markets in the Pacific Northwest markets. For the
referenced period parties have claimed the total amount of transactions with us
subject to refund are $34 million.

         On March 26, 2003, the FERC at its open meeting discussed this
proceeding. While the action that the FERC plans to take cannot be definitively
ascertained from that discussion, it appears that the FERC may conduct further
proceedings to determine whether spot-market bilateral sales in the Pacific
Northwest should be subject to refund.

If the proceedings before the FERC or the CPUC are not resolved in our favor, or
if the CPUC, for any reason, does not grant us, in a timely manner, the
increases we have requested or does not approve the settlement agreement or
issue a final rate order with new rates that are consistent with those provided
for in the settlement agreement, this could have a negative impact on our
financial condition and results of operations.

<PAGE>

                                  SCHEDULE 4.8

                              ENVIRONMENTAL MATTERS

See disclosure regarding environmental contingencies of the Borrower in (i) Note
13 to the Consolidated Financial Statements contained in the 2002 Form 10-K and
(ii) the 3/31/03 Form 10-Q.

<PAGE>

                                  SCHEDULE 4.22

                              COMPLIANCE WITH LAWS

1.       See disclosure regarding legal proceedings of the Borrower in (i) Note
13 to the Consolidated Financial Statements contained in the 2002 Form 10-K and
(ii) the 3/31/03 Form 10-Q.

2.       The disclosure in the first paragraph under the heading Utility
Regulation - Fuel, Purchased Gas and Resource Adjustment Clauses - PSCo in Item
1 of the 2002 Form 10-K is revised to read as follows:

                  The Borrower currently has six adjustment clauses that recover
                  fuel, purchased energy and resource costs: the incentive cost
                  adjustment (the "ICA"), the interim adjustment clause (the
                  "IAC"), the air quality improvement rider, the demand side
                  management cost adjustment, the gas cost adjustment and the
                  steam cost adjustment. These adjustment clauses allow certain
                  costs to be recovered from our retail customers. For certain
                  adjustment mechanisms, the Borrower is required to file
                  applications with the CPUC for approval in advance of the
                  prospective effective dates.

3.       A new paragraph is added to the disclosure under the heading PSCo
General Rate Case in footnote 3 to the financial statements in the 3/31/03 Form
10-Q, which reads as follows:

                           On May 29, 2003, the CPUC engaged in deliberations on
                  the settlement agreement and entered an oral decision
                  approving the settlement agreement with only minor
                  modifications. We expect the CPUC to issue its written order
                  reflecting the results of the May 29, 2003 deliberations in
                  late June 2003. We are now moving to the phase II, rate
                  design, portion of the case.

4.       The second to last sentence of the first paragraph under the heading
PSCo Fuel Adjustment Clause Proceedings is revised to read as follows:

                  PSCo is currently analyzing the testimony and will file
                  responsive testimony in June 2003.

5.       Pacific Northwest Refund Proceeding. In July 2001, the FERC ordered a
preliminary hearing to determine whether there may have been unjust and
unreasonable charges for spot market bilateral sales in the Pacific Northwest
for the period December 25, 2000 through June 20, 2001. We supplied energy to
the Pacific Northwest markets during this period and have been an active
participant in the hearings. In September 2001, the presiding administrative law
judge concluded that prices in the Pacific Northwest during the referenced
period were the result of a number of factors, including the shortage of supply,
excess demand, drought and increased

<PAGE>

natural gas prices. Under these circumstances the administrative law judge
concluded that the prices in the Pacific Northwest markets were not unreasonable
or unjust and no refunds should be ordered. Subsequent to the ruling the FERC
has allowed the parties to request additional evidence regarding the use of
certain strategies and how they may have impacted the markets in the Pacific
Northwest markets. For the referenced period parties have claimed the total
amount of transactions with us subject to refund are $34 million.

         On March 26, 2003, the FERC at its open meeting discussed this
proceeding. While the action that the FERC plans to take cannot be definitively
ascertained from that discussion, it appears that the FERC may conduct further
proceedings to determine whether spot-market bilateral sales in the Pacific
Northwest should be subject to refund.

If the proceedings before the FERC or the CPUC are not resolved in our favor, or
if the CPUC, for any reason, does not grant us, in a timely manner, the
increases we have requested or does not approve the settlement agreement or
issue a final rate order with new rates that are consistent with those provided
for in the settlement agreement, this could have a negative impact on our
financial condition and results of operations.

<PAGE>

                                  SCHEDULE 6.1

                                      LIENS

NONE.

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
ARTICLE I             DEFINITIONS...............................................................................    1

         Section 1.1           Definitions......................................................................    1
         Section 1.2           Times............................................................................   13
         Section 1.3           Accounting Terms and Determinations..............................................   13

ARTICLE II            AMOUNT AND TERMS OF THE LOANS.............................................................   14

         Section 2.1           Committed Advances...............................................................   14
         Section 2.2           Procedure for Making Advances....................................................   14
         Section 2.3           Interest.........................................................................   15
         Section 2.4           Limitation of Outstandings.......................................................   16
         Section 2.5           Principal and Interest Payment Dates.............................................   16
         Section 2.6           Level Status and Margins.........................................................   16
         Section 2.7           Facility Fees....................................................................   18
         Section 2.8           Other Fees.......................................................................   18
         Section 2.9           Termination of the Commitment....................................................   19
         Section 2.10          Voluntary Prepayments............................................................   19
         Section 2.11          Mandatory Prepayments............................................................   19
         Section 2.12          Computation of Interest and Fees.................................................   19
         Section 2.13          Payments.........................................................................   19
         Section 2.14          Payment on Nonbusiness Days......................................................   21
         Section 2.15          Use of Advances..................................................................   21
         Section 2.16          Increased Costs or Reduction of Yield............................................   21
         Section 2.17          Illegality.......................................................................   22
         Section 2.18          Taxes............................................................................   22
         Section 2.19          Capital Adequacy.................................................................   24
         Section 2.20          Mandatory Assignment of Bank's Interest..........................................   25

ARTICLE III           CONDITIONS PRECEDENT......................................................................   25

         Section 3.1           Initial Conditions Precedent.....................................................   25
         Section 3.2           Conditions Precedent to All Advances.............................................   26

ARTICLE IV            REPRESENTATIONS AND WARRANTIES............................................................   27

         Section 4.1           Corporate Existence and Power....................................................   27
         Section 4.2           Authorization of Borrowing; No Conflict as to Law or Agreements..................   27
         Section 4.3           Legal Agreements.................................................................   28
         Section 4.4           Subsidiaries.....................................................................   28
         Section 4.5           Financial Condition; Other Information...........................................   28
         Section 4.6           Adverse Change...................................................................   28
         Section 4.7           Litigation.......................................................................   29
         Section 4.8           Hazardous Substances.............................................................   29
         Section 4.9           Regulation U.....................................................................   29
</TABLE>

                                      -i-

<PAGE>

                               TABLE OF CONTENTS
                                  (continued)
<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
         Section 4.10          Taxes............................................................................   29
         Section 4.11          Burdensome Restrictions..........................................................   29
         Section 4.12          Titles and Liens.................................................................   30
         Section 4.13          ERISA............................................................................   30
         Section 4.14          Securities Law Matters...........................................................   30
         Section 4.15          Investment Company Act...........................................................   31
         Section 4.16          Public Utility Holding Company Act...............................................   31
         Section 4.17          Indenture........................................................................   31
         Section 4.18          Solvency.........................................................................   32
         Section 4.19          Swap Obligations.................................................................   32
         Section 4.20          Insurance........................................................................   32
         Section 4.21          Compliance With Laws.............................................................   32

ARTICLE V             AFFIRMATIVE COVENANTS OF THE BORROWER.....................................................   32

         Section 5.1           Financial Statements; Other Notices..............................................   32
         Section 5.2           Books and Records; Inspection and Examination....................................   34
         Section 5.3           Compliance with Laws.............................................................   35
         Section 5.4           Payment of Taxes and Other Claims................................................   35
         Section 5.5           Maintenance of Properties........................................................   35
         Section 5.6           Insurance........................................................................   35
         Section 5.7           Preservation of Corporate Existence..............................................   35
         Section 5.8           Delivery of Information..........................................................   36
         Section 5.9           Pledged Securities Capacity......................................................   36
         Section 5.10          Use of Proceeds..................................................................   36

ARTICLE VI            NEGATIVE COVENANTS........................................................................   36

         Section 6.1           Liens............................................................................   36
         Section 6.2           Sale of Assets...................................................................   38
         Section 6.3           Consolidation and Merger.........................................................   38
         Section 6.4           Hazardous Substances.............................................................   38
         Section 6.5           Restrictions on Nature of Business...............................................   38
         Section 6.6           Transactions with Affiliates.....................................................   39
         Section 6.7           Ratio of Funded Debt to Total Capital............................................   39
         Section 6.8           Interest Coverage Ratio..........................................................   39

ARTICLE VII           EVENTS OF DEFAULT, RIGHTS AND REMEDIES....................................................   39

         Section 7.1           Events of Default................................................................   39
         Section 7.2           Rights and Remedies..............................................................   42
         Section 7.3           Provisions Regarding Pledged Securities..........................................   43
</TABLE>

                                      -ii-

<PAGE>

                               TABLE OF CONTENTS
                                  (continued)

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
ARTICLE VIII          THE AGENT.................................................................................   44

         Section 8.1           Appointment; Nature of Relationship..............................................   44
         Section 8.2           Powers...........................................................................   45
         Section 8.3           General Immunity.................................................................   45
         Section 8.4           No Responsibility for Loans, Recitals, etc.......................................   45
         Section 8.5           Action on Instructions of Banks..................................................   45
         Section 8.6           Employment of Agents and Counsel.................................................   46
         Section 8.7           Reliance on Documents; Counsel...................................................   46
         Section 8.8           Agent's Reimbursement and Indemnification........................................   46
         Section 8.9           Notice of Default................................................................   47
         Section 8.10          Rights as a Bank.................................................................   47
         Section 8.11          Bank Credit Decision; Disclosure of Information by Agent.........................   47
         Section 8.12          Successor Agent..................................................................   48
         Section 8.13          Delegation to Affiliates.........................................................   49
         Section 8.14          Distribution of Payments and Proceeds............................................   49
         Section 8.15          Expenses.........................................................................   49
         Section 8.16          Payments Received Directly by Banks..............................................   50
         Section 8.17          Agent not Offering Bonds.........................................................   50

ARTICLE IX            ASSIGNMENTS AND PARTICIPATIONS............................................................   50

         Section 9.1           Assignments......................................................................   50
         Section 9.2           Participations...................................................................   53
         Section 9.3           Limitation on Assignments and Participations.....................................   54

ARTICLE X             MISCELLANEOUS.............................................................................   54

         Section 10.1          Disclosure of Information........................................................   54
         Section 10.2          No Waiver; Cumulative Remedies...................................................   55
         Section 10.3          Amendments, Etc..................................................................   55
         Section 10.4          Transmission, Notice and Effectiveness of Communications and Signatures..........   56
         Section 10.5          Costs and Expenses...............................................................   57
         Section 10.6          Indemnification by Borrower......................................................   57
         Section 10.7          Setoff...........................................................................   58
         Section 10.8          Sharing of Setoff................................................................   58
         Section 10.9          Usury............................................................................   59
         Section 10.10         Survival of Representations and Warranties.......................................   59
         Section 10.11         Integration......................................................................   59
         Section 10.12         Further Assurances...............................................................   60
         Section 10.13         Headings.........................................................................   60
         Section 10.14         Time of the Essence..............................................................   60
         Section 10.15         Foreign Banks....................................................................   60
         Section 10.16         Nature of Banks Obligations......................................................   61
         Section 10.17         Execution in Counterparts........................................................   61
</TABLE>

                                     -iii-

<PAGE>
                               TABLE OF CONTENTS
                                  (continued)

<TABLE>
<CAPTION>
                                                                                                                  PAGE
<S>                                                                                                               <C>
         Section 10.18         Binding Effect, Assignment.......................................................   61
         Section 10.19         Governing Law....................................................................   61
         Section 10.20         Severability of Provisions.......................................................   61
         Section 10.21         Consent to Jurisdiction..........................................................   62
         Section 10.22         Waiver of Jury Trial.............................................................   62
         Section 10.23         Recalculation of Covenants Following Accounting Practices Change.................   62
         Section 10.24         Headings.........................................................................   62
         Section 10.25         Nonliability of Banks............................................................   62
</TABLE>

                                      -iv-

<PAGE>

                                TABLE OF CONTENTS

EXHIBITS AND SCHEDULES
Exhibit A         Commitment Amounts and Addresses
Exhibit B         Note
Exhibit C         Compliance Certificate
Exhibit D         Opinion of Borrower's Counsel
Exhibit E         Assignment Certificate
Exhibit F         Borrowing Certificate
Exhibit G         Pledged Securities Compliance Certificate

Schedule 4.2      Consents
Schedule 4.4      Subsidiaries
Schedule 4.7      Litigation
Schedule 4.8      Environmental Matters
Schedule 4.22     Compliance with Laws
Schedule 6.1      Liens

                                      -v-<PAGE>

                                                                    EXHIBIT 10.1

              DEVELOPMENT, COMMERCIALIZATION AND LICENSE AGREEMENT
                                     BETWEEN
           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
           SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                                       AND
                                 CIMA LABS INC.

         This DEVELOPMENT, COMMERCIALIZATION AND LICENSE AGREEMENT (the
"Agreement"), effective as of June 26, 2003 (the "Effective Date"), by and
between [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.***], a Delaware corporation and
wholly owned subsidiary of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***], maintaining
its offices at [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] ("[***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.***]"), and CIMA LABS INC., a Delaware Corporation,
maintaining offices at 10000 Valley View Road, Eden Prairie, MN 55344-9361
("CIMA").

In consideration of the rights conferred and the obligations assumed herein, and
intending to be legally bound, the parties agree as follows:

1.       DEFINITIONS

         As used in this Agreement, the following capitalized terms shall have
         the meanings set out below:

         1.1.     "Affiliate(s)" shall mean, in relation to either party hereto,
                  any entity or person which directly or indirectly controls, is
                  controlled by, or is under common control by a party. The term
                  "control" for purposes of this definition shall mean the right
                  to exercise more than fifty percent (50%) of the voting rights
                  of an entity, or the power to direct or cause the direction of
                  the management or policies, or to direct, select, or appoint
                  officers or directors of the entity.

         1.2.     "[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Confidential Information" has the meaning ascribed to it in
                  Section 9.1

         1.3.     "CIMA Competitor" shall mean any entity or person principally
                  engaged in the business of licensing, formulation, development
                  and manufacturing of fast Oral Disintegrating Tablets and
                  listed on Schedule 1.3 hereto and as such schedule may be
                  amended by mutual agreement from time to time.

<PAGE>

         1.4.     "CIMA Confidential Information" has the meaning ascribed to it
                  in Section 9.2.

         1.5.     "CIMA Licensed Patents" shall mean the patents and patent
                  applications owned or Controlled by CIMA and/or its Affiliates
                  that claim Licensed Product, the DuraSolv(R) Technology, the
                  PakSolv(R) Technology and/or the OraSolv(R) Technology as
                  related to Licensed Product, and its manufacture, its
                  packaging, or its use, its import or its sale and including
                  any extension, reissue, renewal, reexamination or
                  continuation-in-part of such patents or patent applications.
                  CIMA Licensed Patents shall include Developed Intellectual
                  Property. CIMA Licensed Patents shall not include any Work
                  Product. The initial list of CIMA Licensed Patents is set
                  forth on Schedule 1.5.

         1.6.     "CIMA Technical Information" shall mean (a) techniques and
                  data, including ideas, inventions (including patentable
                  inventions, but excluding inventions covered by CIMA Licensed
                  Patents), practices methods, knowledge, know-how, trade
                  secrets, skill, experience, documents, apparatus, test data,
                  including pharmacological, toxicological and clinical test
                  data, analytical and quality control data, manufacturing,
                  patent data or descriptions relating to Licensed Product,
                  including, but not limited to, those that relate to
                  DuraSolv(R)Technology, PakSolv(R)Technology and/or
                  OraSolv(R)Technology, owned or Controlled by CIMA and/or its
                  Affiliates and (b) chemical formulations, compositions of
                  matter, product samples and assays relating to Licensed
                  Product, including, but not limited to, those that relate to
                  DuraSolv(R)Technology, PakSolv(R)Technology and/or
                  OraSolv(R)Technology, owned or Controlled by CIMA and/or its
                  Affiliates. CIMA Technical Information shall include Developed
                  Intellectual Property. CIMA Technical Information shall not
                  include any Work Product.

         1.7.     "CIMA Licensed Technology" shall mean CIMA Licensed Patents
                  and CIMA Technical Information.

         1.8.     "Control or Controlled" in the context of intellectual
                  property rights shall mean rights sufficient to allow a grant
                  of such rights to a party, including by license.

         1.9.     "Developed Intellectual Property" shall mean any and all
                  intellectual property rights, including but not limited to,
                  inventions, whether patentable or not, and know-how arising
                  out of the performance of the Work Plan. Developed
                  Intellectual Property shall not include any party's
                  intellectual property existing as of the Effective Date.

         1.10.    "Development Specifications" shall mean the development goals
                  for the sensory, physical and functional parameters for the
                  Licensed Product as set forth in Schedule 1.10.

<PAGE>

         1.11.    "DuraSolv(R)Technology" shall mean the fast-dissolving drug
                  delivery system generally described in U.S. Patents 6,024,981
                  and 6,221,392 and PCT Published Application No. WO 98/46215.

         1.12.    "Exclusive Field" shall mean any product containing
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***].

         1.13.    "FDA" shall mean the United States Food and Drug
                  Administration, or any successor thereto.

         1.14.    "Field" shall mean the treatment of all human conditions.

         1.15.    "Good Clinical Practice" shall mean the then current standards
                  for clinical trials for pharmaceuticals, as set forth in the
                  United States Federal Food, Drug and Cosmetic Act and
                  applicable regulations promulgated thereunder, as amended from
                  time to time.

         1.16.    "Good Laboratory Practice" shall mean the then current
                  standards for laboratory activities for pharmaceuticals, as
                  set forth in the United States Federal, Food, Drug and
                  Cosmetic Act and applicable regulations promulgated
                  thereunder, as amended from time to time.

         1.17.    "Good Manufacturing Practice" shall mean the then current
                  standards for manufacture of pharmaceuticals, as set forth in
                  the United States Federal, Food, Drug and Cosmetic Act and
                  applicable regulations promulgated thereunder, as amended from
                  time to time.

         1.18.    "Licensed Product" shall mean oral disintegrating tablets
                  containing [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] and all improvements and line extensions
                  thereof.

         1.19.    "Net Sales" shall mean, for the applicable period, the gross
                  amount invoiced by [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] or its sublicensees for the sale or
                  other disposition of Licensed Product, less customary
                  adjustments from gross sales to net sales as determined in
                  accordance with U. S. Generally Accepted Accounting Principles
                  as consistently applied by [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***], including but not
                  limited to: (a) customary quantity, trade and/or cash
                  discounts, allowances, chargebacks, rebates and price
                  adjustments or reductions consistently applied by
                  [***CONFIDENTIAL
<PAGE>

                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***]; (b) actual credits,
                  rebates, or refunds for Licensed Product that are rejected,
                  returned or destroyed by customers; (c) freight, postage, and
                  shipping expenses (including insurance relating thereto)
                  absorbed by [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] or its Affiliates and (d) sales and other
                  excise taxes and duties directly related to the sale, to the
                  extent included in the gross invoiced amount. Net Sales shall
                  not include any sales of Licensed Product to Affiliates and
                  permitted sublicensees if such Affiliates and permitted
                  sublicensees are not end-users, but Net Sales shall include
                  the subsequent final sales to third parties by any such
                  Affiliates or sublicensees.

         1.20.    "Oral Disintegrating Tablets" shall mean a solid tablet dosage
                  form containing medicinal substances which disintegrates
                  rapidly, usually within a matter of seconds when taken orally.

         1.21.    "OraSolv(R)Technology" shall mean the fast-dissolving drug
                  delivery system generally described in U.S. Patent 5,178,878
                  and U.S. Patent Application 08/468,913.

         1.22.    "PakSolv(R)Technology" shall mean the packaging system
                  generally described in U.S. Patents 6,155,423; 6,269,615 and
                  6,311,462.

         1.23.    "Pass-Through Costs" shall mean all costs incurred and paid by
                  CIMA to third parties for services, expenses and equipment
                  relating solely to CIMA's performance under the Work Plan.

         1.24.    "Royalty Period" shall mean the period commencing on the
                  Effective Date and ending with the last-to-expire issued CIMA
                  Licensed Patent in the country of sale which has at least one
                  valid claim covering any Licensed Product in the country of
                  sale and in the Field.

         1.25.    "Territory" shall mean the entire world.

         1.26.    "Trademarks" shall mean the trademarks, tradenames (and
                  registrations and applications therefor) controlled by each of
                  the parties and used on Licensed Product, including, initially
                  the applicable CIMA Trademarks listed on Schedule 1.26(a)
                  hereto and the applicable [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] Trademarks listed on
                  Schedule 1.26(b) hereto.

         1.27.    "Work Plan" shall mean the activities to be conducted by the
                  parties and their agents and Affiliates to develop Licensed
                  Products using DuraSolv(R)

<PAGE>

                  Technology, PakSolv(R) Technology and/or OraSolv(R)
                  Technology, including the activities, budget and timeline as
                  set forth on Schedule 1.27 hereof.

         1.28.    "Work Product" shall mean any and all results, including
                  technical data and documentation arising from the performance
                  of the Work Plan as performed by or for the parties, including
                  but not limited to the formulation, formulation development,
                  analytical development, manufacturing process development,
                  scale up activities, clinical manufacturing, regulatory
                  services, stability studies, toxicology studies, clinical
                  trials and other activities outlined in or arising from the
                  Work Plan. Work Product shall not include any Developed
                  Intellectual Property.

2.       PERFORMANCE OF THE WORK PLAN

         2.1.     Development Steering Committee; Project Coordinators.
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  shall appoint three (3) members and CIMA shall appoint two (2)
                  members to a Development Steering Committee ("DSC"). The
                  objective of the DSC is to coordinate efforts under the this
                  Agreement and the Work Plan. The DSC shall meet no less
                  frequently than once per calendar quarter to review the Work
                  Plan, including but not limited to the budget and timeline.
                  This meeting may be telephonic upon mutual agreement of the
                  parties. CIMA and [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] shall each appoint a project
                  coordinator. CIMA's project coordinator shall provide a
                  monthly report to [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] project coordinator in sufficient
                  detail to allow [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] project coordinator to comprehend in all
                  material respects the status of the Work Plan. The project
                  coordinators may, but shall not necessarily be, members of the
                  DSC. In accordance with Section 2.1, the DSC shall be
                  responsible for reviewing and determining if the measurable
                  criteria for successful completion of each task for each
                  License Milestone Fee has been met.

         2.2.     Budget and Payment. A budget and payment Schedule (a "Budget
                  and Payment Schedule") for the services to be performed by
                  CIMA under the Work Plan shall be specifically set forth in
                  the Work Plan. In consideration for performance of such
                  services under the Work Plan, CIMA will receive payment for
                  (i) each completed task and (ii) the purchase of
                  equipment/instruments needed for the completion of the Work
                  Plan that

<PAGE>

                  CIMA does not currently own that will be used exclusively in
                  the Work Plan and manufacture of Licensed Product, each as set
                  forth and identified in the Work Plan and as specified in the
                  Budget and Payment Schedule. All Pass-Through Costs shall be
                  billed at CIMA's actual incurred costs, without mark-up. No
                  expenditure in excess of an individual estimated budgeted item
                  shall be made unless approved in writing in advance by the
                  DSC. In the event the DSC removes in whole or in part any
                  tasks from the Work Plan, [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] shall only be
                  responsible for the actual expenses incurred by CIMA to the
                  date the DSC removed such task(s) for the removed items, as
                  supported by reasonable documentation accompanying any invoice
                  related thereto. In the event that the DSC adds in whole or in
                  part any tasks to the Work Plan, [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] shall be responsible
                  for the agreed DSC budgeted costs therefor. CIMA shall invoice
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] on
                  a quarterly basis. [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] shall own all equipment itemized in
                  the Work Plan and purchased with funds provided by
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  hereunder. Following completion of the Work Plan or
                  termination of the Supply Agreement, as applicable, CIMA shall
                  deliver such equipment to [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] in such a manner as
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  shall reasonably request at [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] expense.

         2.3.     Variances in the Work Plan.

                  2.3.1.   The DSC shall have the authority to amend the
                           Development Specifications with the consent of all
                           the members of the DSC. Once approved by the DSC,
                           such written amendments to the Development
                           Specifications shall constitute an amendment to
                           Schedule 1.9 hereto.

<PAGE>

                  2.3.2.   In the event an amendment to the Development
                           Specifications or any other request by
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] requires CIMA to perform services
                           beyond the scope of work set forth in the Work Plan,
                           CIMA shall, in the case of an amendment to the
                           Developmental Specifications or if it is willing to
                           perform the requested services beyond the scope of
                           work set forth in the Work Plan, proceed as follows:
                           consistent with the desire of both parties not to
                           disrupt the ongoing progress of the Work Plan, CIMA
                           shall use commercially reasonable efforts to (i)
                           submit a proposed Budget and Payment Schedule for
                           such out of scope work prior to commencing such work
                           and (ii) obtain written authorization from
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] to proceed with such work, which
                           consent shall not be unreasonably withheld. In either
                           case, both parties agree to use good faith efforts to
                           negotiate and agree upon a revised Budget and Payment
                           Schedule as soon as practicable. Any requests to vary
                           the Work Plan, including changes to the Developmental
                           Specifications, shall be made in writing and
                           submitted to the DSC for approval.

         2.4.     CIMA Performance. CIMA shall use commercially reasonable
                  efforts to diligently undertake its obligations under the Work
                  Plan, including but not limited to product development,
                  manufacturing, preparation of the CMC section of the NDA
                  filing, and pre-approval Inspection. Further, CIMA agrees:

                  2.4.1.   to conform to all applicable laws and regulations,
                           including but not limited to current Good Laboratory
                           Practices, Good Manufacturing Practices and Good
                           Clinical Practices in effect at the time that the
                           obligations are performed; and

                  2.4.2.   to provide to [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] a complete disclosure of
                           the Work Product, including all documents reasonably
                           requested by [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***], including all of CIMA's
                           technical data, information and expertise relating to
                           formulation and manufacture of Licensed Products.
                           Such disclosure shall be made no less frequently than
                           quarterly. CIMA shall also execute such documents and
                           take such steps as [***CONFIDENTIAL

<PAGE>

                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***] may
                           reasonably request, at [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] expense, in
                           order to vest [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] with full record
                           ownership of the Work Product.

         2.5.     [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Performance. [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] shall use commercially reasonable efforts to
                  diligently undertake the following activities relating to the
                  Licensed Product according to the Work Plan: (1)
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***],
                  (2) providing assistance in developing the product development
                  strategy, (3) conducting or having a CRO conduct the
                  bioequivalencey and other clinical studies, (4) filing and
                  maintaining the NDA with CIMA as the approved manufacturer as
                  required pursuant to the Manufacturing Agreement in
                  substantially the form as set forth in Schedule 2.11
                  ("Manufacturing Agreement"), (5) undertaking market
                  development, launch, and sales and marketing activities in the
                  Territory, and (6) execute such documents and take such steps
                  as CIMA may reasonably request, at CIMA's expense, in order to
                  vest CIMA with full record ownership of the Developed
                  Intellectual Property. Further, [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] agrees:

                  2.5.1.   to make payments under this Agreement when due and
                           payable; and

                  2.5.2.   to conform to all applicable laws and regulations,
                           including but not limited to current Good Laboratory
                           Practices, Good Manufacturing Practices and Good
                           Clinical Practices in effect at the time that the
                           obligations are performed.

         2.6.     Safety. Each party shall be responsible for the safety of its
                  own employees and agents with respect to the handling, use, or
                  storage of materials involved in performance of the Work Plan.

<PAGE>

         2.7.     Regulatory Approvals. [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] shall own all right, title and
                  interest in and to the regulatory approvals for the Licensed
                  Products. [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] shall have the right, in its sole and absolute
                  discretion, to submit any regulatory submissions with respect
                  to Licensed Product outside of the United States. During the
                  Royalty Period, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] (i) shall keep CIMA reasonably informed of
                  material issues affecting regulatory filings concerning
                  Licensed Product; (ii) shall be responsible for all
                  communications with the FDA and other governmental or
                  regulatory authorities in the Territory and (iii) shall be
                  responsible for all post-regulatory approval regulatory
                  requirements in the Territory, including pharmacovigilance and
                  adverse drug experience reporting.

         2.8.     Subcontractors. In the event that CIMA desires to use the
                  services of third parties to perform any of its obligations
                  under this Agreement, CIMA shall first obtain the written
                  approval, which shall not be unreasonably withheld, of
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  with respect to each such subcontractor and, prior to such
                  approval and thereafter, shall provide [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] with any information
                  reasonably requested by [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] or any governmental or regulatory
                  authority with respect to each such subcontractor. With
                  respect to each subcontractor approved by [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***], CIMA shall ensure
                  that each such subcontractor complies with the applicable
                  obligations of CIMA under this Agreement and shall enter into
                  a written agreement with each such subcontractor that:

                  2.8.1.   contains obligations of confidentiality on such
                           subcontractor no less protective of [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                           Confidential Information than the obligations of CIMA
                           under this Agreement (written evidence of such to be
                           provided to [***CONFIDENTIAL

<PAGE>

                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***] upon
                           written request);

                  2.8.2.   shall include substantially the same terms as those
                           appearing in Section 7 Ownership of Intellectual
                           Property to ensure that [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] obtains the
                           same rights in the intellectual property generated
                           under such subcontractor agreement as those set forth
                           in this Agreement;

                  2.8.3.   permits [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] to exercise its inspection
                           and audit rights pursuant to Section 7;

                  2.8.4.   permits CIMA to assign the agreement to
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] upon [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] request; and

                  2.8.5.   does not impose any payment obligations and/or
                           liability on [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***].

         2.9.     Storage of Original Records. Records related to or arising out
                  of the performance of the Work Plan shall be stored by CIMA in
                  accordance with applicable FDA archival guidelines. At least
                  ninety (90) days prior to the expiration of the storage period
                  required by the FDA, CIMA shall notify [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] in writing of such
                  expiration, and at the end of such period, shall transfer such
                  records to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] in a manner designated by [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***]. [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE

<PAGE>

                  COMMISSION.***] shall be responsible for the cost of the
                  transfer of such records.

         2.10.    Insurance. Each party shall maintain comprehensive general
                  liability insurance, including blanket contractual liability
                  insurance covering its obligations under this Agreement while
                  the Agreement is in effect, which insurance shall afford
                  limits of not less than five million dollars ($5,000,000.00)
                  for each occurrence and five million dollars ($5,000,000.00)
                  in total for bodily injury liability, personal injury
                  liability, products, liability, property damage liability,
                  contractual liability and completed operations liability. The
                  parties shall provide each other with certificates of
                  insurance evidencing the above and showing the name of the
                  issuing company, the policy number, the effective date, the
                  expiration date and the limits of liability. The insurance
                  certificate shall further provide for a minimum of thirty (30)
                  days written notice to the other party of a cancellation of or
                  material change in the insurance. Each party's comprehensive
                  general liability insurance policy shall contain a waiver of
                  subrogation rights which the other party's insurer(s) may have
                  against it.

         2.11.    Manufacturing Agreement. Concurrently with the execution of
                  this Agreement the parties shall enter into the Manufacturing
                  Agreement in substantially the form set forth in Schedule 2.11
                  hereto.

3.       LICENSE GRANT

         In consideration of the development and license fees and royalties,
         specified in paragraphs 4.1, 4.2 and 4.3, CIMA grants to
         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***] the following rights
         during the term of this Agreement:

         3.1.     Grant of License. CIMA hereby grants to [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] an exclusive license,
                  even as to CIMA subject to Sections 3.2, 3.4 and 7 below, with
                  the right to grant sublicenses, under the CIMA Licensed
                  Technology to use, make, have made, develop, have developed,
                  offer to sell, sell, have sold, distribute, import or
                  otherwise dispose of Licensed Products in the Field in the
                  Territory.

         3.2.     Manufacturing. [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] rights to make or have made Licensed Products
                  shall be restricted pursuant to the terms of the Manufacturing
                  Agreement.

<PAGE>

         3.3.     Non-Compete. From the Effective Date and until the later of:
                  a) ten (10) years from the date of the first commercial sale
                  by [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] or
                  its sublicensees of the first Licensed Product under this
                  Agreement, and b) the end of the Royalty Period, CIMA and its
                  Affiliates shall not, directly or indirectly, or assist a
                  third party to, compete with or develop a product, which
                  product contains [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***].

         3.4.     Right to Sublicense. [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] shall be entitled to grant
                  sublicenses under the license granted in Section 3.1 (a) to
                  any third party for consideration and in an arm's-length
                  transaction, or (b) to an Affiliate of [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***], provided that (i)
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  shall promptly notify CIMA upon the execution of any such
                  third-party sublicense, including such sublicensee's name,
                  (ii) the terms and conditions of such grant of sublicense
                  rights (x) are consistent with and do not violate the terms
                  and conditions of this Agreement, and (y) provide
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  with the right and obligation to enforce such terms and
                  conditions; and (iii) [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] remains primarily liable and
                  responsible for the performance of any such sublicensee
                  according to the terms of this Agreement. Notwithstanding the
                  foregoing, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] shall not grant a sublicense to a CIMA
                  Competitor.

4.       PAYMENTS

         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***] shall make payments to
         CIMA, in United States dollars by wire transfer of immediately
         available funds, as follows:

<PAGE>

         4.1.     Development Fees. [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] shall pay CIMA for the work invoiced
                  by CIMA upon completion of the tasks identified in the Work
                  Plan. CIMA shall provide [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] a reasonably detailed invoice for
                  completed services on a quarterly basis in writing. Invoices
                  shall describe the services performed and shall be accompanied
                  by supporting documentation. All Pass-Through Costs must be
                  itemized and supported by third-party invoices.
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  will pay such invoices within [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] following receipt
                  thereof.

         4.2.     License Milestone Fee(s).

                  4.2.1.   A license milestone fee ("License Milestone Fee")
                           shall be payable by [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] within
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] of completion of the following
                           milestones: [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***]

                  4.2.2.   Under no circumstances shall CIMA be entitled to more
                           than one of each License Milestone Fee, unless the
                           scope of this Agreement is expanded and this
                           Agreement is amended to reflect such expanded scope.

         4.3.     Royalties.

                  4.3.1.   Royalty Amount: In consideration for the grant of the
                           license set forth in Section 3.1 above, during the
                           Royalty Period, [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] shall pay to CIMA a
                           royalty on combined Net Sales of Licensed Product as
                           follows:

         Annual Net Sales                                         Royalty Rate

<PAGE>

         [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
         WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

         For example, if annual Net Sales of Licensed Products in a given year
         are [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
         SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***].

                  4.3.2.   Royalties shall be payable on a quarterly basis,
                           within [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] after the end of each
                           calendar quarter, based upon the Net Sales during
                           each calendar quarter, commencing with the calendar
                           quarter in which the first commercial sale of such
                           Licensed Product is made.

                  4.3.3.   [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall furnish to CIMA a non-binding
                           royalty estimate, with in ten (10) calendar days
                           after the close of the quarter.

                  4.3.4.   [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall furnish to CIMA at the same
                           time as each royalty payment is made, a written
                           report showing (i) the gross sales of Licensed
                           Product by [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] and its Affiliates and
                           permitted sublicensees during the reporting period
                           and the calculation of the Net Sales from such gross
                           sales, (ii) the calculation of the royalty due and
                           payable for the calendar quarter upon which the
                           royalty payment is based; (iii) the launch date(s) of
                           Licensed Products in any country(ies) during the
                           reporting period; and (iv) the exchange rates used in
                           determining the amount of payment hereunder.
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall not be required to provide a
                           reconciliation between the royalty payments and the
                           non-binding estimate provided in Section 4.3.3 above.

                  4.3.5.   [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall keep, or cause to be kept,

<PAGE>

                           full, complete and proper records and accounts of Net
                           Sales of Licensed Product in sufficient detail to
                           enable the royalties payable hereunder to be
                           determined. CIMA shall have the right at its own
                           expense to appoint an independent certified public
                           accounting firm to audit the records which are
                           necessary to verify the royalties payable pursuant to
                           this Agreement; provided, however, that if the audit
                           discloses that CIMA was underpaid royalties by at
                           least [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] for any calendar year, then
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall reimburse to CIMA any
                           documented and reasonable costs of such audit and
                           CIMA shall refund to [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] an amount
                           equal to any overpayment of royalties as disclosed by
                           the audit. In any event, [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] shall pay to
                           CIMA an amount equal to the additional royalties to
                           which CIMA is entitled as disclosed by the audit.
                           CIMA may exercise its right of audit no more
                           frequently than once in any calendar year. The
                           accounting firm shall disclose to CIMA only
                           information relating solely to the accuracy of the
                           royalty payments and reports. [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                           shall preserve and maintain all such records required
                           for audit for a period of three (3) years after the
                           calendar quarter to which the record applies.

5.       TERM AND TERMINATION

         5.1.     Term. This Agreement shall commence on the Effective Date and
                  shall remain in full force and effect until agreed to in
                  writing or terminated pursuant to this Agreement.

         5.2.     Termination. This Agreement may be terminated as follows:

                  5.2.1.   By mutual agreement of the parties;

                  5.2.2.   By [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***]:

<PAGE>

                           5.2.2.1. without cause, provided that CIMA is given
                                    thirty (30) days advance written notice of
                                    termination;

                           5.2.2.2. if CIMA is in material breach of this
                                    Agreement and fails to cure such breach
                                    within sixty (60) days after receipt of
                                    written notice from [***CONFIDENTIAL
                                    TREATMENT REQUESTED, PORTION OMITTED FILED
                                    SEPARATELY WITH THE SECURITIES AND EXCHANGE
                                    COMMISSION.***] identifying the breach; or

                           5.2.2.3. if CIMA enters into bankruptcy, whether
                                    voluntary or involuntary, has a receiver
                                    appointed, becomes insolvent, enters into
                                    any arrangement with its creditors, takes or
                                    suffers any similar action in consequence of
                                    debt, or ceases or threatens to cease to
                                    carry on its business as usual.

                  5.2.3.   By CIMA:

                           5.2.3.1. if [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] is
                                    in material breach of this Agreement and
                                    fails to cure such breach within sixty (60)
                                    days (or in the event or case of a
                                    non-disputed payment due, thirty (30) days)
                                    after receipt of written notice from CIMA
                                    identifying the breach;

                           5.2.3.2. a) if [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] does
                                    not submit the initial orders for Licensed
                                    Product within six (6) months of the FDA NDA
                                    approval for the first Licensed Product as
                                    set forth in Section 4.2.1.5; b) if the
                                    first commercial sale by [***CONFIDENTIAL
                                    TREATMENT REQUESTED, PORTION OMITTED FILED
                                    SEPARATELY WITH THE SECURITIES AND EXCHANGE
                                    COMMISSION.***] or its sublicensees of the
                                    first approved Licensed Product by the FDA
                                    does not occur within six (6) months after
                                    receipt of commercial supply (including
                                    samples) of Licensed Product in conformity
                                    with orders placed by [***CONFIDENTIAL
                                    TREATMENT REQUESTED, PORTION OMITTED FILED
                                    SEPARATELY WITH THE SECURITIES AND EXCHANGE
                                    COMMISSION.***] with CIMA under the terms of
                                    the Manufacturing Agreement as set forth in
                                    Schedule 2.11 due to causes other than force
                                    majeure or an

<PAGE>

                                    act or omission on the part of CIMA or its
                                    subcontractors or Affiliates; or c) if
                                    [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***]
                                    permanently discontinues the sale of all
                                    Licensed Products ("permanently" for
                                    purposes of this subsection shall be deemed
                                    to be for a period of twelve (12)
                                    consecutive months or more, other than by
                                    reason a breach of this Agreement or the
                                    Supply Agreement by CIMA, force majeure or
                                    the reorganization in bankruptcy of
                                    [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***]);
                                    for purposes of determining if c) above is
                                    in effect, CIMA may send a written request
                                    to [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] at
                                    any time requesting verification
                                    [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] most
                                    recent sale or promotion of the Licensed
                                    Products and [***CONFIDENTIAL TREATMENT
                                    REQUESTED, PORTION OMITTED FILED SEPARATELY
                                    WITH THE SECURITIES AND EXCHANGE
                                    COMMISSION.***] shall respond to CIMA within
                                    fifteen (15) business days following CIMA's
                                    written request; or

                           5.2.3.3. [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***]
                                    enters into bankruptcy, whether voluntary or
                                    involuntary, has a receiver appointed,
                                    becomes insolvent, enters into any
                                    arrangement with its creditors, takes or
                                    suffers any similar action in consequence of
                                    debt, or ceases or threatens to cease to
                                    carry on its business as usual.

         5.3.     Effect of Termination. Upon termination of this Agreement, the
                  parties shall have the following rights and obligations:

                  5.3.1.   If terminated by both parties pursuant to paragraphs
                           5.2.1 or by [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] pursuant to paragraph
                           5.2.2.1:

<PAGE>

                           (a) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] shall be obligated to pay
                           any earned but unpaid amount, as provided for under
                           the Work Plan pursuant to Section 4.1 and License
                           Milestones pursuant to Section 4.2, and any costs and
                           expenses reasonably incurred by CIMA in anticipation
                           of performance of its obligations under this
                           Agreement and not otherwise covered by payments under
                           Section 4.1; provided, however, that CIMA shall
                           immediately cease activities on the Work Plan and
                           take all reasonable steps to minimize such costs and
                           expenses referred to above; (b) [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                           shall retain all right, title and interest in the
                           Work Product, regardless of the status of the Work
                           Plan and CIMA shall retain all right, title and
                           interest in the Developed Intellectual Property in
                           accordance with Section 7.4.3; (c) CIMA shall provide
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] with a complete disclosure of all
                           Work Product not yet disclosed to [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***]; (d)
                           the provisions of Sections 3.2 and 3.3 shall
                           terminate; and (e) the license granted in Section 3.1
                           shall immediately terminate with any license grant
                           reverting back to CIMA.

                  5.3.2.   If terminated by [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] pursuant to
                           paragraph 5.2.2.2: (a) [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] shall not be
                           obligated to pay any non-invoiced unpaid deliverable
                           payment, provided that CIMA's material breach for
                           which this Agreement is being terminated by
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] is not directly related to
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] failure to make payments due to CIMA,
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] in accordance with this Agreement

<PAGE>

                           or provide accurate records of sales of Licensed
                           Products, as provided for under the Work Plan
                           pursuant to Section 4.1 or License Milestones
                           pursuant to Section 4.2; (b) [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                           shall retain all right, title and interest in the
                           Work Product, regardless of the status of Work Plan
                           and CIMA shall retain all right, title and interest
                           in the Developed Intellectual Property in accordance
                           with Section 7.4.3; (c) CIMA shall provide
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] with a complete disclosure of all
                           Work Product not yet disclosed to [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***] in
                           the manner set forth in paragraph 2.4.2; (d) the
                           provisions of Sections 3.2 and 3.3 shall survive; (e)
                           all rights granted to CIMA pursuant to Section 7.4.2
                           shall immediately terminate and (f) the license
                           granted in Section 3.1 and [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] rights to pay
                           royalties pursuant to Section 4.3 shall survive.

                  5.3.3.   If terminated by [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] pursuant to
                           paragraph 5.2.2.3: (a) [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] shall be
                           obligated to pay any earned but unpaid amount, as
                           provided for under the Work Plan pursuant to Section
                           4.1 and License Milestones pursuant to Section 4.2,
                           and any costs and expenses reasonably incurred by
                           CIMA in anticipation of performance of its
                           obligations under this Agreement and not otherwise
                           covered by payments under Section 4.1; provided,
                           however, that CIMA shall immediately cease activities
                           on the Work Plan and take all reasonable steps to
                           minimize such costs and expenses referred to above;
                           (b) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] shall retain all right,
                           title and interest in the Work Product, regardless of
                           the status of Work Plan and CIMA shall retain all
                           right, title and interest in the Developed
                           Intellectual Property in accordance with Section
                           7.4.3; (c) CIMA shall provide [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE

<PAGE>

                           SECURITIES AND EXCHANGE COMMISSION.***] with a
                           complete disclosure of all Work Product not yet
                           disclosed to [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] in the manner set forth
                           in paragraph 2.4.2; (d) the provisions of Sections
                           3.2 and 3.3 shall survive and (e) the license granted
                           in Section 3.1 and [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] rights to pay
                           royalties pursuant to Section 4.3 shall survive.

                  5.3.4.   If terminated by CIMA pursuant to paragraph 5.2.3.1
                           or 5.2.3.2: (a) [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] shall be obligated to
                           pay any unpaid amount, and costs and expenses as
                           provided for in Section 5.3.1(a); (b)
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall retain all right, title and
                           interest in the Work Product, regardless of the
                           status of Work Plan and CIMA shall retain all right,
                           title and interest in the Developed Intellectual
                           Property in accordance with Section 7.4.3; (c) CIMA
                           shall provide [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] with a complete
                           disclosure of all Work Product not yet disclosed to
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] in the manner set forth in paragraph
                           2.4.2; and (d) the provisions of Section 3
                           immediately terminate.

                  5.3.5.   If terminated by CIMA pursuant to paragraph 5.2.3.3:
                           (a) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] shall be obligated to pay
                           any unpaid amount, and costs and expenses as provided
                           for in Section 5.3.1(a); (b) [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                           shall retain all right, title and interest in the
                           Work Product, regardless of the status of Work Plan
                           and CIMA shall retain all right, title and interest
                           in the Developed Intellectual Property in accordance
                           with Section 7.4.3; (c) CIMA shall provide
                           [***CONFIDENTIAL

<PAGE>

                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***] with
                           a complete disclosure of all Work Product not yet
                           disclosed to [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] in the manner set forth
                           in paragraph 2.4.2; (d) the provisions of Sections
                           3.2 and 3.3 shall survive and (e) the license granted
                           in Section 3.1 and [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] obligations
                           to pay royalties pursuant to Section 4.3 shall
                           survive.

         5.4.     Survival. Except as may be modified pursuant to Section 5.3,
                  the rights and obligations set forth in Sections 2.4.2,
                  2.5(6), 3.4, 5, 7, 8, 9, 10, 13 and 14 shall survive the
                  termination of this Agreement for any reason. If the Agreement
                  is terminated by [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] pursuant to paragraph 5.2.2 or by CIMA
                  pursuant to paragraph 5.2.3, such termination shall not
                  extinguish any claim that either may have against the other
                  party for damages, injunction or other remedies arising out of
                  a breach or nonperformance.

6.       INSPECTIONS AND AUDITS

         6.1.     [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  and its authorized representatives shall have the right to
                  inspect the manufacturing and testing facilities of CIMA and
                  its subcontractors or agents, and to discuss and review in
                  reasonable detail the process and quality control procedures
                  used (and the records created) by CIMA during the term of this
                  Agreement with any employees or consultants familiar with the
                  Work Plan; provided, however, that such inspections shall be
                  during normal business hours and shall not unreasonably
                  interrupt the operations of CIMA, and cannot infringe the
                  confidentiality of other CIMA partners or agreements. Such
                  inspections shall be made no more frequently than once each
                  calendar year unless consented to by CIMA in writing, such
                  consent not to be unreasonably withheld.

         6.2.     [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  and its authorized representatives shall have the right to
                  audit the financial records of CIMA using an independent
                  certified public accountant, at [***CONFIDENTIAL TREATMENT
                  REQUESTED,

<PAGE>

                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] cost and discretion, during CIMA's
                  normal business hours during the terms of this Agreement to
                  verify CIMA's charges billed to the Work Plan pursuant to the
                  terms of Section 2 hereof. This audit right shall be exercised
                  no more than once during any calendar year. If the audit
                  discloses that [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] was overcharged by at least [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] for any calendar year,
                  then CIMA shall reimburse to [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] any documented and
                  reasonable costs of such audit and CIMA shall refund to
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] an
                  amount equal to any overcharge as disclosed by the audit. In
                  any event, [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] shall pay to CIMA an amount equal to any
                  undercharge to which CIMA is entitled as disclosed by the
                  audit.

         6.3.     CIMA shall cooperate with the FDA or any other governmental
                  agency with respect to any inspections it may require of
                  CIMA's facilities and procedures as a result of the Work Plan.
                  CIMA shall promptly notify in writing and provide copies to
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] of
                  any communications CIMA may send or receive to or from the FDA
                  or any other governmental agency if such communications relate
                  in any way to the Work Plan or Licensed Product.
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  and CIMA shall discuss any written response to observations or
                  notifications received in connection with any such inspection,
                  investigation or other inquiry and CIMA shall give
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] an
                  opportunity to comment upon any proposed response before it is
                  made. In the event of disagreement concerning the form or
                  content of such response, however, CIMA shall be responsible
                  for deciding the appropriate form and content of any response
                  with respect to any of its cited manufacturing activities.

<PAGE>

7.       OWNERSHIP OF INTELLECTUAL PROPERTY

         7.1.     CIMA Licensed Technology. CIMA Licensed Technology is and
                  shall remain the sole property of CIMA.

         7.2.     Ownership of Products. [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] shall solely own any and all Licensed
                  Products developed under this Agreement.

         7.3.     Ownership of Regulatory Filings. [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] shall file, own and
                  control all regulatory fillings, including but not limited to
                  filings with the FDA.

         7.4.     Ownership of Work Product and Developed Intellectual Property.

                  7.4.1.   Each party shall retain ownership to its existing
                           intellectual property and intellectual property
                           developed outside of the Work Plan. CIMA shall have a
                           license to use any intellectual property Controlled
                           by [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] solely for the purpose of
                           performing its obligations under this Agreement.

                  7.4.2.   Any and all Work Product, whether or not jointly
                           developed, including but not limited to data and
                           reports generated by CIMA and/or CIMA's agents, shall
                           be the sole and exclusive property of
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***]; provided, however, CIMA shall have
                           an exclusive worldwide, fully-paid, royalty-free
                           license to use Work Product in support of obtaining
                           patent protection with respect to the Developed
                           Intellectual Property.

                  7.4.3.   Any and all Developed Intellectual Property shall be
                           owned by CIMA and shall be considered part of CIMA
                           Licensed Technology, subject to the rights granted to
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] hereunder and subject to a mutually
                           agreed upon license for the Developed Intellectual
                           Property that utilized [***CONFIDENTIAL TREATMENT
                           REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                           SECURITIES AND EXCHANGE COMMISSION.***] proprietary
                           technology.

<PAGE>

         7.5.     Ownership and Use of Trademarks.

                  7.5.1.   Each party shall own and control their own Trademarks
                           and the goodwill associated therewith and shall be
                           solely responsible for prosecuting and maintaining
                           any trademarks, trademark applications and/or
                           trademark registrations. CIMA shall not use any
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] Trademark.

                  7.5.2.   Neither party may use the other party's name except
                           as required by law or regulation or as agreed to in
                           writing by the parties; provided, however,
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall include the applicable CIMA
                           Trademarks identified in Schedule 1.26(a) (the "CIMA
                           Trademarks") and the applicable CIMA Licensed Patent
                           markings on the packaging of Licensed Product and, at
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] sole discretion, in marketing and
                           promotional materials.

                           7.5.2.1. [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] will
                                    use CIMA Trademarks in labeling of License
                                    Product as requested in writing by CIMA, in
                                    a frequency, size, format and location as
                                    reasonably requested by CIMA and as
                                    reasonably agreed to by [***CONFIDENTIAL
                                    TREATMENT REQUESTED, PORTION OMITTED FILED
                                    SEPARATELY WITH THE SECURITIES AND EXCHANGE
                                    COMMISSION.***], prior to the required time
                                    for [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***]
                                    submissions of artwork as set forth in the
                                    Manufacturing Agreement in substantially the
                                    form of Schedule 2.11 hereto.

                           7.5.2.2. [***CONFIDENTIAL TREATMENT REQUESTED,
                                    PORTION OMITTED FILED SEPARATELY WITH THE
                                    SECURITIES AND EXCHANGE COMMISSION.***] may
                                    use CIMA's name and derivations thereof in
                                    promoting, marketing and selling of Licensed
                                    Product in the Territory in accordance with
                                    Section 7.5.2; provided, however that the

<PAGE>

                                    particular formulation of any reference to
                                    CIMA's name and CIMA Trademarks in any
                                    promotional material shall be subject to
                                    CIMA's review and consent; and provided,
                                    further, that once the formulation of any
                                    such reference has been reviewed and
                                    consented to by CIMA, any subsequent
                                    reference to CIMA's name and CIMA's
                                    Trademarks using such formulation shall not
                                    be subject to the further review or consent
                                    of CIMA.

                  7.5.3.   For the purpose of this Section 7.5, CIMA grants to
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] and its permitted sublicensees and
                           Affiliates a non-exclusive license to the CIMA
                           Trademarks identified in Schedule 1.26(a) during the
                           term of this Agreement for the purpose of performing
                           its obligations under this Agreement. Following the
                           Effective Date, CIMA shall provide to
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] its policies and procedures with
                           respect to third party use of its trademarks, and
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall use commercially reasonable
                           efforts to conform to such procedures.

         7.6.     Protection of Intellectual Property. At CIMA's sole discretion
                  and expense, CIMA may file for worldwide patent protection for
                  any Licensed Products that embodies Developed Intellectual
                  Property. CIMA shall have full control over the prosecution
                  and maintenance of any such patent applications filed that
                  claim inventions that embodies CIMA License Technology and
                  Developed Intellectual Property that does not utilize any
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  proprietary technology. [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] and its Affiliates shall cooperate
                  with CIMA, at CIMA's expense, in any such applications filed
                  by CIMA anywhere in the world. [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] shall have the right
                  to comment on any correspondence or filing relating to
                  Licensed Product and to review and approve any proposed
                  response(s) prior to their submission. CIMA shall provide a
                  reasonable amount of time for [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED

<PAGE>

                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] to
                  review and comment on such correspondence, filings and
                  response(s) and shall reasonably act upon any reasonable
                  comments made by [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] concerning the file or prosecution of such
                  applications. If CIMA desires to allow any application or
                  patent claiming Licensed Product to lapse, [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] shall have the right
                  to control such application or patent at [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] expense.

         7.7.     Notice of Actual or Threatened Infringement or Third Party
                  Claims.

                  7.7.1.   Each party shall give notice to the other party
                           promptly, completely and in writing of any known or
                           suspected infringement or threatened infringement of
                           any CIMA Licensed Patents in the Exclusive Field
                           ("Infringement"), and any claim that a CIMA Licensed
                           Patent is invalid. CIMA shall enforce and defend the
                           CIMA Licensed Patent, including, without limitation,
                           prosecute any Infringement and to defend against any
                           claim that the CIMA Licensed Patent is invalid, at
                           its own expense. CIMA shall commence, maintain and
                           direct such enforcement or defense as promptly as is
                           reasonably necessary, but in no event later than
                           ninety (90) days after the receipt of the notice of
                           the Infringement or claim of invalidity.

                  7.7.2.   Any damages or settlement recovered in connection
                           with such enforcement or defense by CIMA shall be
                           retained solely by the CIMA.

                  7.7.3.   [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall reasonably cooperate with and
                           assist CIMA in such enforcement or defense. CIMA
                           shall reimburse [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] its reasonable expenses
                           (excluding attorneys' fees) in providing such
                           cooperation and assistance and will hold
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] harmless from all liability and all
                           costs or

<PAGE>

                           expenses associated with or arising out of its
                           truthful and good faith actions in providing such
                           cooperation and assistance.

                  7.7.4.   CIMA shall keep [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] reasonably informed
                           regarding the status of actions taken by or on behalf
                           of CIMA pursuant to this Section 7.7, including
                           prompt notice of CIMA's commencement of enforcement
                           or defense and its determination that it will not
                           undertake or has completed such enforcement or
                           defense.

                  7.7.5.   In the event either party gives notice of
                           Infringement or a claim of invalidity and CIMA has
                           not commenced enforcement or defense within ninety
                           (90) days of receipt of such notice, [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***] may,
                           in its sole discretion, commence, maintain and direct
                           such enforcement or defense, at its own expense. CIMA
                           shall join any action initiated by [***CONFIDENTIAL
                           TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY
                           WITH THE SECURITIES AND EXCHANGE COMMISSION.***] as a
                           party if [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] so requests.

                  7.7.6.   [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***]

                  7.7.7.   CIMA shall reasonably cooperate with and assist
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] in such enforcement or defense.
                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall reimburse CIMA's reasonable
                           expenses (excluding attorneys' fees) in providing
                           such cooperation and assistance and will hold CIMA
                           harmless from all liability and all costs or expenses
                           associated with or arising out of the truthful and
                           good faith actions of CIMA in providing such
                           cooperation and assistance.

<PAGE>

                  7.7.8.   [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] shall keep CIMA reasonably informed
                           regarding the status of actions taken by or on behalf
                           of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                           OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                           EXCHANGE COMMISSION.***] pursuant to this Section
                           7.7, including prompt notice of its commencement of
                           enforcement or defense and its determination that it
                           will not undertake or has completed such enforcement
                           or defense.

                  7.7.9.   Any settlement of any action for Infringement or
                           defense of any claim that the CIMA Licensed Patent is
                           invalid must be approved in writing by both parties.
                           Such approval may not be unreasonably withheld,
                           delayed or conditioned.

                  7.7.10.  Any settlement shall be consistent with the terms of
                           this Agreement.

                  7.7.11.  Each party shall give notice to the other party
                           promptly, completely and in writing of any claim of
                           infringement or threatened infringement of third
                           party intellectual property rights by use of the CIMA
                           Licensed Technology in accordance with this Agreement
                           or any related agreements ("Third Party
                           Infringement"). Except as provided pursuant to
                           Section 8 hereof, should an action be brought against
                           either party regarding such Third Party Infringement,
                           the other party shall reasonably cooperate with and
                           assist in such defense of use of the CIMA Licensed
                           Technology. Except as provided pursuant to Section 8
                           hereof, each party shall keep the other reasonably
                           informed regarding the status of actions taken
                           pursuant to this Section 7.11, including prompt
                           notice of its commencement of defense and its
                           determination that it will not undertake or has
                           completed such defense.

                  7.7.12.  Except as provided pursuant to Section 8 hereof, CIMA
                           shall join any Third Party Infringement action as a
                           party, if [***CONFIDENTIAL TREATMENT REQUESTED,
                           PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES
                           AND EXCHANGE COMMISSION.***] so requests.

                  7.7.13.  Except as provided pursuant to Section 8 hereof, any
                           settlement of any action for Third Party Infringement
                           must be approved in writing by both parties. Such
                           approval may not be unreasonably withheld, delayed or
                           conditioned.

<PAGE>

8.       INDEMNIFICATION

         8.1.     Indemnification by [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***]. Subject to the terms of Section 8.3,
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  shall indemnify, defend and hold CIMA, its Affiliates and
                  their respective directors, officers, shareholders, employees,
                  representatives, agents, successors and permitted assigns
                  ("CIMA Indemnified Parties") harmless from and against any and
                  all third party liabilities, losses, claims, demands,
                  obligations, judgments, causes of action, assessments, fines,
                  damages, costs and expenses (including, without limitation,
                  reasonable attorneys' fees) (collectively, "Claims"), in each
                  case to the extent such Claims arise out of: (a) a breach or
                  inaccuracy of any representation or warranty made by
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] in
                  Section 11 or 12.2 of this Agreement; (b) a material breach of
                  this Agreement by [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***]; (c) any negligence or willful or
                  reckless actions or misconduct of [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] or its employees,
                  agents and/or subcontractors; (d) [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***]; (e) any allegation of
                  infringement or misappropriation of copyright or trademark
                  rights of any party resulting from [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] instructions for
                  labeling or packaging of Licensed Products; and (f) the
                  manufacture, promotion, distribution, use, testing, marketing
                  and sale of Licensed Products by [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***], its Affiliates or
                  sublicensees. Notwithstanding the foregoing, [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] shall not be liable
                  for any Claims to the extent caused by any of the CIMA
                  Indemnified Parties as determined in a final, non-appealable
                  order of a court of competent jurisdiction.

         8.2.     Indemnification by CIMA. Subject to the terms of Section 8.3,
                  CIMA shall indemnify, defend and hold [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***], its Affiliates and

<PAGE>

                  their respective directors, officers, shareholders, employees,
                  representatives, agents, successors and permitted assigns
                  ("[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Indemnified Parties") harmless from and against any and all
                  Claims, in each case to the extent such Claims arise out of:
                  (a) a breach or inaccuracy of any representation or warranty
                  made by CIMA in Sections 11 and 12.1 of this Agreement; (b) a
                  material breach of this Agreement by CIMA; (c) any negligence
                  or willful or reckless actions or misconduct of CIMA or its
                  Affiliates, employees, agents and/or subcontractors; (d) the
                  manufacture, use, testing, disposal or development of Licensed
                  Product by CIMA, its Affiliates or subcontractors; and (e)
                  third party claims against [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] for alleged
                  infringement of such party's trademark rights due to
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  use of CIMA Trademarks in the United States. [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] agrees to give CIMA
                  prompt notice of any claim by a third party for which
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] is
                  seeking indemnification under section (e) herein.
                  Notwithstanding the foregoing, CIMA shall not be liable for
                  any Claims to the extent caused by any of the [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] Indemnified Parties as
                  determined in a final, non-appealable order of a court of
                  competent jurisdiction.

         8.3.     Procedures for Indemnification.

                  8.3.1.   General. Promptly after becoming aware of same, the
                           party seeking indemnification (the "Indemnified
                           Party") shall notify the other party (the
                           "Indemnifying Party") of any Claims covered under the
                           terms of Sections 8.1 or 8.2, as applicable, for
                           which the Indemnified Party seeks indemnification;
                           provided, however, that any delay in giving such
                           notice shall not relieve the Indemnifying Party
                           hereunder except to the extent such delay materially
                           prejudices the Indemnifying Party's ability to defend
                           against such Claim or materially increases the amount
                           of damages awarded or paid in settlement of such
                           Claim. For a period that shall not exceed ten (10)
                           business days following any such notification, the
                           Indemnified Party and Indemnifying Party shall

<PAGE>

                           investigate and discuss in good faith whether such
                           claim is subject to indemnification under Sections
                           8.1 or 8.2, as applicable. During such discussions,
                           the Indemnified Party shall give the Indemnifying
                           Party full access to all records, data and personnel
                           of the Indemnified Party as may be reasonably
                           necessary to make such determination. If the parties
                           are unable to agree on whether the Indemnifying Party
                           is required to indemnify the Indemnified Party under
                           the terms of Sections 8.1 or 8.2, as applicable, the
                           Indemnifying Party, at its option, shall either
                           assume or decline defense of the Claims, including
                           negotiations for its settlement or compromise.

                  8.3.2.   Defense Assumed. If the Indemnifying Party assumes
                           defense of a Claim as described herein, the
                           Indemnified Party shall reasonably cooperate with the
                           Indemnifying Party in the defense of such Claim and
                           may be represented, at the Indemnified Party's
                           expense, by counsel of its choice, provided that,
                           where the Indemnifying Party has assumed defense of a
                           Claim, the Indemnifying Party shall have sole control
                           over such defense. The Indemnifying Party shall not
                           be responsible for defending any claims other than
                           those described in Sections 8.1 or 8.2, as
                           applicable, even if brought in the same suit. In
                           addition to the foregoing, if a court of competent
                           jurisdiction later determines that a Claim for which
                           the Indemnifying Party assumed defense was not
                           eligible for indemnification under Sections 8.1 or
                           8.2, as applicable, within thirty (30) calendar days
                           following such determination, the Indemnified Party
                           shall reimburse the Indemnifying Party in full for
                           all judgments, costs and expenses (including without
                           limitation reasonable attorneys' fees) incurred in
                           connection with such Claim.

                  8.3.3.   Defense Declined. If the Indemnifying Party declines
                           to assume defense of any Claim, and it is later
                           determined by a court of competent jurisdiction that
                           such Claim was eligible for indemnification under
                           Sections 8.1 or 8.2, as applicable, with thirty (30)
                           calendar days following such determination, the
                           Indemnifying Party shall reimburse the Indemnified
                           Party in full for all judgments, costs and expenses
                           (including without limitation reasonable attorneys'
                           fees) incurred in connection with such Claim.

                  8.3.4.   Settlement of Claims. The Indemnifying Party shall
                           not settle any Claim without the prior written
                           consent of the Indemnified Parties if such
                           settlement: (a) materially diminishes any of the
                           Indemnified Party's rights under this Agreement or
                           seeks to impose additional obligations on the
                           Indemnified Party; or (b) arises out of or is a part
                           of any criminal action, suit or proceeding or
                           contains a stipulation or admission or
                           acknowledgement of any liability or wrongdoing

<PAGE>

                           (whether in contract, tort or otherwise) on the part
                           of the Indemnified Party.

                  8.3.5.   Contributory Negligence; Right of Contribution.
                           Nothing contained herein shall bar a claim for
                           contributory negligence or a party's right of
                           contribution.

9.       CONFIDENTIAL INFORMATION

         9.1.     [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Confidential Information. CIMA acknowledges and agrees (a)
                  that (i) Work Product, (ii) any plans, specifications,
                  designs, data, results, information, works in progress and any
                  other documents or material related to the Work Plan, and
                  (iii) any information, works in progress, trade secrets, data
                  or other secret, sensitive or confidential material related to
                  the business technology, products, systems, formulas,
                  practices, processes, customers or projects of
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  that are disclosed to or become known by CIMA during the term
                  of this Agreement and which are not generally known to the
                  public constitute the confidential information of
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  (collectively the "[***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] Confidential Information"); (b) to
                  hold such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] Confidential Information in strict confidence
                  and disclose such [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] Confidential Information only to such
                  Affiliates, officers and employees as are necessary to carry
                  out the provisions of this Agreement and who are likewise
                  bound by provisions equivalent to this Section 9.1; (c) not to
                  disclose such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] Confidential Information to any third party;
                  (d) to use such [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] Confidential Information only as necessary to
                  perform the services related to the Work Plan; and (e) upon
                  termination of this Agreement, to destroy or return all
                  tangible

<PAGE>

                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Confidential Information (including tangible media containing
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Confidential Information) to [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***]. This provision shall
                  supersede and replace any previous confidentiality and/or
                  non-disclosure agreements between the parties.
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Confidential Information shall not include those portions of
                  Work Product to the extent such portions of Work Product
                  embody any trade secret within the Developed Intellectual
                  Property for which [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] has received prior written notice and
                  reasonable identification thereof from CIMA.

         9.2.     CIMA Confidential Information. [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] acknowledges and
                  agrees (a) that any information, work in progress, trade
                  secrets, data or other secret, sensitive or confidential
                  material related to the business technology, products,
                  systems, formulas, practices, processes, customers or projects
                  of CIMA that are disclosed to or become known by
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  during the term of this Agreement and which are not generally
                  known to the public constitute the confidential information of
                  CIMA (collectively the "CIMA Confidential Information") (b) to
                  hold such CIMA Confidential Information in strict confidence
                  and disclose such CIMA Confidential Information only to such
                  Affiliates, officers and employees as are necessary to carry
                  out the provisions of this Agreement and who are likewise
                  bound by provisions equivalent to this Section 9.2; (c) not to
                  disclose such CIMA Confidential Information to any third
                  party; (d) to use such CIMA Confidential Information only as
                  reasonably useful to further develop, manufacture, and/or
                  commercialize any Licensed Product or any formulation based on
                  Licensed Product and (e) upon termination of this Agreement,
                  to destroy or return all tangible CIMA Confidential
                  Information (including tangible media containing CIMA
                  Confidential Information) to CIMA. This provision shall
                  supersede and replace any previous confidentiality and/or
                  non-disclosure agreements between the parties.

<PAGE>

         9.3.     Notwithstanding the provisions of Sections 9.1 and 9.2, the
                  aforesaid secrecy obligations shall not apply to any
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Confidential Information or CIMA Confidential Information that
                  is reasonably demonstrated by the receiving party to fall
                  within any of the following categories

                  9.3.1.   information that is in the public domain at the time
                           of disclosure by the disclosing party, or that which
                           subsequently enters the public domain through no
                           breach of this Agreement;

                  9.3.2.   information that is demonstrated by written records
                           to be in the possession of the receiving party prior
                           to disclosure hereunder;

                  9.3.3.   information obtained by the receiving party from a
                           third party who is not under a restriction to
                           disclose such information;

                  9.3.4.   information which is required by law or court order
                           to be disclosed, or;

                  9.3.5.   information that is independently developed by the
                           receiving party after disclosure hereunder, without
                           the aid, application or use in any way of
                           Confidential Information received under this
                           Agreement.

                  Specific [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                  FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] Confidential Information or CIMA Confidential
                  Information shall not be deemed to be available to the public
                  or in the prior possession of the receiving party merely
                  because it is embodied in more general information available
                  to the public or in the receiving party's prior possession.
                  Any combination of known information shall be within any of
                  the foregoing exclusions only if the combination as such is
                  within such exclusion. Any information shown to fall within
                  the foregoing exceptions shall not be identified by the
                  receiving party as information, which was received from, is
                  used by, or considered proprietary by the disclosing party.

         9.4.     Notwithstanding Sections 9.1, 9.2 and 9.3.4, in the event that
                  the receiving party becomes legally compelled to disclose any
                  of the [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                  FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***] Confidential Information or CIMA Confidential
                  Information, as the case may be, the receiving party will give
                  the disclosing party prompt notice so that the disclosing
                  party may seek a protective order or other appropriate remedy.
                  The receiving party shall furnish only that portion of the
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND

<PAGE>

                  EXCHANGE COMMISSION.***] Confidential Information or CIMA
                  Confidential Information, as the case may be that is legally
                  required to be disclosed.

         9.5.     Notwithstanding Section 9.2, [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] may disclose any CIMA
                  Confidential Information, including without limitation any
                  plans, specifications, designs, processes, reports, papers,
                  formulas and any other information and material provided to
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  under this Agreement to third parties as reasonably useful to
                  further develop, enhance, improve, manufacture, or
                  commercialize any Licensed Products; provided, however, that
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  require any such third parties to execute a corresponding
                  confidentiality agreement. Under no circumstances may
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  disclose any CIMA Confidential Information to a CIMA
                  Competitor.

10.      DISPUTE RESOLUTION

         10.1.    The parties, through their designated project coordinators and
                  the DSC, shall make a good faith effort to resolve any claims,
                  disputes, or controversies arising out of or relating to this
                  Agreement or the breach or alleged breach thereof.

         10.2.    In the event the parties do not or are unable to reach a
                  mutually agreeable resolution within ten (10) business days of
                  receipt of written notice of any claim, dispute, or
                  controversy, the DSC shall promptly elevate the dispute to
                  representative senior executives of each party in writing.
                  These senior executives from each party shall within twenty
                  (20) days thereafter meet for face-to-face negotiations. If
                  the senior executives are unable to reach a resolution within
                  ten 10) days after such meeting, the parties may agree in
                  writing to submit to voluntary, non-binding mediation. Said
                  mediation shall occur in Wilmington, Delaware within thirty
                  (30) business days after agreement to submit said dispute to
                  mediation and shall last for no more than two (2) business
                  days. In the event the parties do not agree on mediation,
                  either party may seek such other relief as may be available to
                  it in law or equity.

<PAGE>

         10.3.    Notwithstanding the foregoing, either party may apply to any
                  court having jurisdiction over the parties and the subject
                  matter of the dispute for a temporary restraining order and/or
                  preliminary injunction to enjoin the other party from
                  misappropriating or infringing any intellectual property
                  rights of the moving party, or to enforce the termination or
                  confidentiality provisions of this Agreement.

11.      MUTUAL REPRESENTATIONS, WARRANTIES AND COVENANTS

         Each of the parties represents, warrants and covenants to the other
         that:

         11.1.    It has not been debarred and is not subject to debarment and
                  will not use in any capacity, in connection with the services
                  to be performed under this Agreement, any person who has been
                  debarred pursuant to Section 306 of the FDCA, 21 U.S.C. 335a,
                  or who is the subject of a conviction described in such
                  Section or who undergoes any analogous proceeding under
                  foreign law.

         11.2.    It is validly existing and in good standing under the laws of
                  the state of its incorporation;

         11.3.    The execution of this Agreement and full and timely
                  performance of the covenants, duties and obligations described
                  herein have been duly authorized by all necessary corporate
                  action in accordance with all applicable laws.

         11.4.    It has the full power and authority to execute and deliver
                  this Agreement and perform its covenants, duties and
                  obligations described in this Agreement.

         11.5.    This Agreement is a valid, legal and binding obligation upon
                  such party, enforceable in accordance with its terms, except
                  as enforceability may be limited by applicable insolvency and
                  other laws affecting creditors' rights generally or by the
                  availability of equitable remedies.

         11.6.    Each party and their respective agents shall maintain all
                  records and reports as required to comply with appropriate
                  work regulations, to obtain FDA approval, and as further
                  required under the Work Plan.

12.      INDIVIDUAL REPRESENTATIONS, WARRANTIES AND COVENANTS

         12.1.    CIMA represents, warrants and covenants to [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] as follows:

                  12.1.1.  All studies performed by CIMA or its agents and all
                           materials supplied by CIMA or its agents under the
                           Work Plan shall conform to, and shall be performed or
                           manufactured in conformity with

<PAGE>

                           current Good Manufacturing Practices, Good Clinical
                           Practices and all other applicable FDA regulations;
                           when shipped from CIMA, materials developed under the
                           Work Plan shall not be adulterated or misbranded
                           under the Federal Food, Drug, and Cosmetic Act (the
                           "FDCA"), or under any other applicable laws,
                           standards, rules, regulations, or requirements and
                           may be introduced into interstate commerce pursuant
                           to the FDCA.

                  12.1.2.  All Licensed Product shall conform to the
                           specifications set forth in the Work Plan and in any
                           applicable regulatory filings.

                  12.1.3.  All materials delivered by CIMA under the Work Plan,
                           including but not limited to Work Product, shall be
                           free and clear of all liens, security interests, or
                           other encumbrances.

                  12.1.4.  CIMA shall make prompt payment to all of its
                           subcontractors under this Agreement.

                  12.1.5.  CIMA owns or Controls the CIMA Licensed Technology
                           and the CIMA Trademarks and has the right to grant
                           the licenses granted pursuant to this Agreement.

                  12.1.6.  CIMA has the right to use the CIMA Licensed
                           Technology in connection with the Work Plan.

                  12.1.7.  CIMA has granted no license and entered into no
                           agreements that are inconsistent with or will impair
                           its ability to perform its obligations under this
                           Agreement, nor will it do so during the term of this
                           Agreement.

                  12.1.8.  The Licensed Products will not infringe any patents,
                           trade secrets or other intellectual property rights
                           of third parties that are known to CIMA. The CIMA
                           Trademarks will not infringe any intellectual
                           property rights of third parties that are known to
                           CIMA.

                  12.1.9.  To its knowledge, the rights that make up the CIMA
                           Licensed Technology are valid and enforceable.

                  12.1.10. CIMA has maintained the CIMA Licensed Technology in
                           full force and effect, including the payment of
                           maintenance fees and the protection of the
                           confidential status of all trade secrets and
                           confidential information. CIMA will continue to do so
                           during the term of this Agreement.

                  12.1.11. As of the Effective Date, CIMA has completely and
                           accurately responded to all due diligence requests
                           made by

<PAGE>

                           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] with respect to the transactions
                           contemplated by this Agreement.

         12.2.    [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  represents, warrants and covenants to CIMA that
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  has granted no license and entered into no agreements that are
                  inconsistent with or will impair its ability to perform its
                  obligations under this Agreement, nor will it do so during the
                  term of this Agreement.

13.      DISCLAIMER OF WARRANTIES AND LIMITATION OF LIABILITY

         IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR LOST PROFITS,
         PUNITIVE OR OTHER INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY
         KIND ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. THE
         LIMITATION ON LIABILITY SET FORTH IN THIS SECTION SHALL NOT APPLY TO
         THE OTHER PARTY'S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT OR
         DAMAGES ARISING OUT OF A PARTY'S INTENTIONAL BREACH OF, OR MISCONDUCT
         UNDER, THIS AGREEMENT.

14.      MISCELLANEOUS

         14.1.    Notices. All notices and consents required or permitted to be
                  given under this Agreement shall be in writing and shall be
                  deemed to have been duly given if and when (a) delivered
                  personally, (b) mailed by first class certified mail, return
                  receipt requested, postage prepaid, on the date certified by
                  the U.S. Postal Service to have been received by the
                  addressee, (c) by facsimile, provided the sender personally
                  calls the recipient and confirms receipt of such facsimile, or
                  (d) on the date certified by a nationally recognized overnight
                  express courier service to have been received by the
                  recipient, as follows:

         If to CIMA:

                  CIMA Labs Inc.
                  President and Chief Executive Officer
                  10000 Valley View Road
                  Eden Prairie, MN 55344-9361
                  Tel: 952-947-8700
                  Fax: 952-947-8770

<PAGE>

         If to [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
         SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]:

                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]

         14.2.    Public Disclosure/Media Releases. Neither party shall issue or
                  release any media release or public announcement (including
                  any announcements made via any posting on the World Wide Web
                  or Internet), or other similar publicity announcing the
                  existence of this Agreement or relating to any term or
                  condition of this Agreement in any country or the
                  relationships created by this Agreement without three (3)
                  Business Days' prior written notice, including by e-mail, to
                  the other party and the prior agreement of the other party on
                  the relevant wording relating to the Agreement or term or
                  condition of the Agreement. Notwithstanding the foregoing,
                  each party shall have the right to issue media releases,
                  immediately and without prior consent of the other party that
                  disclose any information required by the rules and regulations
                  of the Securities and Exchange Commission, the New York Stock
                  Exchange (NYSE), National Association of Securities Dealers
                  (NASD) or applicable law; provided that the disclosing party
                  shall notify, including by e-mail, the other party no later
                  than simultaneously with such issuance of such disclosure and
                  shall use commercially reasonable efforts to provide a copy of
                  the relevant wording relating to the Agreement, or any term or
                  condition thereof to the other party prior to the disclosure
                  thereof. As of the Effective Date, CIMA shall contact
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  Investor Relations Group for approval and [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] shall contact CIMA's
                  Chief Financial Officer for approval of such disclosure.

         14.3.    Relationship Between Parties. The relationship of CIMA to
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  shall be that of an independent contractor, and no provision
                  of this Agreement shall be construed to constitute any party
                  as a partner or joint venturer of the other party, or an
                  employer or employee of the other. Except as may be more
                  specifically set forth herein, (a) neither party shall be
                  liable in any manner for the debts and liabilities of the
                  other party, and (b) each party shall be solely responsible
                  for all costs and expenses incurred by it in performing its
                  obligations under this Agreement.

<PAGE>

         14.4.    Force Majeure. Any delays in performance by either party under
                  this Agreement shall not be construed as a breach of this
                  Agreement if and to the extent such delay is caused by
                  occurrences beyond the reasonable control of the party
                  affected ("Force Majeure"), including but not limited to acts
                  of God, embargoes, governmental restrictions, strikes or other
                  concerted acts of workers, fire, flood, explosion, riots,
                  terrorism, wars, civil disorder, rebellion or sabotage. Delays
                  caused by events for which a party could have but failed to
                  take commercially reasonable steps to prevent or compensate
                  for (e.g. fire insurance, data backup) shall not be considered
                  to be caused by Force Majeure events. The non-performing party
                  shall, upon giving written notice to the other party of the
                  reason for delay, due to Force Majeure, be temporarily excused
                  from such performance to the extent of such prevention,
                  interference or delay, provided that the non-performing party
                  shall use its commercially reasonable efforts to avoid or
                  remove such causes of non-performance and shall continue
                  performance with the utmost dispatch whenever such causes are
                  removed.

         14.5.    Assignments. Neither party shall voluntarily, by operation of
                  law or otherwise, assign any of its rights or obligations
                  under this Agreement without the prior written consent of the
                  other party, which consent shall not be unreasonably withheld.
                  Notwithstanding the foregoing, this Agreement may be assigned
                  by [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***],
                  without CIMA's consent, as part of an assignment or sale of
                  all, or substantially all, of its assets to which this
                  Agreement relates, and [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] may assign its rights and obligations
                  under this Agreement to an Affiliate; provided, however, that
                  if an Affiliate that has been assigned any rights or
                  obligations hereunder, the terms of such assignment shall
                  contain provisions that if such Affiliate shall no longer be
                  an Affiliate of [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
                  OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                  COMMISSION.***], such Affiliate shall promptly reconvey such
                  rights and/or obligations back to [***CONFIDENTIAL TREATMENT
                  REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] or to another
                  Affiliate designated by [***CONFIDENTIAL TREATMENT REQUESTED,
                  PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND
                  EXCHANGE COMMISSION.***] that is not a CIMA Competitor. In the
                  event of a permitted assignment hereunder, the assigning party
                  shall notify the other party in writing of such assignment. If
                  pursuant to any permitted assignment hereunder the assignee
                  does not agree to assume all of the obligations of the

<PAGE>

                  assignor, the assignor shall be liable for all obligations to
                  the other party not so assumed by the assignee.

         14.6.    Entire Understanding. This Agreement, along with any other
                  attachments, appendixes, exhibits, or schedules, states the
                  entire understanding between the parties with respect to the
                  subject matter hereof, and supersedes all earlier and
                  contemporaneous oral and written communications and agreements
                  or promises made with respect to the same subject matter, and
                  any other previous agreements, promises, or representations of
                  any kind with respect to the relationship between the parties
                  hereto. This Agreement shall not be modified except as
                  provided in this Agreement or in a written document signed by
                  both parties. In the event of any differences in
                  interpretation between the Agreement and any of its
                  attachments, appendixes, exhibits or schedules, the language
                  of the Agreement shall govern. This Agreement expressly
                  supercedes and replaces that certain Startup Development
                  Agreement dated as of April ___, 2003 between the parties and
                  all sums paid as of the Effective Date by [***CONFIDENTIAL
                  TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
                  SECURITIES AND EXCHANGE COMMISSION.***] to CIMA on account of
                  such Startup Development Agreement shall be credited in full
                  to the first payments due under this Agreement.

         14.7.    Controlling Document. In the event of any conflict between the
                  terms and conditions of this Agreement and any terms and
                  conditions set forth in any, order, invoice, verbal agreement,
                  or otherwise, the terms and conditions of this Agreement shall
                  govern.

         14.8.    Parties in Interest. This Agreement shall bind CIMA and
                  [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
                  SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]
                  and their respective successors, agents and permitted assigns,
                  if any. There are no third party beneficiaries to this
                  Agreement.

         14.9.    No Waivers. No failure to exercise, delay in exercising, or
                  single or partial exercise of any right, power, or remedy by
                  either party shall constitute a waiver of, or shall preclude
                  any other or further exercise of, the same or any other right,
                  power, or remedy.

         14.10.   Severability. If any provision of this Agreement is construed
                  to be invalid, illegal, or unenforceable, then the remaining
                  provisions of this Agreement shall not be affected thereby and
                  shall be enforceable without regard thereto but construed and
                  reformed so as to conform as nearly as possible to the intent
                  of the parties in entering into this Agreement.

         14.11.   Counterparts. This Agreement may be executed in any number of
                  counterparts, each of which when so executed and delivered
                  shall be an

<PAGE>

                  original hereof, and it shall not be necessary, in making
                  proof of this Agreement, to produce or account for more than
                  one counterpart hereof.

         14.12.   Controlling, Law. This Agreement is made under, and shall be
                  construed and enforced in accordance with, the laws of the
                  State of Delaware, without regard to that State's conflict of
                  law rules or principles.

         14.13.   Jurisdiction and Venue. The parties hereby submit to the
                  jurisdiction of, and waive any venue objections against, the
                  United States District Court for the District of Delaware and
                  the state courts of Delaware, in any litigation or dispute
                  arising out of this Agreement.

         14.14.   Headings and References. The headings and captions used in
                  this Agreement are used for convenience only and are not to be
                  construed or interpreting this Agreement.

         14.15.   Parties Represented by Counsel. Each of the parties has been
                  represented by counsel in the negotiation and drafting of this
                  Agreement. Both parties have participated in its drafting.
                  This Agreement shall not be construed against either party on
                  account of it having been drafted by the other party or by
                  lack of representation by counsel.

         14.16.   Costs and Attorney's Fees. The prevailing party in any suit
                  or proceeding arising out of or relating to this Agreement
                  shall be entitled to recover all of its reasonable costs and
                  expenses, including reasonable attorneys' fees.

         IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed by its duly authorized representative as of the Effective Date.

CIMA LABS INC.                           [***CONFIDENTIAL TREATMENT
                                         REQUESTED, PORTION OMITTED
By: /s/ Steven B. Ratoff                 FILED SEPARATELY WITH THE
    ----------------------               SECURITIES AND EXCHANGE
Name: Steven B. Ratoff                   COMMISSION.***]

Title:  Chairman & Interim CEO           By: /s/ [***CONFIDENTIAL
                                            ----
                                         TREATMENT REQUESTED, PORTION
                                         OMITTED FILED SEPARATELY WITH
                                         THE SECURITIES AND EXCHANGE
                                         COMMISSION.***]

                                         Name: [***CONFIDENTIAL
                                         TREATMENT REQUESTED, PORTION
                                         OMITTED FILED SEPARATELY WITH

<PAGE>

                                         THE SECURITIES AND
                                         EXCHANGE COMMISSION.***]

                                         Title: [***CONFIDENTIAL TREATMENT
                                         REQUESTED, PORTION OMITTED
                                         FILED SEPARATELY WITH THE
                                         SECURITIES AND EXCHANGE
                                         COMMISSION.***]

<PAGE>

                               LIST OF SCHEDULES

Schedule 1.3               CIMA Competitors

Schedule 1.5               CIMA Licensed Patents

Schedule 1.10              Developmental Specifications

Schedule 1.26(a)           CIMA Trademarks

Schedule 1.26(b)           [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED
                           FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
                           COMMISSION.***] Trademarks

Schedule 1.27              Work Plan

Schedule 2.11              Form of Manufacturing Agreement

<PAGE>

                                  SCHEDULE 1.3
                                CIMA COMPETITORS

-        Perrigo Company

-        Phoqus Pharmaceuticals Ltd.

-        Cardinal Health, Drug discovery and development division

-        Yamanouchi Pharma Technologies

-        Therics, Inc.

-        Eurand

-        Dr. Reddy's Laboratories Ltd.

-        Ethypharm

-        Impax Labs, inc.

-        Biovail Corporation

-        KV Pharmaceutical Inc.

-        Capricorn Pharma Inc.

-        Intech Pharmaceuticals, Inc.

<PAGE>

                                  SCHEDULE 1.5
                                  CIMA PATENTS

OraSolv(R) Technology

         U.S. Pat. No. 5,178,878
         U.S. Pat. App. No. 08/468,913
         Australia Pat. No. 646,232
         Austria Pat. No. E145551
         Belgium Pat. No. 0 494 972
         Canada Pat. No. 2,061,917
         Switzerland Pat. No. 0 494 972
         Germany Pat. No. 69029273.2
         Denmark Pat. No. 0 494 972
         Spain Pat. No. 2097155
         France Pat. No. 0 494 972
         Great Britain Pat. No. 0 494 972
         Italy Pat. No. 0 494 972
         Sweden Pat. No. 0 494 972
         Japan Pat. No. 3 412 694
         Japan Pat. App. No. 15441/2003

PakSolv(R) Technology

         U.S. Pat. No. 6,155,423
         Australia Pat. No. 732,118
         Canada Pat. App. No. 2284132
         Europe Pat. App. No. 98913352.5 (European Publication No. 1,015,352)
         Japan Pat. App. No. 541960/1998
         U.S. Pat. No. 6,269,615
         U.S. Pat. No. 6,311,462
         Australia Pat. No. 734,383
         Europe Pat. App. No. 99914893.5 (European Publication No. 1,107,911)
         Japan Pat. App. No. 535554/2000

DuraSolv(R) Technology

         U.S. Pat. No. 6,024,981
         U.S. Pat. No. 6,221,392
         Australia Pat. No. 726,336
         Canada Pat. App. No. 2284663
         Europe Pat. App. No. 98914665.9
         Japan Pat. App. No. 544093/1998

<PAGE>

                                  SCHEDULE 1.10
                          DEVELOPMENTAL SPECIFICATIONS

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

<PAGE>

                                SCHEDULE 1.26(a)
                                CIMA TRADEMARKS

CIMA

CIMA LABS INC.

OraSolv(R)

PakSolv(R)

DuraSolv(R)

CIMA

<PAGE>

                                SCHEDULE 1.26(b)

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
               SECURITIES AND EXCHANGE COMMISSION.***]TRADEMARKS

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

<PAGE>

SCHEDULE 1.27

[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00055-of-00352.parquet"}]]