Document:

ARIZONA ELECTRIC
                                                          EXECUTION VERSION

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                                                          Exhibit 10.14
                                                          -------------

                            ASSET PURCHASE AGREEMENT

                                 by and between

                   CITIZENS COMMUNICATIONS COMPANY, as SELLER,

                                       and

                     UNISOURCE ENERGY CORPORATION, as BUYER,

                             Dated October 29, 2002

                         ------------------------------

                    Relating to Purchase by Buyer of Seller's
                Electric Utility Business in the State of Arizona

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                                TABLE OF CONTENTS

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ARTICLE I DEFINITIONS.............................................................................................1

         1.1        Definitions...................................................................................1

         1.2        Certain Interpretive Matters.................................................................14

ARTICLE II PURCHASE AND SALE.....................................................................................14

         2.1        Transfer of Assets...........................................................................14

         2.2        Excluded Assets..............................................................................15

         2.3        Assumed Liabilities..........................................................................17

         2.4        Excluded Liabilities.........................................................................19

         2.5        Control of Litigation........................................................................20

ARTICLE III THE CLOSING..........................................................................................21

         3.1        Closing......................................................................................21

         3.2        Closing Payment..............................................................................21

         3.3        Adjustment to Base Purchase Price............................................................21

         3.4        Prorations...................................................................................24

         3.5        Deliveries by Seller.........................................................................24

         3.6        Deliveries by Buyer..........................................................................26

         3.7        Work in Progress.............................................................................26

ARTICLE IV REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER.................................................27

         4.1        Incorporation; Qualification.................................................................27

         4.2        Authority....................................................................................27

         4.3        Consents and Approvals; No Violation.........................................................27

         4.4        Insurance....................................................................................28

         4.5        Real Property Leases.........................................................................28

         4.6        Environmental Matters........................................................................28

         4.7        Labor Matters................................................................................29

         4.8        Benefit Plans:  ERISA........................................................................29

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         4.9        Real Property................................................................................30

         4.10       Condemnation.................................................................................30

         4.11       Assigned Agreements..........................................................................30

         4.12       Legal Proceedings............................................................................31

         4.13       Permits......................................................................................31

         4.14       Taxes........................................................................................31

         4.15       Intellectual Property........................................................................32

         4.16       Capital Expenditures.........................................................................32

         4.17       Compliance With Laws.........................................................................32

         4.18       Title........................................................................................32

         4.19       DISCLAIMERS..................................................................................32

         4.20       Financial Statements.........................................................................33

         4.21       SEC Filings; Financial Statements............................................................33

         4.22       Sufficiency of Assets........................................................................34

ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER................................................................34

         5.1        Organization.................................................................................34

         5.2        Authority....................................................................................34

         5.3        Consents and Approvals; No Violation.........................................................34

         5.4        Availability of Funds........................................................................35

         5.5        SEC Filings; Financial Statements............................................................35

         5.6        Legal Proceedings............................................................................36

         5.7        No Knowledge of Seller's Breach..............................................................36

         5.8        Qualified Buyer..............................................................................36

         5.9        Inspections..................................................................................36

         5.10       WARN Act.....................................................................................36

ARTICLE VI COVENANTS OF THE PARTIES..............................................................................37

         6.1        Conduct of Business and Operation of Assets..................................................37

         6.2        Access to Information........................................................................38

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         6.3        Environmental Inspections and Information....................................................40

         6.4        Confidentiality..............................................................................41

         6.5        Public Statements............................................................................42

         6.6        Expenses.....................................................................................42

         6.7        Further Assurances...........................................................................42

         6.8        Consents and Approvals.......................................................................43

         6.9        Fees and Commissions.........................................................................44

         6.10       Tax Matters..................................................................................45

         6.11       Advice of Changes............................................................................47

         6.12       Seller Employees.............................................................................47

         6.13       Risk of Loss.................................................................................52

         6.14       Tax Exempt Financing.........................................................................53

         6.15       Seller Guarantees and Surety Instruments.....................................................58

         6.16       Citizens Marks...............................................................................58

         6.17       Title Commitments............................................................................58

         6.18       Joint Use Agreement re: Easements............................................................58

         6.19       Leases.......................................................................................59

         6.20       Post-Execution Delivery of Schedules.........................................................59

ARTICLE VII CONDITIONS...........................................................................................59

         7.1        Conditions to Obligations of Buyer...........................................................59

         7.2        Conditions to Obligations of Seller..........................................................60

ARTICLE VIII INDEMNIFICATION.....................................................................................61

         8.1        Indemnification of Seller by Buyer...........................................................61

         8.2        Indemnification of Buyer by Seller...........................................................62

         8.3        Certain Limitations on Indemnification.......................................................62

         8.4        Defense of Claims............................................................................65

ARTICLE IX TERMINATION...........................................................................................66

         9.1        Termination..................................................................................66

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         9.2        Procedure and Effect of Termination..........................................................67

         9.3        Liquidated Damages; Termination Fees.........................................................68

ARTICLE X MISCELLANEOUS PROVISIONS...............................................................................69

         10.1       Amendment and Modification...................................................................69

         10.2       Waiver of Compliance; Consents...............................................................69

         10.3       [Intentionally Omitted]......................................................................69

         10.4       Notices......................................................................................69

         10.5       Assignment...................................................................................71

         10.6       Governing Law................................................................................71

         10.7       Counterparts.................................................................................71

         10.8       Interpretation...............................................................................71

         10.9       Schedules and Exhibits.......................................................................72

         10.10      Entire Agreement.............................................................................72

         10.11      U.S. Dollars.................................................................................72

         10.12      Bulk Sales Laws..............................................................................72

         10.13      Construction of Agreement....................................................................72

         10.14      Severability.................................................................................72

         10.15      Third Party Beneficiary......................................................................73
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<PAGE>
                            ASSET PURCHASE AGREEMENT

     ASSET PURCHASE AGREEMENT, dated October 29, 2002 (this "Agreement"), by and
among Citizens  Communications  Company, a Delaware  corporation  ("Seller") and
UniSource Energy Corporation, an Arizona corporation ("Buyer"). Seller and Buyer
are referred to, individually, as a "Party" and, together, as the "Parties."

                               W I T N E S S E T H
                               -------------------

     WHEREAS, Seller owns all of the Assets (as defined below); and

     WHEREAS,  Buyer desires to purchase and assume,  and Seller desires to sell
and assign, the Assets, and certain associated  liabilities,  upon the terms and
conditions hereinafter set forth in this Agreement.

     NOW, THEREFORE, in consideration of the mutual covenants,  representations,
warranties and  agreements  hereinafter  set forth,  and intending to be legally
bound hereby, the Parties agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

     1.1  Definitions.  As used in this Agreement,  the following terms have the
meanings specified in this Section 1.1.

          "ACC"  means the  Arizona  Corporation  Commission  and any  successor
     agency thereto.

          "ADEQ" means the Arizona  Department of Environmental  Quality and any
     successor agency thereto.

          "Advances" has the meaning set forth in Section 3.3(e).

          "Adverse Environmental Condition" has the meaning set forth in Section
     6.3(c).

          "Affiliate" of any Person means a Person that directly,  or indirectly
     through one or more  intermediaries,  controls,  or is controlled by, or is
     under common control with, the Person specified.

          "Agreement"  means this Asset  Purchase  Agreement  together  with the
     Schedules  and Exhibits  attached  hereto,  as the same may be from time to
     time amended.

          "Allocation" has the meaning set forth in Section 6.10(f).

          "ALTA" has the meaning set forth in Section 6.17.

<PAGE>

          "Ancillary  Agreements"  means the agreements,  contracts,  documents,
     instruments and  certificates  provided for in this Agreement to be entered
     into by one or more of the Parties or any of their Affiliates in connection
     with the transactions contemplated by this Agreement.

          "APBO" has the meaning set forth in Section 6.12(d)(iii)(D).

          "Approved Capital  Expenditures"  means the Capital  Expenditures that
     have been expressly approved by Buyer in writing and that are identified in
     said  writing  as  Approved  Capital  Expenditures  for  purposes  of  this
     Agreement.

          "Arizona Gas Purchase  Agreement" has the meaning set forth in Section
     7.1(j).

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

          "Asset  Material  Adverse  Effect" means any  occurrence or condition,
     arising after the date hereof,  that has or would reasonably be expected to
     have a material adverse effect with an aggregate  economic  impact,  taking
     into account all relevant considerations,  in excess of $10,000,000 (except
     as provided otherwise in Sections 6.3(c), 6.13(b)(i) or 6.13(c)(ii)) on the
     condition of the Assets, taken as a whole, or on the business,  operations,
     financial  condition or results of operations  of the Business,  taken as a
     whole,  other  than any such  occurrence  or  condition  (a)  arising  from
     business,  economic or financial market conditions,  considered  generally,
     (b)  arising  from  the  conditions  in  the  electric  utility   industry,
     considered generally and not specifically as to the Business,  (c) which is
     remedied, cured or otherwise reversed (including by the payment of money or
     application  of insurance  proceeds)  before the  Termination  Date, or (d)
     arising  from  entering  into this  Agreement  or the  announcement  of the
     transactions  contemplated by this Agreement;  it being understood that the
     occurrences  and/or  conditions  which  could,  depending on the nature and
     extent  thereof,  be deemed to result in an Asset  Material  Adverse Effect
     shall include,  without limitation,  (x) the terms or conditions of a Final
     Order  with  respect  to  any  Required  Regulatory  Approval,   considered
     individually or together with any other such Final Order(s) with respect to
     any  other  Required   Regulatory   Approval(s),   other  than   Regulatory
     Exceptions,  and (y) facts or  circumstances  relating to the Assets and/or
     the Business  which come to the attention of Buyer between the date of this
     Agreement and the Closing Date,  whether as a result of Buyer's  Inspection
     of the Assets or its  examination of  information  and data relating to the
     Assets  and/or the  Business,  as  contemplated  by Section  6.2 or 6.3, or
     otherwise.

          "Assigned  Agreements"  means  any  contracts,   agreements,  software
     licenses  and  related  contracts,  Easements,  Real  Property  Leases  and
     personal  property  leases  entered into by Seller or any of its Affiliates
     with respect to the  ownership,  operation or  maintenance of the Assets or
     the Business,  including  those  disclosed on Schedules 4.5 and 4.11(a) and
     excluding those disclosed on Schedule 2.2,  including  without  limitation,
     the IBEW CBAs and the Power Service Contract.

                                       2
<PAGE>

          "Assignment  and  Assumption   Agreement"  means  the  Assignment  and
     Assumption  Agreement between Seller and Buyer substantially in the form of
     Exhibit A attached hereto.

          "Assumed Liabilities" has the meaning set forth in Section 2.3.

          "Balance Sheet" has the meaning set forth in Section 4.20.

          "Base Purchase Price" has the meaning set forth in Section 3.2.

          "Benefit Plans" means each of Seller's deferred  compensation and each
     bonus or other incentive  compensation,  stock  purchase,  stock option and
     other equity  compensation plan,  program,  agreement or arrangement;  each
     severance or termination  pay,  medical,  surgical,  hospitalization,  life
     insurance and other  "welfare" plan, fund or program (within the meaning of
     Section 3(1) of ERISA); each profit-sharing, stock bonus or other "pension"
     plan, fund or program  (within the meaning of Section 3(2) of ERISA);  each
     employment,  termination  or severance  agreement;  and each other employee
     benefit plan, fund, program,  agreement or arrangement,  in each case, that
     is sponsored, maintained or contributed to or required to be contributed to
     by such  Party  or by any  ERISA  Affiliate,  in any  case  maintained  for
     employees of Seller connected with the Business, or in which such employees
     participate.

          "Bill of Sale"  means the Bill of Sale,  substantially  in the form of
     Exhibit B attached  hereto,  to be  delivered at the Closing by Seller with
     respect  to  the  Tangible   Personal   Property  included  in  the  Assets
     transferred to Buyer.

          "Bond Counsel" has the meaning set forth in Section 6.14(c)(i).

          "Business"  means,  collectively,   (a)  the  electricity  generation,
     transmission and distribution business conducted by Seller within the State
     of Arizona;  and (b) the provision of related services and products and the
     engagement in related activities by Seller within the State of Arizona.

          "Business Day" means any day other than  Saturday,  Sunday and any day
     which is a day on which banking  institutions  in the States of Arizona and
     New York are  authorized  by law or other  governmental  action  to  remain
     closed.

          "Buyer" has the meaning set forth in the Preamble.

          "Buyer Indemnifiable Loss" has the meaning set forth in Section 8.2.

          "Buyer Indemnitee" has the meaning set forth in Section 8.2.

          "Buyer Material  Adverse Effect" means a Material  Adverse Effect with
     respect to Buyer.

          "Buyer Required  Regulatory  Approvals" means the Required  Regulatory
     Approvals set forth in Schedule 5.3(b).

                                       3
<PAGE>

          "CERCLA"  means  the  federal  Comprehensive  Environmental  Response,
     Compensation,  and  Liability  Act,  42  U.S.C.  Section  9601 et seq.,  as
     amended.

          "Capital  Expenditures"  means capital additions to or replacements of
     property, plants and equipment included in the Assets or otherwise relating
     to the Business and other  expenditures or repairs on property,  plants and
     equipment included in the Assets or otherwise relating to the Business that
     would be  capitalized  by Seller in accordance  with its normal  accounting
     policies.

          "Capital  Expenditures  Schedule" has the meaning set forth in Section
     4.16.

          "Citizens Marks" has the meaning set forth in Section 2.2(c).

          "Closing" has the meaning set forth in Section 3.1.

          "Closing  Date" means one minute after 11:59 p.m. on the date which is
     five  (5)  Business  Days  following  the  date on  which  the  last of the
     conditions  precedent  to the  Closing  set  forth in  Article  VII of this
     Agreement  have  been  either  satisfied  or  waived by the Party for whose
     benefit such conditions precedent exist, subject to such extensions (not to
     exceed six (6)  months) as may be  required  by Seller to repair or replace
     lost or damaged Assets in accordance  with Section  6.13(c),  or such other
     date as the Parties may mutually agree.

          "COBRA" means the Consolidated  Omnibus Budget  Reconciliation  Act of
     1984.

          "COBRA  Continuation  Coverage"  means  the  requirements  of  Section
     4980B(f) of the Code.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Commercially  Reasonable  Efforts" means efforts by a Party which are
     reasonably within the contemplation of the Parties at the time of executing
     this Agreement and which do not require the performing  Party to expend any
     funds  other  than  expenditures  which are  customary  and  reasonable  in
     transactions of the kind and nature contemplated by this Agreement in order
     for the performing Party to satisfy its obligations hereunder.

          "Current   Retirees"   has  the   meaning   set   forth   in   Section
     6.12(d)(iii)(D).

          "Direct Claim" has the meaning set forth in Section 8.4(c).

          "Easements"  means all easements,  rights of way,  permits,  licenses,
     prescriptive  rights and other ways of  necessity,  and other  similar real
     property grants, whether or not of record, relating to real property.

          "Encumbrances"   means  any  mortgages,   pledges,   liens,   security
     interests,  conditional and installment sale  agreements,  activity and use
     limitations,  conservation easements,  deed restrictions,  encumbrances and
     charges of any kind.

                                       4
<PAGE>

          "Environmental  Claim"  means any and all  pending  and/or  threatened
     administrative or judicial actions,  suits, orders, claims, liens, notices,
     notices   of   violations,   investigations,   complaints,   requests   for
     information,  proceedings, or other written communication, whether criminal
     or civil,  pursuant to or relating to any applicable  Environmental  Law or
     pursuant to a common law theory, by any Person (including,  but not limited
     to, any Governmental  Authority,  private person and citizens' group) based
     upon,  alleging,  asserting,  or  claiming  any  actual  or  potential  (a)
     violation of, or liability  under any  Environmental  Law, (b) violation of
     any Environmental Permit, or (c) liability for investigatory costs, cleanup
     costs,  removal costs,  remedial costs,  response costs,  natural  resource
     damages,  property damage, personal injury, fines, or penalties arising out
     of, based on, resulting from, or related to any Environmental  Condition or
     any Release or  threatened  Release into the  environment  of any Regulated
     Substances  at any  location  related  to the  Assets,  including,  but not
     limited  to,  any  Off-Site  Location  to which  Regulated  Substances,  or
     materials containing Regulated Substances, were sent for handling, storage,
     treatment, or disposal.

          "Environmental Condition" means the presence or Release of a Regulated
     Substance   (other  than  a   naturally-occurring   substance)   on  or  in
     environmental  media,  or  structures  on  Real  Property,  at an  Off-Site
     Location  or other  property  (including  the  presence  in surface  water,
     groundwater,  soils or subsurface strata, or air), including the subsequent
     migration of any such Regulated Substance, regardless of when such presence
     or Release occurred or is discovered.

          "Environmental Data" has the meaning set forth in Section 6.3(e).

          "Environmental  Laws" means all  federal,  state,  local,  provincial,
     foreign and  international  civil and criminal  laws,  regulations,  rules,
     ordinances,   codes,  decrees,   judgments,   directives,  or  judicial  or
     administrative   orders   relating  to  pollution  or   protection  of  the
     environment,  natural  resources  or human  health and  safety,  including,
     without  limitation,  laws relating to Releases or  threatened  Releases of
     Regulated Substances  (including,  without limitation,  Releases to ambient
     air, surface water,  groundwater,  land,  surface and subsurface strata) or
     otherwise  relating  to the  manufacture,  processing,  distribution,  use,
     treatment,  storage, Release, transport,  disposal or handling of Regulated
     Substances.  "Environmental Laws" include: (a) with respect to federal law,
     CERCLA, the Hazardous Materials Transportation Act (49 U.S.C.ss.ss. 1801 et
     seq.), the Resource Conservation and Recovery Act (42 U.S.C.ss.ss.  6901 et
     seq.),  the Federal Water Pollution  Control Act (33  U.S.C.ss.ss.  1251 et
     seq.),  the  Clean  Air  Act (42  U.S.C.ss.ss.  7401 et  seq.),  the  Toxic
     Substances  Control Act (15 U.S.C.  ss.ss. 2601 et seq.), the Oil Pollution
     Act (33 U.S.C.ss.ss.  2701 et seq.),  the Emergency  Planning and Community
     Right-to-Know Act (42 U.S.C.ss.ss.  11001 et seq.), the Occupational Safety
     and Health Act (29  U.S.C.ss.ss.  651 et seq.), the Safe Drinking Water Act
     (42 U.S.C.ss. 300f et. seq.), the Surface Mine Conservation and Reclamation
     Act (30 U.S.C.ss.ss.  1251-1279), and regulations adopted pursuant thereto,
     and counterpart state and local laws, regulations adopted pursuant thereto;
     and (b) with  respect to  Arizona  law,  laws  comparable  to such  federal
     statutes and regulations adopted pursuant thereto.

                                       5
<PAGE>

          "Environmental    Permits"    means   any   permits,    registrations,
     certificates,  certifications,  licenses and  authorizations,  consents and
     approvals of Governmental  Authorities issued under Environmental Laws held
     by Seller with respect to the Assets.

          "Environmental  Price Adjustment" has the meaning set forth in Section
     6.3(c).

          "Environmental Reports" has the meaning set forth in Section 4.6.

          "Environmental Threshold" has the meaning set forth in Section 6.3(c).

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

          "ERISA   Affiliate"  means  a  trade  or  business,   whether  or  not
     incorporated,  that  together  with a  Party  would  be  deemed  a  "single
     employer" within the meaning of Section 4001(b) of ERISA.

          "Estimated Adjustment" has the meaning set forth in Section 3.3(b).

          "Estimated  Closing  Statement"  has the  meaning set forth in Section
     3.3(b).

          "Excluded Assets" has the meaning set forth in Section 2.2.

          "Excluded Liabilities" has the meaning set forth in Section 2.4.

          "Exempt Facilities" means those facilities listed in Exhibit A to each
     Loan Agreement included in the IDRB Documents.

          "FERC" means the Federal Energy Regulatory Commission or any successor
     agency thereto.

          "Final Order" means an action by the relevant  Governmental  Authority
     that has not been  reversed,  stayed,  enjoined,  set  aside,  annulled  or
     suspended and/or with respect to which any waiting period prescribed by law
     before the transactions  contemplated hereby may be consummated has expired
     and the time  period  permitted  by  statute or  regulation  for filing any
     request for a stay, petition for rehearing,  reconsideration or application
     for review of the action or for filing a court appeal has passed.

          "Financial Statements" has the meaning set forth in Section 4.20.

          "FIRPTA  Affidavit" means the Foreign  Investment in Real Property Tax
     Act Certification and Affidavit to be executed by Seller.

          "GAAP" means U.S. generally accepted accounting principles.

          "Good Utility  Practices"  means any  practices,  methods,  standards,
     guides,  or acts, as  applicable,  that (a) are  generally  accepted in the
     region  during  the  relevant  time  period  for  use  in  the  electricity
     generation,  transmission and distribution  industry, (b) are commonly used
     in  prudent   electricity   generation,   transmission   and   distribution
     engineering, construction, project management and operations, and (c) would
     be expected if the Business is to be  conducted  at a reasonable  cost in a
     manner  consistent  with  laws,  rules and  regulations  applicable  to the
     Business  and  the  objectives  of   reliability,   safety,   environmental
     protection, economy and expediency. Good Utility Practice is intended to be
     acceptable  practices,  methods,  or acts generally accepted in the region,
     and is not  intended to be limited to the optimum  practices,  methods,  or
     acts to the exclusion of all others.

                                       6
<PAGE>

          "Governmental  Authority" means any foreign,  federal, state, local or
     other governmental, regulatory or administrative agency, court, commission,
     department,   board,  or  other  governmental   subdivision,   legislature,
     rulemaking board, court,  tribunal,  arbitrating body or other governmental
     authority.

          "Grandfathered  Active Employees" has the meaning set forth in Section
     6.12(d)(iii)(D).

          "Grandfathered  Individuals"  has the  meaning  set  forth in  Section
     6.12(d)(iii)(D).

          "HSR Act" means the  Hart-Scott-Rodino  Antitrust  Improvements Act of
     1976, as amended.

          "IBEW" means International Brotherhood of Electrical Workers.

          "IBEW CBAs" has the meaning set forth in Section 6.12(a).

          "IDRB Documents" has the meaning set forth in Section 6.14(m).

          "IDRB  Indebtedness"  means the  indebtedness  of Seller  owing to the
     issuers of the Revenue Bonds and arising under the Loan Agreements included
     among the IDRB Documents.

          "Income Tax" means any federal,  state, local or foreign Tax (a) based
     upon,  measured  by or  calculated  with  respect  to gross or net  income,
     profits or receipts (including, without limitation, capital gains Taxes and
     minimum Taxes) or (b) based upon, measured by or calculated with respect to
     multiple bases (including,  without limitation,  corporate franchise taxes)
     if one or more of the bases on which such Tax may be based,  measured by or
     calculated  with  respect  to, is  described  in clause  (a),  in each case
     together with any interest, penalties, or additions to such Tax.

          "Indemnifiable Loss" means any claim,  demand, suit, loss,  liability,
     damage,   obligation,   payment,   cost  or  expense  (including,   without
     limitation,   the  cost  and  expense  of  any  action,  suit,  proceeding,
     assessment,   judgment,  settlement  or  compromise  relating  thereto  and
     reasonable  attorneys'  fees and  reasonable  disbursements  in  connection
     therewith).

          "Indemnifying    Party"   means   a   Party   obligated   to   provide
     indemnification under this Agreement.

                                       7
<PAGE>

          "Indemnitee" means a Person entitled to receive  indemnification under
     this Agreement.

          "Independent  Accounting Firm" means such independent  accounting firm
     of national reputation as is mutually appointed by the Buyer and Seller.

          "Inspection"  means all  tests,  reviews,  examinations,  inspections,
     investigations, interviews, verifications, samplings and similar activities
     conducted by Buyer or its Representatives prior to the Closing with respect
     to  the  Assets,  including  "Phase  I"  and/or  "Phase  II"  environmental
     assessments.

          "Intellectual  Property"  means patents and patent rights,  trademarks
     and trademark rights, inventions,  copyrights and copyright rights, and all
     pending  applications  for  registrations  of  patents,   trademarks,   and
     copyrights.

          "Inventories" means materials,  spare parts, consumable supplies, fuel
     supplies and chemical  inventories  relating to the Assets or the operation
     of the Business.

          "Knowledge" means the actual knowledge, as of the date hereof or, with
     respect to any certificate  delivered pursuant to this Agreement,  the date
     of delivery of such certificate,  of the Persons identified on Schedule 1.1
     and successors to each such Person's employment responsibilities.

          "Material  Adverse Effect" means any occurrence or condition,  arising
     after the date hereof,  that has or would  reasonably be expected to have a
     material  adverse  effect with an  aggregate  an adverse  economic  impact,
     taking into account all relevant  considerations,  in excess of $10,000,000
     on the business, operations,  properties, financial condition or results of
     operations of any Party (including its Affiliates,  taken as a whole) or on
     the  ability  of either  Party to  perform  in all  material  respects  its
     obligations under this Agreement and the Ancillary Agreements.

          "Material Taking" has the meaning set forth in Section 6.13(b).

          "Non-Union Employees" has the meaning set forth in Section 6.12(b).

          "Off-Site  Location"  means  any  real  property  other  than the Real
     Property.

          "Order"  means  any  award,  decision,  injunction,  judgment,  order,
     consent order, writ, decree, consent decree,  ruling,  subpoena, or verdict
     entered,  issued,  made or  rendered by any court,  administrative  agency,
     other Governmental Authority, or by an arbitrator,  each of which possesses
     competent jurisdiction.

          "Party" has the meaning set forth in the Recitals.

          "Permitted Encumbrances" means any of the following:

                                       8
<PAGE>

     (a) mechanics',  carriers', workers' and other similar liens arising in the
ordinary  course of business  for charges  that are not  delinquent  or that are
being contested in good faith and have not proceeded to judgment;

     (b) liens for current Taxes and assessments not yet due and payable;

     (c) with  respect to the Real  Property,  usual and  customary  nonmonetary
Encumbrances,   covenants,  Easements,  restrictions  and  other  title  matters
(whether  or not  recorded)  that  do not and are  not  expected  to  materially
interfere  with the operation of that portion of the Business  conducted on such
Real Property or the Business as a whole;

     (d) Encumbrances  securing the payment or performance of any of the Assumed
Liabilities;

     (e) all applicable zoning ordinances and land use restrictions in effect as
of the date of this  Agreement  and all  changes to or new  adoptions  of zoning
ordinances and land use  restrictions  prior to the Closing Date that do not and
are not expected to materially  interfere  with the operation of that portion of
the Business conducted on such Real Property or the Business as a whole;

     (f) with  respect  to any Asset  which  consists  of a  leasehold  or other
possessory interests in real property, all Encumbrances,  covenants,  Easements,
restrictions  and other title  matters  (whether or not  recorded)  to which the
underlying  fee estate in such real  property is subject that do not or will not
interfere  materially  with  the  operation  of  that  portion  of the  Business
currently conducted on such property or the Business as a whole; and

     (g) any other Encumbrances,  obligations,  defects or irregularities of any
kind whatsoever affecting title to the Assets that will be terminated,  released
or waived on or before the Closing Date or that are not,  individually or in the
aggregate, reasonably likely to materially interfere with the present use of the
Assets or to materially increase the cost of conducting the Business.

     "Permits" means any permits, licenses, registrations,  franchises and other
authorizations,  consents and  approvals  of  Governmental  Authorities  held by
Seller with respect to the Assets or the Business.

     "Person" means any  individual,  partnership,  limited  liability  company,
joint venture, corporation,  trust, unincorporated organization, or governmental
entity or any department or agency thereof.

     "Post-Closing Adjustment" has the meaning set forth in Section 3.3(d).

     "Post-Retirement  Welfare  Benefits"  has the  meaning set forth in Section
6.12(d)(iii)(D).

                                       9
<PAGE>

     "Power Service Agreement" means that certain Power Service Agreement, dated
as of June 1, 2001, between Pinnacle West Capital Corporation and Seller.

     "Proposed  Post-Closing  Adjustment"  has the  meaning set forth in Section
3.3(c).

     "Proprietary  Information" of a Party means all information about the Party
or  its  Affiliates,   including  their  respective  properties  or  operations,
furnished  to the  other  Party  or its  Representatives  by  the  Party  or its
Representatives,  before or after the date hereof,  regardless  of the manner or
medium  in which  it is  furnished  and all  analyses,  reports,  tests or other
information  created  or  prepared  by,  or on  behalf  of, a Party  during  the
performance  of  "Phase  I"  or  "Phase  II"  environmental   site  assessments.
Proprietary  Information  does not include  information  that: (a) is or becomes
generally available to the public, other than as a result of a disclosure by the
other Party or its  Representatives;  (b) was  available to the other Party on a
nonconfidential   basis   prior  to  its   disclosure   by  the   Party  or  its
Representatives;  (c) becomes  available to the other Party on a nonconfidential
basis  from a person,  other than the Party or its  Representatives,  who is not
otherwise  bound  by  a   confidentiality   agreement  with  the  Party  or  its
Representatives, or is not otherwise under any obligation to the Party or any of
its  Representatives  not to transmit the  information to the other Party or its
Representatives; or (d) is independently developed by the other Party.

     "Purchase Price" has the meaning set forth in Section 3.2.

     "Qualifying  Offer" means an offer to a Transferred  Non-Union  Employee of
the same or similar job that is at least 100% of such  employee's  current total
cash  compensation at the time the offer was made (consisting of base salary and
target incentive bonus), and does not require,  as a condition of acceptance,  a
relocation of residence as described in Section 6.12(f).

     "Real Property" has the meaning set forth in Section 2.1(a).  Any reference
to the Real Property includes, by definition, Seller's right, title and interest
in  and to  the  surface  and  subsurface  elements,  including  the  soils  and
groundwater  present at the Real  Property,  and any  reference to items "at the
Real Property"  includes all items "at, on, in, upon,  over,  across,  under and
within" the Real Property.

     "Real Property Leases" has the meaning set forth in Section 4.5.

     "Recovery Costs" has the meaning set forth in Section 8.4(d).

     "Regulated  Substances" means (a) any petrochemical or petroleum  products,
oil or coal ash, radioactive materials,  radon gas, asbestos in any form that is
or could become friable,  urea formaldehyde foam insulation and dielectric fluid
containing polychlorinated biphenyls; (b) any chemicals, materials or substances
defined as or included in the definition of "hazardous  substances,"  "hazardous
wastes," "hazardous materials," "hazardous constituents,"  "restricted hazardous
materials,"    "extremely    hazardous    substances,"    "toxic    substances,"
"contaminants," "pollutants," "toxic pollutants" or words of similar meaning and
regulatory  effect  under any  applicable  Environmental  Law; and (c) any other
chemical, material or substance, exposure to which or whose discharge, emission,
disposal  or  Release is  prohibited,  limited or  regulated  by any  applicable
Environmental Law.

                                       10
<PAGE>

     "Regulations" has the meaning set forth in Section 6.14(a)(iii).

     "Regulatory Exceptions" means any of the following:

     (a) a refusal by the ACC or the FERC to authorize an increase in base rates
for the Business,  an imposition by the ACC or the FERC of a rate moratorium for
the Business,  or a  requirement  by the ACC or the FERC of the filing of a rate
case for the Business;

     (b) an  imposition  by the ACC requiring  Buyer to provide  service,  or to
improve  service,  to Persons  located  in any  authorized  service  area of the
Business,   provided  such   requirement  has  a  corresponding   rate  recovery
opportunity;

     (c)  an  imposition  by the  ACC  of  performance,  safety  or  reliability
standards  for  Buyer's   operation  of  the  Business  that  are  substantially
equivalent  to those  standards  being met by Buyer or its  Affiliates  in their
other utility  operations  in Arizona,  provided (i) Buyer is given a reasonable
period of time  after  Closing  to meet  such  imposed  standards  and (ii) such
imposed standards have a corresponding rate recovery opportunity; and

     (d) terms and  conditions  imposed by any  Governmental  Authority  that is
required to issue a Required  Regulatory  Approval that are either (i) usual and
customary; (ii) applicable to the Business or to Buyer or any Affiliate of Buyer
as of the date of this  Agreement;  or  (iii)  contemplated  by this  Agreement,
including the understandings of the Parties referenced in Section 6.8(c)(i).

     "Regulatory  Material  Adverse Effect" means,  with respect to any Party, a
Material Adverse Effect resulting from the effect on such Party of the terms and
conditions  of a Final Order with  respect to any Required  Regulatory  Approval
other than Regulatory Exceptions.

     "Release" means release,  spill, leak,  discharge,  dispose of, pump, pour,
emit,  empty,  inject,  leach,  dump or  allow to  escape  into or  through  the
environment.

     "Remediation"  means  any  action  taken  in  the  investigation,  removal,
confinement,  cleanup, treatment, or monitoring of a Release or an Environmental
Condition on Real Property or Off-Site Location,  including, without limitation,
(a) obtaining any Permits or  Environmental  Permits  required for such remedial
activities, and (b) implementation of any engineering controls and institutional
controls. The term "Remediation" includes,  without limitation, any action which
constitutes  "removal action" or "remedial  action" as defined by Section 101 of
CERCLA, Section 6901(23) and (24); or any action which constitutes "remediation"
or "remedial action" as defined by Arizona Revised Statutes Sections  49-151(4),
49-171(8) and 49-282.02(C)(2).

                                       11
<PAGE>

     "Representatives" of a Party means such Party's authorized representatives,
including without limitation, its professional and financial advisors.

     "Required Regulatory  Approvals" means with respect to a Party, any consent
or approval of, filing with, or notice to, any  Governmental  Authority  that is
necessary  for the  execution  and delivery of this  Agreement and the Ancillary
Agreements  by  such  Party  or the  consummation  thereby  of the  transactions
contemplated hereby, other than such consents, approvals, filings or notices (i)
which are not  required in the  ordinary  course to be obtained or made prior to
the Closing and the transfer of the Assets, (ii) which, if not obtained or made,
will not prevent such Party from performing its material obligations  hereunder,
or (iii) that relate to a Permit that is not material to the Business,  taken as
a whole.

     "Revenue Bonds" has the meaning set forth in Section 6.14(a)(i).

     "Savings Plan" has the meaning set forth in Section 6.12(d)(iii)(E).

     "SEC" means the Securities and Exchange Commission and any successor agency
thereto.

     "Seller" has the meaning set forth in the Preamble.

     "Seller Indemnifiable Loss" has the meaning set forth in Section 8.1.

     "Seller Indemnitee" has the meaning set forth in Section 8.1.

     "Seller  Material  Adverse  Effect"  means a Material  Adverse  Effect with
respect to Seller.

     "Seller  Required  Regulatory  Approvals"  means  the  Required  Regulatory
Approvals set forth in Schedule 4.3(b).

     "Seller SEC Reports" has the meaning set forth in Section 4.21.

     "Seller's   Pension   Plan"  has  the   meaning   set   forth  in   Section
6.12(d)(iii)(C).

     "Severance Cost" has the meaning set forth in Section 6.12(b).

     "Special Warranty Deed" means a special warranty deed  substantially in the
form of Exhibit C attached hereto.

     "Subsidiary" when used in reference to any Person means any entity of which
outstanding  securities  having ordinary voting power to elect a majority of the
Board of Directors or other Persons  performing similar functions of such entity
are owned directly or indirectly by such Person.

     "Sufficient Notice" has the meaning set forth in Section 6.14(c)(ii).

     "Taking" has the meaning set forth in Section 6.13(b).

                                       12
<PAGE>

     "Tangible Personal Property" has the meaning set forth in Section 2.1(c).

     "Taxes"  means  all  taxes,  charges,  fees,  levies,  penalties  or  other
assessments  imposed by any federal,  state,  local or foreign taxing authority,
including,  but not limited  to,  income,  excise,  property,  sales,  transfer,
franchise,  payroll,  withholding,  social  security,  gross receipts,  license,
stamp, occupation,  employment or other taxes, including any interest, penalties
or additions attributable thereto.

     "Tax Impact" has the meaning set forth in Section 6.14(a)(vi).

     "Tax Return" means any return,  report,  information  return,  declaration,
claim for  refund or other  document  (including  any  schedule  or  related  or
supporting  information)  required to be supplied to any taxing  authority  with
respect to Taxes including amendments thereto.

     "Termination Date" has the meaning set forth in Section 9.1(b).

     "Terminated  Power  Service  Agreement"  means that certain  Power  Service
Agreement,  dated as of January 5, 1995,  between Arizona Public Service Company
and Seller, as heretofore terminated.

     "Third Party Claim" means any claim,  action, or proceeding made or brought
by any Person who is not (a) a Party to this Agreement, or (b) an Affiliate of a
Party to this Agreement.

     "Title Commitment" has the meaning set forth in Section 6.17.

     "Title Company" has the meaning set forth in Section 6.17.

     "Title Policies" has the meaning set forth in Section 6.17.

     "Transfer Taxes" means any real property  transfer or gains tax, sales tax,
conveyance  fee, use tax,  stamp tax,  stock  transfer tax or other similar tax,
including any related penalties, interest and additions to tax.

     "Transferable  Permits" means those Permits and Environmental  Permits with
respect to the Assets or the Business  which may be transferred to Buyer with or
without a filing  with,  notice to,  consent of or approval of any  Governmental
Authority, and excluding those Permits and Environmental Permits with respect to
the Assets or the Business which are  non-transferable to Buyer and with respect
to which Buyer must apply for and obtain replacements.

     "Transferred   Employees"  means   Transferred   Non-Union   Employees  and
Transferred Union Employees.

     "Transferred  Employee Records" means records related to Seller's employees
who become employees of Buyer but only to the extent such records pertain to (A)
skill and development  training and biographies,  (B) seniority  histories,  (C)
salary  and   benefit   information,   (D)   Occupational,   Safety  and  Health
Administration reports, or (E) subject to the limitation of the Health Insurance
Portability  and  Accountability  Act of 1996 and any  applicable  state privacy
legislation and regulations, active medical restriction forms.

                                       13
<PAGE>

     "Transferred  Non-Union  Employees"  has the  meaning  set forth in Section
6.12(b).

     "Transferred Union Employees" has the meaning set forth in Section 6.12(a).

     "Union Employees" has the meaning set forth in Section 6.12(a).

     "UniSource" means UniSource Energy Corporation,  an Arizona corporation and
a direct or indirect parent corporation of Buyer.

     "UniSource Designee" means a wholly-owned  subsidiary,  direct or indirect,
of either  UniSource or Tucson  Electric Power Company,  an Arizona  corporation
named in the approvals by the ACC and the FERC as an entity that may acquire the
Assets.

     "UniSource SEC Reports" has the meaning set forth in Section 5.5.

     "WARN Act" means the Federal Worker Adjustment  Retraining and Notification
Act of 1988, as amended.

     "1954 Code" has the meaning set forth in Section 6.14(a)(iii).

     1.2 Certain  Interpretive  Matters.  In this Agreement,  unless the context
otherwise  requires,  the singular shall include the plural, the masculine shall
include  the  feminine  and  neuter,  and vice  versa.  The term  "includes"  or
"including"  shall mean  "including  without  limitation."  The terms  "hereof,"
"herein" and  "herewith"  and words of similar  import shall,  unless  otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Schedules  and  Exhibits  hereto) and not to any  particular  provision  of this
Agreement.  References to a Section,  Article,  Exhibit or Schedule shall mean a
Section,  Article,  Exhibit or Schedule of this  Agreement,  and  reference to a
given  agreement  or  instrument  shall  be a  reference  to that  agreement  or
instrument as modified, amended, supplemented or restated through the date as of
which such reference is made.

                                   ARTICLE II

                                PURCHASE AND SALE

     2.1 Transfer of Assets.  Upon the terms and subject to the  satisfaction of
the conditions  contained in this Agreement,  at the Closing,  Seller will sell,
assign,  convey,  transfer and deliver to Buyer or the UniSource  Designee,  and
Buyer or such UniSource Designee will purchase,  assume and acquire from Seller,
free and clear of all Encumbrances (except for Permitted  Encumbrances),  all of
Seller's right, title and interest in and to all the assets (except for Excluded
Assets), real, personal or mixed, tangible, or intangible,  used or held for use
by Seller in or in connection  with, or otherwise  necessary for, the conduct of
the Business,  including, without limitation, those assets described below, each
as in existence on the Closing Date (such assets, collectively, the "Assets"):

                                       14
<PAGE>

     (a) those certain  parcels of real property  owned by Seller  together with
all buildings,  facilities, and other improvements thereon and all appurtenances
thereto as described in Schedule 4.9 (the "Real Property");

     (b) all accounts  receivable and earned but unbilled revenues  attributable
to the Business, and all Inventories;

     (c)   all   machinery   (mobile   or   otherwise),   equipment   (including
communications  equipment  and  computers),   vehicles,   tools,  furniture  and
furnishings and other personal property related to the Business, owned by Seller
and  located on the Real  Property on the Closing  Date,  together  with all the
personal  property of Seller used  principally  in the operation of the Business
that are in the  possession  of Seller and  whether  or not  located on the Real
Property (collectively, the "Tangible Personal Property");

     (d) subject to the provisions of Section 6.7(c),  all Assigned  Agreements,
including the Power Service  Agreement and any and all rights,  claims or causes
of action against Arizona Public Service Company or any other Person that Seller
may have under the Terminated Power Service Agreement;

     (e) subject to the provisions of Section 6.7(c), all Real Property Leases;

     (f) all Transferable Permits;

     (g) all books,  customer lists and customer  information  databases,  meter
reading and service data,  accounts payable and receivable  data,  operating and
maintenance records,  warranty  information,  operating,  safety and maintenance
manuals,    engineering   design   plans,   blueprints   and   as-built   plans,
specifications,  procedures and similar items of Seller relating specifically to
the Assets  and  necessary  for the  operation  of the  Assets and the  Business
(subject to the right of Seller to retain copies of same for its use) other than
such items which are proprietary to third parties and accounting records;

     (h) all  unexpired,  transferable  warranties  and  guarantees  from  third
parties with respect to any Asset as of the Closing Date;

     (i) Seller prepaid expenses; and

     (j) petty cash held locally for the benefit of the Business.

     2.2  Excluded  Assets.  Notwithstanding  anything  to the  contrary in this
Agreement,  nothing in this Agreement  will  constitute a transfer to Buyer or a
UniSource  Designee of, or be construed  as  conferring  on Buyer or a UniSource
Designee, and neither Buyer nor said UniSource Designee is acquiring, any right,
title or interest in or to the following  specific  assets which are  associated
with the Assets or the Business, but which are hereby specifically excluded from
the sale and the definition of Assets herein (the "Excluded Assets"):

                                       15
<PAGE>

     (a) assets  that  Seller  uses in both the  Business  and  Seller's  gas or
communications  businesses,  the  material  items of  which  are  identified  in
Schedule 2.2 hereto and any contracts or agreements regarding the procurement of
goods or services by Seller for use in its gas or communications businesses;

     (b) cash and cash equivalents  (including checks) in transit, in hand or in
bank  accounts,  other  than  petty  cash held  locally  for the  benefit of the
Business;

     (c)  the  rights  of  Seller  and its  Affiliates  to the  names  "Citizens
Communications Company",  "Citizens Utilities", "CZN" or "Citizens" or any other
trade names,  trademarks,  service marks,  corporate names, corporate symbols or
logos or any part, derivative or combination thereof (the "Citizens Marks");

     (d) the stock  record and minute books of Seller,  duplicate  copies of all
books and records  transferred to Buyer, all records prepared in connection with
the sale of the  Business  (including  bids  received  from  third  parties  and
analyses  relating to the Business and all  original  documents  relating to the
Revenue Bonds  (provided that copies of such  documents  relating to the Revenue
Bonds have been furnished to Buyer);

     (e) assets  disposed of by Seller  after the date of this  Agreement to the
extent such dispositions are not prohibited by this Agreement;

     (f) except in the case of causes of action against third parties (including
indemnification and contribution) (i) relating to an Environmental  Condition or
Regulated  Substance or arising under  Environmental  Laws and not relating to a
Retained  Liability or (ii) relating to the Terminated Power Service  Agreement,
the  rights of Seller in and to any  causes  of  action  against  third  parties
(including  indemnification  and contribution)  relating to any Real Property or
Tangible Personal Property, Permits, Environmental Permits, Taxes, Real Property
Leases or the  Assigned  Agreements,  if any,  and not  relating  to the Assumed
Liabilities, including any claims for refunds, prepayments, offsets, recoupment,
insurance proceeds (subject to Section 6.13(c)), condemnation awards (subject to
Section 6.13(b)),  judgments and the like, whether received as payment or credit
against future  liabilities,  relating  specifically to the Real Property or any
improvements thereon and relating to any period prior to the Closing Date;

     (g) all  personnel  records of Seller and its  Affiliates  relating  to the
Transferred  Employees other than Transferred Employee Records or other records,
the  disclosure  of which is required by law or legal or  regulatory  process or
subpoena;

     (h) any and all of Seller's  rights and  interests in any contract  that is
not an Assigned Agreement or the Terminated Power Service Agreement,  or that is
an  intercompany  transaction  between Seller and an Affiliate of Seller and all
accounts owing by and among Seller and any of its Affiliates, whether or not any
such  intercompany  transaction or account relates to the provision of goods and
services, payment arrangements, intercompany charges or balances, or the like;

     (i) except to the extent  set forth in  Section  3.4,  rights to refunds of
Taxes  payable with respect to the  Business,  the Assets,  or any other assets,
properties or operations of Seller or any Affiliate thereof;

                                       16
<PAGE>

     (j) all deferred tax assets or collectibles;

     (k) any insurance  policy,  bond, letter of credit or similar item, and any
cash surrender value in regard thereto;

     (l) except as otherwise set forth in Section 6.12,  assets  attributable to
or related to a Benefit Plan; and

     (m) all other assets listed in Schedule 2.2 hereto.

     2.3  Assumed  Liabilities.  On the  Closing  Date,  Buyer or the  UniSource
Designee  acquiring  the  Assets  shall  deliver to Seller  the  Assignment  and
Assumption  Agreement  pursuant to which Buyer or such UniSource  Designee shall
assume  and  agree to  discharge  when  due,  without  recourse  to  Seller,  in
accordance  with the respective  terms and subject to the respective  conditions
thereof,  all of the Assumed Liabilities.  All of the following  liabilities and
obligations  of Seller or Buyer which  relate to, or arise by virtue of Seller's
or Buyer's  ownership of the Assets or  operation  of the  Business  (other than
Excluded Liabilities) are referred to collectively as the "Assumed Liabilities":

     (a) all  liabilities and obligations of Seller or Buyer arising on or after
the Closing Date under the Assigned  Agreements,  the Real Property Leases,  and
the  Transferable  Permits  in  accordance  with the terms  thereof,  including,
without limitation,  the Assigned Agreements entered into by Seller (i) prior to
the date hereof and (ii) after the date hereof consistent with the terms of this
Agreement,  except in each case to the extent such  liabilities and obligations,
but for a breach or  default  by Seller,  would  have been  paid,  performed  or
otherwise  discharged  on or prior  to the  Closing  Date and are not  otherwise
included  among the items  causing  an  adjustment  to the Base  Purchase  Price
contemplated  in  Section  3.3 or to the  extent  the same arise out of any such
breach or  default  or out of any  event  which  after  the  giving of notice or
passage of time or both would constitute a default by Seller;

     (b) all liabilities  and obligations of Seller for accounts  payable to the
extent included among the items causing an adjustment to the Base Purchase Price
contemplated in Section 3.3;

     (c) all  liabilities  and  obligations  associated  with the  Assets or the
Business in respect of Taxes for which  Buyer is liable  pursuant to Section 3.4
or 6.10(a) hereof;

     (d) all  liabilities and obligations of Seller or Buyer with respect to the
Transferred  Employees  incurred on or after the Closing Date for which Buyer is
responsible pursuant to Section 6.12;

                                       17
<PAGE>

     (e) all  liabilities,  responsibilities  and obligations of Seller or Buyer
arising  under  Environmental  Laws or relating to  Environmental  Conditions or
Regulated Substances (including common law liabilities relating to Environmental
Conditions and Regulated Substances), whether such liability,  responsibility or
obligation  is known or unknown,  contingent  or accrued as of the Closing Date,
including  but not  limited  to:  (i) costs of  compliance  (including  capital,
operating  and other costs)  relating to any  violation or alleged  violation of
Environmental  Laws  occurring  prior  to, on or after the  Closing  Date,  with
respect  to the  ownership  of the Assets or  operation  of the  Business;  (ii)
property damage or natural resource damage (whether such damages were manifested
before or after the Closing  Date)  arising  from  Environmental  Conditions  or
Releases of Regulated  Substances  at, on, in, under,  adjacent to, or migrating
from any Assets prior to, on or after the Closing  Date;  (iii) any  Remediation
(whether or not such Remediation  commenced before the Closing Date or commences
after the Closing Date) of Environmental Conditions or Regulated Substances that
are present or have been Released  prior to, on or after the Closing  Date,  at,
on, in, adjacent to or migrating from the Assets; (iv) any violations or alleged
violations  of  Environmental  Laws  occurring on or after the Closing Date with
respect to the  ownership of any Assets or operation  of the  Business;  (v) any
bodily injury or loss of life arising from Environmental  Conditions or Releases
of Regulated  Substances  at, on, in, under,  adjacent to or migrating  from any
Asset on or after  the  Closing  Date;  (vi) any  bodily  injury,  loss of life,
property   damage,   or  natural  resource  damage  arising  from  the  storage,
transportation,  treatment,  disposal,  discharge,  recycling or Release, at any
Off-Site  Location,  or arising from the arrangement for such activities,  on or
after the Closing Date, of Regulated Substances generated in connection with the
ownership  of the  Assets  or the  operation  of the  Business;  and  (vii)  any
Remediation of any  Environmental  Condition or Release of Regulated  Substances
arising  from  the  storage,  transportation,  treatment,  disposal,  discharge,
recycling or Release, at any Off-Site Location,  or arising from the arrangement
for such  activities,  on or after the Closing  Date,  of  Regulated  Substances
generated in connection with the ownership or operation of the Assets; provided,
that  nothing set forth in this  Section 2.3 shall  require  Buyer to assume any
liabilities,  responsibilities  or  obligations  that are expressly  excluded in
Section 2.4;

     (f) any Tax that may be imposed by any federal,  state or local  government
on the ownership, sale (except as otherwise provided in Section 3.4 or 6.10(a)),
operation  of the  Business or use of the Assets on or after the  Closing  Date,
except for any Income Taxes attributable to the income of Seller;

     (g) all liabilities and obligations of Seller or Buyer arising on and after
the Closing Date under those Orders  specifically  relating to the Assets or the
Business issued by or entered into with any Governmental Authority and listed in
Schedule 2.3(g) or imposed on Buyer in any Required Regulatory Approval;

     (h)  customer  advances,   customer  deposits  and  construction  advances,
unperformed   service   obligations,   Easement  relocation   obligations,   and
engineering  and  construction  required  to  complete  scheduled  construction,
construction work in progress,  and other capital expenditure  projects, in each
case directly  related to the Business and  outstanding  on or arising after the
Closing Date; and

     (i) actions and proceedings  based on conduct,  actions,  circumstances  or
conditions  arising or  occurring  on or after the  Closing  Date,  actions  and
proceedings  described in Schedule 2.3(i),  actions and proceedings arising from
or directly related to any other Assumed Liability, and generic or industry-wide
actions and  proceedings  outstanding on or arising on or after the Closing Date
that are applicable to the Business.

                                       18
<PAGE>

     2.4 Excluded Liabilities.  Notwithstanding anything to the contrary in this
Agreement,  Buyer shall not assume or be obligated to pay,  perform or otherwise
discharge the following liabilities or obligations of Seller (collectively,  the
"Excluded Liabilities"):

     (a) any  liabilities  or  obligations  of Seller in respect of any Excluded
Assets or other assets of Seller that are not Assets;

     (b) any  liabilities or obligations  with respect to Taxes  attributable to
Seller's  ownership,  or use of the  Assets or  operation  of the  Business  for
taxable periods, or portions thereof, ending before the Closing Date, except for
Taxes for which Buyer is liable pursuant to Section 3.4 or 6.10(a) hereof;

     (c) any  liabilities  or  obligations  of Seller  accruing under any of the
Assigned  Agreements  prior to the Closing Date or any liability,  other than an
Assumed  Liability,  underlying  a  Permitted  Encumbrance,  in each case to the
extent not included  among the items  causing an adjustment to the Base Purchase
Price contemplated in Section 3.3;

     (d) any and all asserted or unasserted  liabilities or obligations to third
parties  (including  employees)  for injuries or damages,  whether  arising from
tortious  conduct or  otherwise,  or similar  causes of action  relating  to the
Assets or the Business arising during or attributable to the period prior to the
Closing Date, other than such that relate to liabilities or obligations  assumed
by Buyer;

     (e) any  fines,  penalties  and  associated  costs  for  defending  related
enforcement  actions,  resulting  from any  violation  or alleged  violation  of
Environmental  Laws with respect to the ownership of the Assets or the operation
of the Business occurring prior to the Closing Date;

     (f) any payment  obligations of Seller pursuant to the Assigned  Agreements
for goods delivered or services  rendered prior to the Closing Date,  including,
but not limited to, rental  payments  pursuant to the Real Property  Leases,  in
each case to the extent not included  among the items  causing an  adjustment to
the Base Purchase Price contemplated in Section 3.3;

     (g) any  liabilities,  responsibilities  and  obligations of Seller arising
under  Environmental  Laws or relating to Environmental  Conditions or Regulated
Substances   (including   common  law  liabilities   relating  to  Environmental
Conditions and Regulated Substances), whether such liability,  responsibility or
obligation was known or unknown, contingent or accrued, which relates to (i) any
bodily injury,  loss of life, property damage or natural resource damage arising
from the storage,  transportation,  treatment, disposal, discharge, recycling or
Release of Regulated  Substances  generated in connection  with the ownership of
the Assets or the operation of the Business at any Off-Site Location, or arising
from the arrangement for such activities, prior to the Closing Date; or (ii) any
Remediation  of  any  Environmental  Condition  or  Regulated  Substance  at any
Off-Site  Location,  arising  from  the  storage,   transportation,   treatment,
disposal,  discharge,  recycling or Release of Regulated Substances generated in
connection  with the ownership of the Assets or the operation of the Business at
such Off-Site  Location,  or arising from the arrangement  for such  activities,
prior to the  Closing  Date;  provided,  that for  purposes  of this  paragraph,
"Off-Site Location" does not include any location to which Regulated  Substances
disposed of or Released at the site of any Asset may have migrated;

                                       19
<PAGE>

     (h) any  liability  to third  parties  (including  employees)  for personal
injury  or  loss  of  life,  to the  extent  caused  (or  allegedly  caused)  by
Environmental  Conditions  or the Release of  Regulated  Substances  at, on, in,
under, or adjacent to, or migrating from, the Assets prior to the Closing;

     (i) subject to Section 6.12, any liabilities or obligations of Seller,  any
Seller  Subsidiary or any ERISA Affiliate of Seller relating to any Benefit Plan
including but not limited to any such liability (i) relating to benefits payable
under  any  Benefit  Plan;  (ii)  relating  to  the  Pension  Benefit   Guaranty
Corporation  under Title IV of ERISA;  (iii) relating to a multi-employer  plan;
(iv) with  respect to  non-compliance  with the notice and benefit  continuation
requirements of COBRA; (v) with respect to any  noncompliance  with ERISA or any
other  applicable  laws;  or (vi) with respect to any suit,  proceeding or claim
which is brought  against Seller,  Buyer,  any Benefit Plan, or any fiduciary or
former fiduciary of any such Benefit Plan;

     (j) subject to Section 6.12, any  liabilities  or obligations  arising from
facts or  circumstances  prior to the Closing Date relating to the employment or
termination of employment, including discrimination,  wrongful discharge, unfair
labor  practices,  or  constructive  termination  by Seller  of any  individual,
attributable  to any actions or  inactions  by Seller  prior to the Closing Date
other than  actions or  inactions  taken at the written  direction  of Buyer (it
being  understood and agreed that Buyer shall have no liability for action taken
by Seller pursuant to Section 6.12 except as expressly provided therein);

     (k) subject to Section 6.12, any obligations of Seller for wages, overtime,
employment taxes,  severance pay, transition payments in respect of compensation
or similar  benefits  accruing or arising prior to the Closing under any term or
provision of any contract,  plan, instrument or agreement relating to any of the
employees of Seller;

     (l) all  obligations  of Seller with  respect to the Revenue  Bonds and any
other indebtedness for money borrowed by Seller (including items due to Seller's
Affiliates) other than payment  obligations arising on or after the Closing Date
under any  equipment  lease of the kind listed in Schedule  4.11(a) or under any
line  extension  contracts  or  similar  construction  arrangements,   it  being
understood and agreed that such leases,  contracts and similar  arrangements  do
not create indebtedness for money borrowed; and

     (m) any liability of Seller arising out of a breach by Seller or any of its
Affiliates of any of their  respective  obligations  under this Agreement or the
Ancillary Agreements.

     2.5 Control of Litigation.

     (a) The  Parties  agree and  acknowledge  that,  from and after the Closing
Date,  Seller shall be entitled  exclusively  to control,  defend and settle any
litigation,  administrative or regulatory  proceeding,  and any investigation or
Remediation activity (including without limitation any environmental  mitigation
or  Remediation  activities),   arising  out  of  or  related  to  any  Excluded
Liabilities,  and Buyer agrees to cooperate fully in connection therewith and in
connection therewith,  shall comply with the provisions of Section 6.2, provided
that, in no event shall  Seller's  exercise of its rights under this Section 2.5
(i)  unreasonably  interfere with Buyer's  conduct or operation of the Business,
(ii) place any environmental liens or deed restrictions on the Real Property, or
(iii)  cause  Buyer to be  responsible  for  maintaining  any  institutional  or
engineering controls that may be part of a Remediation activity.

                                       20
<PAGE>

     (b) The  Parties  agree and  acknowledge  that,  from and after the Closing
Date,  Buyer shall be  entitled  exclusively  to control,  defend and settle any
litigation,  administrative or regulatory  proceeding,  and any investigation or
Remediation activity (including without limitation any environmental  mitigation
or  Remediation   activities),   arising  out  of  or  related  to  any  Assumed
Liabilities, and Seller agrees to cooperate fully in connection therewith and in
connection therewith, shall comply with the provisions of Section 6.2.

                                   ARTICLE III

                                   THE CLOSING

     3.1  Closing.  Upon  the  terms  and  subject  to the  satisfaction  of the
conditions in Article VII of this Agreement,  each of (i) the sale,  assignment,
conveyance,  transfer  and  delivery of the Assets to Buyer by Seller,  (ii) the
payment of the Purchase  Price to Seller by Buyer,  (iii) the  assumption of the
Assumed  Liabilities by Buyer, and (iv) the consummation of the other respective
obligations of the Parties  contemplated  by this Agreement to be consummated on
the Closing  Date shall take place at a closing (the  "Closing"),  to be held at
the  offices  of Seller in  Phoenix,  Arizona,  or another  mutually  acceptable
location, at 9:00 a.m. local time on the Closing Date.

     3.2 Closing Payment.  Upon the terms and subject to the satisfaction of the
conditions contained in this Agreement,  in consideration of the aforesaid sale,
assignment,  assumption,  conveyance, transfer and delivery of the Assets, Buyer
will pay or cause to be paid to Seller at the  Closing  an  aggregate  amount in
U.S.  dollars of ninety-two  million dollars  ($92,000,000)  (the "Base Purchase
Price")  plus or  minus  any  adjustments  pursuant  to the  provisions  of this
Agreement (the  "Purchase  Price"),  by wire transfer of  immediately  available
funds  denominated in U.S.  dollars or by such other means as are agreed upon by
Seller and Buyer.

     3.3 Adjustment to Base Purchase Price.

          (a) Subject to Section 3.3(b), at the Closing, the Base Purchase Price
     shall be  adjusted  to  account  for the items  set  forth in this  Section
     3.3(a):

          (i) the Base Purchase Price shall be decreased by four million dollars
     ($4,000,000) if the Closing occurs on or before July 28, 2003;

          (ii) [intentionally omitted]

          (iii)  the Base  Purchase  Price  shall be  increased  by two  million
     dollars  ($2,000,000)  in the  event  the  Closing  occurs  after the first
     anniversary of the date hereof;

                                       21
<PAGE>

          (iv) the Base  Purchase  Price  shall be  increased  by the  aggregate
     amount of all accounts  receivable and earned but unbilled  revenues (other
     than any  amounts  that are due from  any of  Seller's  Affiliates  or that
     otherwise  are  Excluded  Assets)  attributable  to the  Business as of day
     immediately  preceding  the  Closing  Date  net  of  Seller's  reserve  for
     allowance  for bad  debt (as  reflected  in  Seller's  written  policy  for
     allowance for bad debt as of the date hereof);

          (v) the Base Purchase Price shall be decreased by all accounts payable
     attributable  to the  Business  as of the  day  immediately  preceding  the
     Closing Date (other than any liability that is an Excluded Liability);

          (vi) the Base  Purchase  price shall be decreased by (A) the aggregate
     amount  of  customer  advances  for  construction  times  25%  and  (B) the
     aggregate amount of customer deposits,  in each case to the extent relating
     to the Business outstanding as of the day immediately preceding the Closing
     Date (other than any  amounts  due to any of  Seller's  Affiliates  or that
     otherwise is an Excluded Liability);

          (vii) the Base Purchase Price shall increased by the aggregate  amount
     of Inventories recorded on Seller's books and records as of day immediately
     preceding the Closing Date;

          (viii) the Base  Purchase  Price  shall be adjusted to account for the
     net balance payable to or by Seller, if any, for items prorated pursuant to
     Section 3.4, other than the items addressed in Section 3.4(a);

          (ix) the Base Purchase Price shall be increased or decreased if and to
     the extent required by Sections 6.3(c), 6.12(b),  6.12(d)(iii)(D) and 6.13;
     and

          (x) the Base Purchase Price will be increased by the aggregate  amount
     of all (i) Approved Capital Expenditures that are accrued by Seller between
     the date of this  Agreement  and the Closing Date  (including  expenditures
     recorded in the Construction Work in Progress account of the Business as of
     the day immediately preceding the Closing Date and relating to the Approved
     Capital Expenditures),  (ii) without duplication,  expenditures to purchase
     materials,  supplies and other  capital items that are dedicated to, but as
     of Closing have not been used in, the  construction  or  improvement of the
     property,   plant  or  equipment  and  relating  to  the  Approved  Capital
     Expenditures) and (iii) without duplication, other expenditures recorded as
     an asset of the Business as of the day  immediately  preceding  the Closing
     Date and relating to such Approved Capital Expenditures.

     (b) At least  ten  (10),  but no more than  thirty  (30) days  prior to the
Closing  Date,  Seller shall  prepare and deliver to Buyer an estimated  closing
statement (the "Estimated Closing Statement") that shall set forth Seller's best
estimate of the estimated  adjustments  to the Base Purchase  Price  required by
Section  3.3(a)  (regardless  of  whether  notice  of such Base  Purchase  Price
adjustments   have  been   previously   delivered  to  Buyer)  (the   "Estimated
Adjustment").  Within  five (5) days  following  the  delivery  of an  Estimated
Closing  Statement  to Buyer,  Buyer may object in good faith to such  Estimated
Closing  Payment in  writing.  In the event of any such  objection,  the Parties
shall attempt to resolve their  differences by  negotiation.  If the Parties are
unable to do so before  three (3) days prior to the Closing  Date,  then (i) the
full  amount of the  Estimated  Adjustment  shall be made at the  Closing if the
amount in dispute is less than $1,000,000, or (ii) the undisputed portion of the
Estimated  Adjustment  shall be made at the  Closing if the amount in dispute is
$1,000,000  or more.  The  disputed  portions  shall  be paid as a  Post-Closing
Adjustment if and to the extent required by Section 3.3(d).

                                       22
<PAGE>

     (c) Within sixty (60) days following the Closing Date, Seller shall prepare
and  deliver  to  Buyer  a final  closing  statement  setting  forth  the  final
adjustments to the Base Purchase Price required by Section 3.3(a) (the "Proposed
Post-Closing  Adjustment").   All  calculations  of  the  Proposed  Post-Closing
Adjustments shall be prepared using the same accounting principles, policies and
methods as Seller has  historically  used in connection  with the calculation of
the items reflected on such Proposed Post-Closing Adjustments.

     (d)  Within  thirty  (30)  days   following  the  delivery  of  a  Proposed
Post-Closing Adjustment to Buyer, Buyer may object to such Proposed Post-Closing
Adjustment in writing.  Seller  agrees to cooperate  with Buyer to provide Buyer
and  Buyer's   Representatives   information   used  to  prepare  the   Proposed
Post-Closing Adjustments and information relating thereto. If Buyer objects to a
Proposed  Post-Closing  Adjustment,  the Parties  shall  attempt to resolve such
dispute by  negotiation.  If such  Parties  are unable to resolve  such  dispute
within  thirty  (30) days of any such  objection  by Buyer,  the  Parties  shall
appoint  an  Independent   Accounting  Firm.  The  fees  and  expenses  of  such
Independent  Accounting Firm shall be allocated between Buyer and Seller so that
Seller's  share of such fees and expenses shall be in the same  proportion  that
the aggregate amount of such remaining disputed amounts so submitted by Buyer to
such auditor that is  successfully  disputed by Buyer (as finally  determined by
such auditor)  bears to the total amount of such remaining  disputed  amounts so
submitted by Buyer to such auditor. The Independent Accounting Firm shall review
such Proposed Post-Closing  Adjustment and determine the appropriate  adjustment
to the Base Purchase Price, if any, within thirty (30) days of such appointment.
The Parties agree to cooperate with the Independent  Accounting Firm and provide
it with such  information  as it  reasonably  requests to enable it to make such
determination.  The finding of such Independent Accounting Firm shall be binding
on the Parties  hereto.  Upon  determination  by  agreement of the Parties or by
binding  determination  of the  Independent  Accounting  Firm of the appropriate
adjustment  to the Base  Purchase  Price  (in  either  case,  the  "Post-Closing
Adjustment"),  if such Post-Closing  Adjustment  results in a change to the Base
Purchase Price,  the Party owing the difference shall deliver such difference to
the  Party  owed such  amount  no later  than two (2)  Business  Days  after the
determination of such Post Closing Adjustment, in immediately available funds or
in any other manner as reasonably  requested by the Party owed such amount, plus
interest at 6.0% per annum on such  determined  amount from the Closing  Date to
(but not including) the date of payment.

     (e) If at any time  following  the Closing Date Buyer  actually  returns to
customers  greater than  thirty-five  percent  (35%) of the  aggregate  customer
advances for construction  directly  relating to the Business and outstanding as
of the Closing Date  ("Advances"),  Seller shall reimburse Buyer for all amounts
returned to  customers  to the extent said returns  exceed  twenty-five  percent
(25%) of  Advances.  Buyer  may,  at any time  within  seven (7) years  from the
Closing  Date,  provide  notice to Seller of a  reimbursement  claim  under this
Section 3.3(e), which notice shall include reasonable documentary substantiation
of returns to  customers  of  Advances.  In the event  Seller  agrees  with said
determination,  it shall promptly pay such  reimbursement to Buyer. In the event
Seller  disputes said  determination,  it shall initiate the dispute  resolution
procedures with regard to the  Post-Closing  Adjustment,  as provided in Section
3.3(d), which shall be binding on the Parties.

                                       23
<PAGE>

     3.4  Prorations.  Buyer and  Seller  agree  that all of the items  normally
prorated,  including  those  listed  below  (but not  including  Income  Taxes),
relating to the Business and operation of the Assets shall be prorated as of the
Closing Date,  with Seller liable for such items to the extent such items relate
to any time period prior to the Closing Date, and Buyer liable for such items to
the  extent  such items  relate to  periods  commencing  with the  Closing  Date
(measured  in the same  units used to compute  the item in  question,  otherwise
measured by calendar  days).  The Base Purchase  Price shall be increased to the
extent  Buyer will  benefit  financially  due to Seller's  payment  prior to the
Closing  Date of the portion of any such item  allocable  to Buyer,  and (except
with  respect to the items  addressed in clause (a) below) shall be decreased to
the extent Seller will benefit  financially  due to Buyer's  payment on or after
the Closing Date of the portion of any such item allocable to Seller.  The items
subject to proration include the following:

     (a)  Subject  to  Section  6.10(b),  personal  property,  real  estate  and
occupancy  Taxes,  assessments and other charges,  if any, on or with respect to
the Business and operation of the Assets;

     (b) rent,  Taxes (other than Income  Taxes) and all other items  (including
prepaid  services or goods not included in Inventories)  payable by or to Seller
under any of the Assigned  Agreements  to the extent not included in the account
payables of the Business  outstanding  as of the day  immediately  preceding the
Closing Date;

     (c) any permit, license,  registration,  compliance assurance fees or other
fees with respect to any Transferable Permit or other Asset;

     (d) sewer  rents and charges for water,  telephone,  electricity  and other
utilities with respect to the Assets;

     (e) rent and Taxes payable by or to Seller under the Real  Property  Leases
assigned  to Buyer to the extent not  included  in the  account  payables of the
Business outstanding as of the day immediately preceding the Closing Date;

     (f) deposits made by Seller to the extent transferred to Buyer;

     (g) prepaid expenses paid by Seller to the extent transferred to Buyer; and

     (h) petty cash held  locally for the benefit of the  Business to the extent
transferred to Buyer.

     3.5 Deliveries by Seller. At the Closing,  Seller will deliver, or cause to
be delivered, the following to Buyer:

     (a) The Bill of Sale, duly executed by Seller;

                                       24
<PAGE>

     (b)  Copies of any and all  consents,  waivers  or  approvals  obtained  or
required   to  be   obtained   by  Seller   from   Government   Authorities   or
non-governmental  Persons  with  respect to the  transfer of the Assets,  or the
consummation of the transactions contemplated by this Agreement;

     (c) One or more Special Warranty Deeds conveying title to the Real Property
to Buyer, duly executed and acknowledged by Seller and in recordable form;

     (d) An opinion  from  Seller's  general  counsel,  dated the Closing  Date,
substantially  in the form of  Exhibit D  attached  hereto,  and  opinions  from
Seller's Bond  Counsel,  dated the Closing  Date,  substantially  in the form of
Exhibit E attached hereto;

     (e) The Assignment and Assumption Agreement, duly executed by Seller;

     (f) A FIRPTA Affidavit, duly executed by Seller;

     (g) Copies, certified by the Secretary or Assistant Secretary of Seller, of
corporate  resolutions  authorizing the execution and delivery of this Agreement
and all of the agreements and instruments to be executed and delivered by Seller
in connection  herewith,  and the consummation of the transactions  contemplated
hereby;

     (h) A  certificate  of the  Secretary  or  Assistant  Secretary  of  Seller
identifying  the name and title and bearing the  signatures  of the  officers of
Seller authorized to execute and deliver this Agreement and the other agreements
and instruments contemplated hereby;

     (i)  Certificate  of Good  Standing  with respect to Seller,  issued by the
Secretary of State of the State of Delaware;

     (j) To the extent  available,  originals of all Assigned  Agreements,  Real
Property Leases and Transferable Permits and, if not available, true and correct
copies thereof  (delivery of the foregoing  documents will be deemed made in the
case of any such  documents  then located at any of the offices  included in the
Assets,  but  only to the  extent  that  Seller  delivers  to  Buyer a  schedule
generally  identifying each such office and the general  categories of documents
located in each such office);

     (k) All such other  instruments  of  assignment,  transfer or conveyance as
shall,  in the  reasonable  opinion of Buyer and its  counsel,  be  necessary to
transfer  the  Assets to Buyer,  in  accordance  with this  Agreement  and where
necessary or desirable in recordable form;

     (l) Such other  agreements,  documents,  instruments  and  writings  as are
required to be delivered  by Seller at or prior to the Closing Date  pursuant to
this  Agreement  or  otherwise  reasonably  requested  by  Buyer  in  connection
herewith; and

     (m) A certificate  dated the Closing Date  executed by Seller's  President,
Public Services  Sector,  to the effect that, to such officer's  Knowledge,  the
conditions set forth in Sections 7.1(e) and (f) have been satisfied by Seller.

                                       25
<PAGE>

     3.6 Deliveries by Buyer. At the Closing, Buyer will deliver, or cause to be
delivered, the following:

     (a) The  Purchase  Price,  as  adjusted  pursuant  to Section  3.3, by wire
transfer  of  immediately   available  funds  denominated  in  U.S.  dollars  in
accordance with Seller's  instructions or by such other means as are agreed upon
by Seller and Buyer;

     (b) The Assignment and Assumption Agreement, duly executed by Buyer;

     (c) All such other  instruments of transfer or assumption as shall,  in the
reasonable  opinion  of  Seller  and its  counsel,  be  necessary  for the sale,
conveyance,  assignment  and transfer of the Assets to, or the assumption of the
Assumed Liabilities by, Buyer in accordance with this Agreement;

     (d) Copies,  certified by the Secretary or Assistant Secretary of Buyer, of
resolutions  authorizing the execution and delivery of this Agreement and all of
the  agreements  and  instruments  to be executed and  delivered by the Buyer in
connection  herewith,  and the  consummation  of the  transactions  contemplated
hereby;

     (e) A  certificate  of the  Secretary  or  Assistant  Secretary  of  Buyer,
identifying  the name and title and bearing the  signatures  of the  officers of
Buyer  authorized to execute and deliver this Agreement and the other agreements
and instruments contemplated hereby;

     (f) An opinion  from  Buyer's  general  counsel,  dated the  Closing  Date,
substantially in the form of Exhibit F attached hereto;

     (g) Certified copies of any and all consents, waivers or approvals obtained
or  required  to  be  obtained   by  Buyer  from   Government   Authorities   or
non-governmental  Persons  with  respect  to the  transfer  of the Assets or the
consummation of the transactions contemplated by this Agreement;

     (h) Such other  agreements,  documents,  instruments  and  writings  as are
required to be delivered  by Buyer at or prior to the Closing  Date  pursuant to
this  Agreement  or  otherwise  reasonably  requested  by Seller  in  connection
herewith;

     (i)  Certificate  of Good  Standing  with  respect to Buyer,  issued by the
Secretary of State of Arizona; and

     (j) A  certificate  dated  the  Closing  Date  executed  by  Buyer's  Chief
Financial  Officer  to  the  effect  that,  to  such  officer's  knowledge,  the
conditions  set forth in Sections  7.2(e),  (f) and (g) have been  satisfied  by
Buyer.

     3.7 Work in Progress. The Parties agree to work together before the Closing
Date to effect on the Closing Date an orderly transition with respect to work in
progress.

                                       26
<PAGE>

                                   ARTICLE IV

              REPRESENTATIONS, WARRANTIES AND DISCLAIMERS OF SELLER

     Seller hereby represents and warrants to Buyer as follows:

     4.1   Incorporation;   Qualification.   Seller   is  a   corporation   duly
incorporated,  validly existing and in good standing under the laws of the State
of Delaware and has all requisite  corporate  power and authority to own, lease,
and operate its material  assets and  properties and to carry on its business as
is now being  conducted.  Seller is duly  qualified  to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in which
its  business,  as now being  conducted,  shall  require it to be so  qualified,
except  where the failure to be so  qualified  would not have a Seller  Material
Adverse Effect.

     4.2 Authority. Seller has full corporate power and authority to execute and
deliver this Agreement and each of the Ancillary Agreements to which Seller is a
signatory and to consummate the transactions contemplated hereby or thereby. The
execution  and delivery by Seller of this  Agreement  and each of the  Ancillary
Agreements to which Seller is a signatory and the  consummation by Seller of the
transactions  contemplated  hereby  and  thereby  have  been  duly  and  validly
authorized by all necessary  corporate action required on the part of Seller and
this Agreement has been duly and validly executed and delivered by Seller.  Each
of this  Agreement and the  Ancillary  Agreements to which Seller is a signatory
constitutes  the legal,  valid and  binding  agreement  of  Seller,  enforceable
against  Seller  in  accordance  with its  terms,  except as may be  limited  by
applicable  bankruptcy,   insolvency,  fraudulent  conveyance,   reorganization,
moratorium  or other  similar  laws  affecting  or  relating to  enforcement  of
creditors'  rights  generally and general  principles of equity  (regardless  of
whether enforcement is considered in a proceeding at law or in equity).

     4.3 Consents and Approvals; No Violation.

     (a) Except as set forth in Schedule 4.3(a), neither the execution, delivery
and performance of this Agreement nor the execution, delivery and performance of
the  Ancillary  Agreements  by Seller  will (i)  conflict  with or result in any
breach of any provision of the Certificate of Incorporation or Bylaws of Seller,
(ii) result in a default (or give rise to any right of termination, cancellation
or acceleration)  under any of the terms,  conditions or provisions of any note,
bond, mortgage,  indenture, material agreement or other instrument or obligation
to which  Seller is a party or by which it, or any of the  Assets  may be bound,
except  for  such   defaults  (or  rights  of   termination,   cancellation   or
acceleration)  as to which  requisite  waivers or consents have been obtained or
that would not,  individually  or in the aggregate,  result in a Seller Material
Adverse  Effect  or an  Asset  Material  Adverse  Effect;  or (iii)  subject  to
obtaining the Seller Required Regulatory Approvals, constitute violations of any
law,  regulation,   order,  judgment  or  decree  applicable  to  Seller,  which
violations,  individually or in the aggregate, would result in a Seller Material
Adverse Effect or an Asset Material Adverse Effect.

     (b) Except as set forth in  Schedule  4.3(b)  (the  filings  and  approvals
referred  to in  Schedule  4.3(b) are  collectively  referred  to as the "Seller
Required  Regulatory  Approvals"),  no consent or approval of,  filing with,  or
notice to,  any  Governmental  Authority  is  necessary  for the  execution  and
delivery  of this  Agreement  and the  Ancillary  Agreements  by  Seller  or the
consummation  by Seller of the  transactions  contemplated  hereby and  thereby,
other  than  those the  failure  to obtain  which  would not  result in a Seller
Material  Adverse  Effect  or an Asset  Material  Adverse  Effect  and would not
otherwise result in a material violation of law by Buyer.

                                       27
<PAGE>

     4.4 Insurance.  Schedule 4.4 lists, as of the date of this  Agreement,  all
material policies of fire,  liability,  workers' compensation and other forms of
insurance (if any) owned or held by, or on behalf of, Seller with respect to the
Assets and the Business. Except as set forth in such Schedule, all such policies
are in full force and effect,  all premiums  with respect  thereto  covering all
periods  up to and  including  the  date  hereof  have  been  paid  (other  than
retroactive  premiums  which  may be  payable  with  respect  to  auto,  general
liability  and  workers'  compensation  insurance  policies),  and no  notice of
cancellation  or  termination  has been received with respect to any such policy
which was not replaced on substantially  similar terms prior to the date of such
cancellation.  Except as described in Schedule 4.4,  within the thirty-six  (36)
months  preceding  the date of this  Agreement,  Seller has not been refused any
insurance  with respect to the Assets or the Business nor has its coverage  been
limited by any insurance  carrier to which it has applied for any such insurance
or with which it has carried insurance during the last twelve (12) months.

     4.5  Real  Property  Leases.  Schedule  4.5  lists,  as of the date of this
Agreement,  all material real property  leases under which Seller is a lessee or
lessor and which  relate to the  Assets,  including  a  separate  listing of all
leases of office space used by Seller in the conduct of the Business  (the "Real
Property  Leases").  Seller  will  deliver to Buyer true,  correct and  complete
copies of each of the Real Property Leases in accordance with Section 6.20.

     4.6  Environmental  Matters.  Seller has heretofore  delivered to Buyer all
environmental  reports and all  environmental  site assessments  relating to the
Assets that have been identified by Seller after diligent inquiry, which reports
have been  identified  in  schedules  delivered to Buyer on or prior to the date
hereof ("Environmental Reports").  Except as disclosed in Schedule 4.6 or in the
Environmental Reports:

     (a) Seller holds, and is in substantial  compliance with, all Environmental
Permits  that are  required  for Seller to conduct the  Business and operate the
Assets, and Seller is otherwise in compliance with applicable Environmental Laws
with  respect to the  Business  and  operation  of the  Assets,  except for such
failures to hold or comply with required Environmental Permits, or such failures
to  be  in  compliance  with  applicable   Environmental  Laws,  as  would  not,
individually or in the aggregate, result in an Asset Material Adverse Effect;

     (b) Seller has not received  (i) any written  request for  information,  or
been notified that it is a potentially  responsible  party,  under CERCLA or any
similar state law with respect to any of the Real Property,  or (ii) any written
notification  from a  Governmental  Authority with respect to pending or ongoing
investigations or enforcement actions related to alleged or potential violations
of any applicable Environmental Law with respect to any of the Real Property;

     (c) Seller has not entered  into or agreed to any  consent  decree or order
relating to the Assets, and is not subject to any outstanding judgment,  decree,
or  judicial  order  relating to  compliance  with any  Environmental  Law or to
Remediation of Regulated  Substances under any Environmental Law relating to the
Assets; and

                                       28
<PAGE>

     (d) To Seller's Knowledge,  no Release of Regulated Substances has occurred
at, from, in, on, or under the Real Property,  and, except as legally permitted,
no Regulated  Substances  are present in, on,  about or migrating  from the Real
Property, in each case that would give rise to an Environmental Claim related to
the Assets for which  Remediation  would  reasonably be required,  except in any
such case to the extent that any such Release or Environmental  Claim would not,
individually or in the aggregate,  result in an Environmental Claim in excess of
$500,000.

     4.7  Labor  Matters.  Schedule  4.7 sets  forth the  collective  bargaining
agreements,  and  amendments  thereto,  to which Seller is a party in connection
with the  Business.  Seller has  previously  delivered to Buyer true and correct
copies of all such collective bargaining agreements and amendments thereto. With
respect  to the  Assets  and the  Business,  except to the  extent  set forth in
Schedule  4.7 and except for such matters as would not,  individually  or in the
aggregate,  result  in an  Asset  Material  Adverse  Effect,  (a)  Seller  is in
compliance  with  all  applicable  laws  respecting  employment  and  employment
practices,  occupational safety and health, plant closing,  mass layoffs,  terms
and  conditions of employment  and wages and hours;  (b) Seller has not received
any written notice of any unfair labor practice complaint against Seller pending
before the National Labor Relations Board; (c) no arbitration proceeding arising
out of or under any collective  bargaining  agreement is pending against Seller;
and (d) Seller  has not  experienced  any work  stoppage  within the  three-year
period  prior to the date hereof and to  Seller's  Knowledge  none is  currently
threatened.

     4.8 Benefit Plans: ERISA.

     (a) Schedule 4.8 lists all material Benefit Plans. True and complete copies
of all such Benefit Plans have been made available to the Buyer.

     (b) No liability  under Title IV or Section 302 of ERISA has been  incurred
by Seller or any ERISA  Affiliate of Seller that has not been satisfied in full,
and no  condition  exists that  presents a material  risk to Seller or any ERISA
Affiliate of Seller of incurring any such  liability,  other than  liability for
premiums due to the Pension Benefit  Guaranty  Corporation  (which premiums have
been paid when due).  Insofar as the  representation  made in this  Section  4.8
applies to  Sections  4064,  4069 or 4204 of Title IV of ERISA,  it is made with
respect to any employee benefit plan, program,  agreement or arrangement subject
to Title IV of ERISA to which Seller or any ERISA  Affiliate of Seller made,  or
was required to make,  contributions  during the five (5)-year  period ending on
the last day of the most recent plan year ended prior to the Closing Date.

     (c) Except as expressly provided in this Agreement, the consummation of the
transactions  contemplated  by this  Agreement  will  not,  either  alone  or in
combination  with another event,  (i) entitle any current or former  employee or
officer  of  Seller  or  any  ERISA   Affiliate  of  Seller  to  severance  pay,
unemployment  compensation or any other payment,  or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such employee
or officer.

                                       29
<PAGE>

     (d) There has been no material  failure of any of the Benefit Plans that is
a group health plan (as defined in Section  5000(b)(1)  of the Code) to meet the
requirements  of  Section  4980B(f)  of the Code  with  respect  to a  qualified
beneficiary (as defined in Section 4980B(g) of the Code). Neither the Seller nor
any ERISA Affiliate of Seller has  contributed to a  nonconforming  group health
plan (as  defined in  Section  5000(c)  of the Code) and no ERISA  Affiliate  of
Seller  has  incurred a tax under  Section  5000(e) of the Code that is or could
become a liability of Buyer.

     (e) There are no pending, or to Seller's Knowledge, threatened claims by or
on behalf of any Benefit Plans, by any employee or beneficiary covered under any
such Benefit  Plans,  or otherwise  involving any such Benefit Plans (other than
routine claims for benefits).

     4.9 Real Property. Schedule 4.9 contains a description of the Real Property
included  in the  Assets.  True  and  correct  copies  of any  current  surveys,
abstracts,  title  commitments  and title  opinions  identified  by Seller after
diligent  inquiry  to be in  Seller's  possession  and  all  policies  of  title
insurance  currently in force and identified by Seller after diligent inquiry to
be in the possession of Seller with respect to the Real Property have heretofore
been made available to Buyer.

     4.10  Condemnation.  Except as set forth in Schedule  4.10,  Seller has not
received any written notices of and otherwise has no Knowledge of any pending or
threatened  proceedings or actions by any  Governmental  Authority to condemn or
take by power of eminent domain all or any part of the Assets.

     4.11 Assigned Agreements.

     (a)  Schedule  4.11(a)  lists  each  Assigned  Agreement  (other  than Real
Property   Leases,   line   extension   agreements   and  similar   construction
arrangements,   railroad  crossing  agreements  and  similar  arrangements,  and
Easements  held by Seller) which is material to the  Business,  other than those
(i) that are listed or  described  on another  Schedule,  (ii) that  provide for
annual  payments by Seller after the date hereof of less than  $100,000 or (iii)
that, when aggregated with all other Assigned  Agreements not listed on Schedule
4.5 or  4.11(a),  provide for  payments by Seller  after the date hereof of less
than $500,000 in the aggregate.  Schedule 4.11(a) also lists each agreement that
is material to the Assets or the Business that may expire or that Seller expects
to  terminate  prior to the  Closing  Date other than any  agreement  that is an
Excluded Asset.

     (b) Except as disclosed in Schedule 4.11(b), each Assigned Agreement listed
on Schedule 4.5 or 4.11(a)  constitutes a legal, valid and binding obligation of
Seller and, to Seller's Knowledge, constitutes a valid and binding obligation of
the other parties  thereto,  and may be transferred to the Buyer as contemplated
by this  Agreement  without  the consent of the other  parties  thereto and will
continue in full force and effect thereafter,  unless in such case the impact of
such lack of  legality,  validity or binding  nature,  or inability to transfer,
would not, individually or in the aggregate, result in an Asset Material Adverse
Effect.

     (c)  Except  as set  forth in  Schedule  4.11(c),  there is not,  under the
Assigned  Agreements  listed on Schedule  4.5 or  4.11(a),  any default or event
which,  with notice or lapse of time or both,  would constitute a default on the
part of the Seller or to Seller's  Knowledge,  any of the other parties thereto,
except such events of default and other events which would not,  individually or
in the aggregate, result in an Asset Material Adverse Effect.

                                       30
<PAGE>

     4.12 Legal  Proceedings.  Except as set forth in Schedule 4.12, there is no
action or  proceeding  pending or, to  Seller's  Knowledge,  threatened  against
Seller before any court,  arbitrator  or  Governmental  Authority,  which would,
individually  or in the aggregate,  reasonably be expected to result in a Seller
Material Adverse Effect or an Asset Material Adverse Effect. Except as set forth
in  Schedule  4.12 Seller is not  subject to any  outstanding  Order that would,
individually or in the aggregate,  result in a Seller Material Adverse Effect or
an Asset Material Adverse Effect.

     4.13 Permits.  Seller has all Permits  (other than  Environmental  Permits,
which are  addressed  in Section  4.6 hereof)  necessary  to own and operate the
Assets except where the failure to have such Permits would not,  individually or
in the aggregate,  create a Seller Material  Adverse Effect or an Asset Material
Adverse  Effect.  Except as disclosed on Schedule 4.13,  Seller has not received
any written  notification  that it is in violation of any such  Permits,  except
notifications of violations  which would not,  individually or in the aggregate,
result in a Seller Material  Adverse Effect or an Asset Material Adverse Effect.
Seller is in compliance with all Permits except where such non-compliance  would
not,  individually  or in the  aggregate,  result in a Seller  Material  Adverse
Effect or an Asset Material Adverse Effect.

     4.14 Taxes.

     (a)  Seller  has  filed or  caused  to be filed  all Tax  Returns  that are
required to be filed by it with respect to any Tax  relating to the Assets,  and
has paid or caused  to be paid all  Taxes  that  have  become  due as  indicated
thereon,  except where such Tax is being  contested in good faith by appropriate
proceedings, or where the failure to so file or pay would not result in a Seller
Material Adverse Effect or an Asset Material Adverse Effect. Seller has complied
in all  material  respects  with all  applicable  laws,  rules  and  regulations
relating to withholding Taxes relating to Transferred Employees. All Tax Returns
relating to the Assets are true,  correct and complete in all material respects.
There are no liens for Taxes upon the Assets  except for liens for Taxes not yet
due and Permitted Encumbrances.

     (b)  Except as set forth in  Schedule  4.14,  no  notice of  deficiency  or
assessment  has  been  received  from  any  taxing  authority  with  respect  to
liabilities  for Taxes of Seller in respect of the  Assets,  which have not been
fully paid or finally settled, and any such deficiency shown in Schedule 4.14 is
being contested in good faith through appropriate proceedings.

     (c)  Except  as set  forth  in  Schedule  4.14,  there  are no  outstanding
agreements or waivers  extending the applicable  statutory periods of limitation
for Taxes  associated  with the Assets that will be binding upon Buyer after the
Closing.

     (d) Except as set forth on  Schedule  4.14,  none of the Assets is property
that is required to be treated as being  owned by any other  person  pursuant to
the so-called safe harbor lease provisions of former Section 168(f) of the Code,
and none of the  Assets is  "tax-exempt  use"  property  within  the  meaning of
Section 168(h) of the Code.

                                       31
<PAGE>

     (e) Schedule 4.14 sets forth the taxing  jurisdictions in which Seller owns
assets or conducts business that require a notification to a taxing authority of
the  transactions  contemplated by this  Agreement,  if the failure to make such
notification,  or obtain Tax clearance  certificates  in  connection  therewith,
would  either  require  Buyer to withhold  any portion of the  consideration  or
subject Buyer to any liability for any Taxes of Seller.

     4.15  Intellectual  Property.  The Citizens Marks and the software licenses
and related contracts  described in Schedules 2.2 and 4.11(a)  constitute all of
the material  Intellectual  Property necessary for the operation and maintenance
of the Assets or the conduct of the  Business,  each of which Seller  either has
all right,  title and interest in or valid and binding  rights under contract to
use in connection  with the operation of the Assets and the Business.  Except as
disclosed  in Schedule  4.15,  (a) Seller is not, nor has it received any notice
that it is, in  default  (or with the giving of notice or lapse of time or both,
would be in default),  under any contract to use such Intellectual Property, and
(b) to Seller's Knowledge,  such Intellectual Property is not being infringed by
any other Person.  Except as disclosed in Schedule 4.15, Seller has not received
notice that it is infringing  any  Intellectual  Property of any other Person in
connection with the Assets or the Business, and Seller, to its Knowledge, is not
infringing any Intellectual Property of any other Person which,  individually or
in the aggregate, would have an Asset Material Adverse Effect.

     4.16  Capital  Expenditures.  Seller has  heretofore  delivered  to Buyer a
schedule of all Capital Expenditures that, as of the date of this Agreement, are
planned by Seller from the date hereof  through  December 31, 2003 (the "Capital
Expenditures Schedule").

     4.17  Compliance  With Laws.  Seller is in compliance  with all  applicable
laws,  rules and  regulations  with  respect to its  ownership of the Assets and
operation of the Business  except  where the failure to be in  compliance  would
not,  individually  or in the  aggregate,  result in a Seller  Material  Adverse
Effect or an Asset Material Adverse Effect.

     4.18 Title.  Seller has, and will have as of the Closing Date,  good, valid
and indefeasible title to the Real Property and the other Assets purported to be
owned  by  Seller,   free  and  clear  of  all  Encumbrances   except  Permitted
Encumbrances.

     4.19 DISCLAIMERS.

     (a) EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE
IV, THE ASSETS ARE TRANSFERRED "AS IS, WHERE IS", AND SELLER EXPRESSLY DISCLAIMS
ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE,  EXPRESS OR IMPLIED, AS
TO  LIABILITIES,  OPERATIONS OF THE ASSETS,  CONDITION,  VALUE OR QUALITY OF THE
ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),  RISKS AND OTHER INCIDENTS OF
THE ASSETS AND SELLER  SPECIFICALLY  DISCLAIMS ANY REPRESENTATION OR WARRANTY OF
MERCHANTABILITY,  USAGE,  SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO THE ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR
THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH
ENVIRONMENTAL   REQUIREMENTS,   OR  THE   APPLICABILITY   OF  ANY   GOVERNMENTAL
REQUIREMENTS,  INCLUDING BUT NOT LIMITED TO ANY  ENVIRONMENTAL  LAWS, OR WHETHER
SELLER  POSSESSES  SUFFICIENT REAL PROPERTY OR PERSONAL  PROPERTY TO OPERATE THE
ASSETS.   EXCEPT  AS  OTHERWISE   EXPRESSLY  PROVIDED  HEREIN,   SELLER  FURTHER
SPECIFICALLY  DISCLAIMS ANY  REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF
HAZARDOUS   SUBSTANCES  OR  LIABILITY  OR  POTENTIAL   LIABILITY  ARISING  UNDER
ENVIRONMENTAL LAWS WITH RESPECT TO THE ASSETS.

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<PAGE>

     (b) It is understood that Seller makes no  representation  or warranty with
respect  to the  assigned  rights in  respect of the  Terminated  Power  Service
Agreement contemplated in Section 2.1(d).

     4.20 Financial  Statements.  Schedule 4.20 sets forth the unaudited balance
sheet for the  Business as of December  31, 2001 (the  "Balance  Sheet") and the
unaudited  statement of income of the Business for the twelve-month period ended
December 31, 2001  (collectively,  the  "Financial  Statements").  Except as set
forth in Schedule 4.20, the Financial Statements have been prepared on a pre-tax
basis in  accordance,  in all  material  respects,  with GAAP applied on a basis
consistent  with prior periods except for the omission of full footnotes to such
Financial  Statements.  Except as set forth in Schedule  4.20, the Balance Sheet
presents fairly in all material respects the financial condition of the Business
as of its date and the income  statement  included in the  Financial  Statements
presents  fairly in all  material  respects  the  results of  operations  of the
Business for the periods covered  thereby.  The books and records of Seller from
which the  Financial  Statements  were derived were complete and accurate in all
material respects at the time of such preparation.

     4.21 SEC Filings; Financial Statements.

     (a)  Seller  has  filed,  or caused to be filed,  all  forms,  reports  and
documents required to be filed by Seller with the SEC since January 1, 2001, and
has  heretofore  delivered or made available to Buyer in the form filed with the
SEC, together with any amendments  thereto,  its (i) Annual Reports on Form 10-K
for the fiscal year ended December 31, 2000 and 2001, (ii) Quarterly  Reports on
Form 10-Q for the fiscal quarter ended March 31 and June 30, 2002, and (iii) all
other  reports or  registration  statements  filed by Seller  with the SEC since
January 1, 2001 (collectively, the "Seller SEC Reports"). The Seller SEC Reports
were  prepared   substantially  in  accordance  with  the  requirements  of  the
Securities Act of 1933, as amended,  or the Securities  Exchange Act of 1934, as
amended,  as the case may be, and the rules and  regulations  promulgated  under
each of such  respective  acts,  and did not at the time they were filed contain
any  untrue  statement  of a  material  fact or omit to  state a  material  fact
required  to be stated  therein  or  necessary  in order to make the  statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading.

     (b) The financial  statements,  including all related notes and  schedules,
contained  in the Seller SEC  Reports (or  incorporated  by  reference  therein)
fairly  present  the  consolidated  financial  position  of  Seller  as  at  the
respective  dates thereof and the  consolidated  results of operations  and cash
flows of Seller for the periods  indicated in accordance  with GAAP applied on a
consistent  basis  throughout  the  periods  involved  (except  for  changes  in
accounting principles disclosed in the notes thereto) and subject in the case of
interim financial statements to normal year-end adjustments.

                                       33
<PAGE>

     4.22 Sufficiency of Assets. The Assets and the Excluded Assets are the only
assets  owned,  used,  or held for use by Seller in, or in  connection  with, or
otherwise  necessary  for, the conduct of the  Business as presently  conducted,
except for such  assets the  failure to own,  use, or hold for use, as would not
have an Asset Material Adverse Effect or a Material Adverse Effect for Buyer.

                                   ARTICLE V

                     REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer represents and warrants to Seller as follows:

     5.1 Organization.  Buyer is an Arizona corporation, duly organized, validly
existing and in good  standing  under the laws of the state of its  organization
and has all requisite  corporate  power and authority to own,  lease and operate
its properties and to carry on its business as is now being conducted.

     5.2 Authority.  Buyer has full corporate power and authority to execute and
deliver this Agreement and each of the Ancillary  Agreements to which Buyer is a
signatory and to consummate the  transactions  contemplated  hereby and thereby.
The  execution  and  delivery  by  Buyer  of this  Agreement  and the  Ancillary
Agreements  to which Buyer is a signatory and the  consummation  by Buyer of the
transactions  contemplated  hereby  and  thereby  have  been  duly  and  validly
authorized by all necessary  corporate  action required on the part of Buyer and
this Agreement and the Ancillary  Agreements have been duly and validly executed
and delivered by Buyer.  Each of this Agreement and the Ancillary  Agreements to
which Buyer is a signatory, constitute the legal, valid and binding agreement of
Buyer,  enforceable against Buyer in accordance with its terms, except as may be
limited  by  applicable  bankruptcy,  insolvency,   reorganization,   fraudulent
conveyance,   moratorium  or  other  similar  laws   affecting  or  relating  to
enforcement  of creditors'  rights  generally  and general  principles of equity
(regardless  of whether  enforcement  is considered in a proceeding at law or in
equity).

     5.3 Consents and Approvals; No Violation.

     (a) Except as set forth in Schedule 5.3(a), neither the execution, delivery
and  performance  of this  Agreement  by Buyer nor the  execution,  delivery and
performance  of the Ancillary  Agreements by Buyer or any of its  Affiliates nor
the  consummation by Buyer of the transactions  contemplated  hereby and thereby
will (i) conflict  with or result in any breach of any provision of the Articles
of Incorporation or Bylaws (or other similar  governing  documents) of Buyer, or
any of its Affiliates, or (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage,  indenture,  material agreement or other
instrument or  obligation to which Buyer or any of its  Affiliates is a party or
by which any of their respective  assets may be bound,  except for such defaults
(or rights of termination,  cancellation or  acceleration) as to which requisite
waivers or consents  have been obtained or which would not,  individually  or in
the  aggregate,  have a Buyer  Material  Adverse  Effect  or  (iii)  subject  to
obtaining the Buyer Required Regulatory Approvals,  constitute violations of any
law,  regulation,   order,   judgment  or  decree  applicable  to  Buyer,  which
violations,  individually or in the aggregate,  would result in a Buyer Material
Adverse Effect.

                                       34
<PAGE>

     (b) Except as set forth in  Schedule  5.3(b)  (the  filings  and  approvals
referred to in such Schedule are collectively referred to as the "Buyer Required
Regulatory  Approvals"),  no consent or approval of,  filing with, or notice to,
any  Governmental  Authority is necessary for Buyer's  execution and delivery of
this Agreement and the Ancillary  Agreements or the consummation by Buyer of the
transactions   contemplated  hereby  and  thereby,  other  than  such  consents,
approvals,  filings or notices,  which,  if not  obtained or made,  will not (i)
prevent  Buyer from  performing  its  obligations  under this  Agreement and the
Ancillary Agreements or (ii) result in a Buyer Material Adverse Effect.

     5.4  Availability  of Funds.  Buyer  acknowledges  and  agrees  that on the
Closing Date, it will have sufficient funds to pay the Purchase Price under this
Agreement and the Arizona Gas Purchase Agreement  (including  sufficient cash to
fund the equity  portions  thereof) and to timely perform all of its obligations
under this  Agreement,  the  Ancillary  Agreements,  and  Arizona  Gas  Purchase
Agreement.  Tucson  Electric Power Company has the ability to contribute cash as
equity to a  wholly-owned  subsidiary  which  constitutes a "Utility" or "Public
Utility" subject to the receipt of required approvals under Title 14, Chapter 2,
Article 8 (Public  Utility  Holding  Companies and Affiliated  Interests) of the
Arizona  Administrative  Code. As of September 30, 2002,  Tucson  Electric Power
Company held cash in the amount of approximately $65,000,000.

     5.5 SEC Filings; Financial Statements.

     (a)  UniSource  has filed,  or caused to be filed,  all forms,  reports and
documents  required to be filed by UniSource with the SEC since January 1, 2001,
and has heretofore  delivered or made available to Seller in the form filed with
the SEC,  together with any amendments  thereto,  its (i) Annual Reports on Form
10-K for the fiscal  year  ended  December  31,  2000 and 2001,  (ii)  Quarterly
Reports on Form 10-Q for the fiscal  quarter  ended March 31 and June 30,  2002,
and (iii) all other reports or registration  statements  filed by UniSource with
the SEC since January 1, 2001 (collectively,  the "UniSource SEC Reports").  The
UniSource  SEC  Reports  were  prepared  substantially  in  accordance  with the
requirements  of the  Securities  Act of 1933,  as  amended,  or the  Securities
Exchange  Act of  1934,  as  amended,  as the  case may be,  and the  rules  and
regulations  promulgated  under each of such respective acts, and did not at the
time they were filed contain any untrue  statement of a material fact or omit to
state a material  fact  required to be stated  therein or  necessary in order to
make the statements  therein, in the light of the circumstances under which they
were made, not misleading.

     (b) The financial  statements,  including all related notes and  schedules,
contained in the UniSource SEC Reports (or  incorporated  by reference  therein)
fairly  present  the  consolidated  financial  position of  UniSource  as at the
respective  dates thereof and the  consolidated  results of operations  and cash
flows of UniSource for the periods  indicated in accordance with GAAP applied on
a  consistent  basis  throughout  the  periods  involved  (except for changes in
accounting principles disclosed in the notes thereto) and subject in the case of
interim financial statements to normal year-end adjustments.

                                       35
<PAGE>

     5.6 Legal  Proceedings.  Except as set forth in Schedule 5.6, (a) there are
no actions or proceedings  pending or, to Buyer's knowledge  threatened  against
Buyer or any of its  Affiliates  before any court or arbitrator or  Governmental
Authority,  which,  individually  or in the  aggregate,  would result in a Buyer
Material  Adverse  Effect,  and (b) neither  Buyer nor any of its  Affiliates is
subject  to  any  outstanding  Orders,  which  would,  individually  or  in  the
aggregate, result in a Buyer Material Adverse Effect.

     5.7 No Knowledge of Seller's  Breach.  Buyer has no knowledge of any breach
by Seller of any  representation or warranty of Seller or of any other condition
or  circumstance  that would  excuse  Buyer from its timely  performance  of its
obligations   hereunder.   Buyer  shall  notify  promptly  Seller  if  any  such
information comes to Buyer's attention prior to the Closing.

     5.8  Qualified  Buyer.  Buyer  is  qualified  to  obtain  any  Permits  and
Environmental  Permits  necessary  for Buyer to own and operate the Assets as of
the Closing.

     5.9 Inspections. Buyer is knowledgeable about the Business as engaged in by
Seller  and of the  usual  and  customary  practices  of  companies  engaged  in
businesses  similar  to the  Business  and has had  access  to the  Assets,  the
officers  and  employees of Seller,  and the books,  records and files of Seller
relating to the Business and the Assets.  Buyer  acknowledges and agrees that it
has, prior to its execution of this  Agreement,  (i) reviewed the  Environmental
Reports  and (ii) had an  opportunity  to  conduct  Inspections  of the  Assets,
including  the Real  Property.  Subject to Sections  6.2,  6.3 and  7.1(g),  and
without waiving  Seller's  representations  and warranties in Section 4.6, Buyer
acknowledges  that it is satisfied with such review and  Inspections to date and
(ii) Buyer  acknowledges  and agrees  that past,  present,  and future  physical
characteristics  and Environmental  Conditions may not have been revealed by its
Inspections and the  investigations of the Assets contained in the Environmental
Reports.  In making its decision to execute this Agreement,  and to purchase the
Assets,  Buyer has relied on and will  continue  to rely upon the results of its
Inspections,   the  Environmental  Reports  and  Seller's   representations  and
warranties   in  Section   4.6.   Buyer   acknowledges   and  agrees   that  the
representations  and  warranties  set  forth  in  Article  IV of this  Agreement
constitute  the sole and exclusive  representations  and warranties of Seller to
Buyer  in  connection  with  the  transactions  contemplated  hereby  and by the
Ancillary Agreements, and there are no representations,  warranties,  covenants,
understandings or agreements,  oral or written,  in relation thereto between the
Parties  other  than those  incorporated  herein,  including  Section  6.3,  and
therein.  Except for the representations  and warranties  expressly set forth in
Article IV of this Agreement, Buyer disclaims reliance on any representations or
warranties,  either  express  or  implied,  by or on  behalf  of  Seller  or its
Affiliates or Representatives. Without limiting the generality of the foregoing,
Buyer acknowledges and agrees that, except as provided in Section 4.6, there are
no  representations  or warranties  of Seller with respect to the  Environmental
Condition of the Assets,  compliance with  Environmental  Laws and Environmental
Permits of the  presence  or  Releases of  hazardous  material in the  fixtures,
soils,  groundwater,  surface water or air on, under or about or emanating  from
any of the Assets.

     5.10 WARN Act.  Buyer  does not  intend to engage in a "Plant  Closing"  or
"Mass Layoff" as such terms are defined in the WARN Act within sixty days of the
Closing Date.

                                       36
<PAGE>

                                   ARTICLE VI

                            COVENANTS OF THE PARTIES

     6.1 Conduct of Business and Operation of Assets.

     (a) Except as described in Schedule  6.1(a),  as required by an  applicable
law  or by  any  Governmental  Authority,  as  expressly  contemplated  by  this
Agreement or to the extent Buyer otherwise consents in writing (such consent not
to be unreasonably withheld),  during the period from the date of this Agreement
to the Closing Date,  Seller shall (i) operate the Assets in the ordinary course
of business consistent with its past practices and Good Utility Practices,  (ii)
use all  Commercially  Reasonable  Efforts to preserve  intact the Assets in all
material respects,  and endeavor to preserve the goodwill and relationships with
customers, suppliers and others having business dealings with it, (iii) maintain
insurance  described  in Section  4.4 (or  replacements  thereto  providing  for
substantially  the same  coverage),  and (iv)  comply with all  applicable  laws
relating to the Assets,  including without  limitation,  all Environmental Laws,
except  where the  failure to so comply  would not  result in an Asset  Material
Adverse  Effect.  Seller  agrees to incur Capital  Expenditures  in the ordinary
course in respect of (A) growth of the customer base (see, e.g., items under the
heading  "Growth" in the Capital  Expenditures  Schedule) and (B) maintenance of
the Assets and  replacement  activities  (see,  e.g.,  items  under the  heading
"Replacement" in the Capital Expenditures Schedule).  Buyer agrees that Seller's
deferral of Capital  Expenditures in respect of network growth (see, e.g., items
under the heading  "Infrastructure" in the Capital Expenditures  Schedule) shall
not be deemed to be inconsistent with or to violate Good Utility Practices.

     (b) Without  limiting  the  generality  of Section  6.1(a)  and,  except as
contemplated  in this  Agreement  or as  described  in  Schedule  6.1(a),  or as
required under  applicable law or by any  Governmental  Authority,  prior to the
Closing Date, without the prior written consent of Buyer (such consent not to be
unreasonably withheld), Seller shall not:

          (i) Make any material change in the levels of Inventories  customarily
     maintained by Seller with respect to the Business, other than changes which
     are consistent with Good Utility Practices;

          (ii) Sell, lease (as lessor),  encumber, pledge, transfer or otherwise
     dispose of, any Asset (except for Inventories used, consumed or replaced in
     the ordinary course of business consistent with past practices of Seller or
     with Good  Utility  Practices)  other than to encumber  any such Asset with
     Permitted Encumbrances;

          (iii) Modify, amend or voluntarily terminate,  prior to the respective
     expiration  date of any of the Assigned  Agreements or Real Property Leases
     or any of the Permits or Environmental  Permits with respect to such Assets
     in any material respect, other than (A) in the ordinary course of business,
     to the extent  consistent with the past practices of Seller or Good Utility
     Practices,  (B) with cause, to the extent consistent with past practices of
     Seller or Good Utility  Practices,  or (C) as may be required in connection
     with  transferring  Seller's  rights  or  obligations  thereunder  to Buyer
     pursuant to this Agreement;

                                       37
<PAGE>

          (iv) Except as otherwise  provided  herein,  enter into any commitment
     for the purchase, sale, or transportation of fuel for the Business having a
     term  greater than six months and not  terminable  on or before the Closing
     Date either (A)  automatically,  or (B) by option of Seller (or,  after the
     Closing,  by Buyer) in its sole discretion,  if the aggregate payment under
     such commitment for fuel and all other outstanding commitments for fuel for
     the Business not previously approved by Buyer would exceed $1,000,000;

          (v) Except as  otherwise  provided  herein,  enter into any  contract,
     agreement,  commitment or  arrangement  for the Business that  individually
     exceeds  $250,000  or in the  aggregate  exceeds  $1,000,000  unless  it is
     terminable by Seller (or, after the Closing Date, by Buyer) without penalty
     or premium upon no more than sixty (60) days notice;

          (vi) Except as otherwise  required by the terms of the applicable IBEW
     CBA or as otherwise  provided in Section  6.12,  (A) hire,  or transfer any
     employees of or for the Business  prior to the Closing,  other than to fill
     vacancies in existing positions in the reasonable discretion of Seller, (B)
     materially  increase salaries or wages of employees  employed in connection
     with such Asset  prior to the  Closing,  (C) take any  action  prior to the
     Closing  to affect a  material  change  in the IBEW  CBA(s) or (D) take any
     action prior to the Closing to materially  increase the aggregate  benefits
     payable to the  employees  (considered  as a group)  employed in connection
     with the Business; and

          (vii) Except as otherwise  provided herein,  enter into any written or
     oral contract, agreement,  commitment or arrangement with respect to any of
     the  proscribed  transactions  set forth in the  foregoing  paragraphs  (i)
     through (vi).

     6.2 Access to Information.

     (a) Between the date of this  Agreement and the Closing Date,  Seller will,
at  reasonable  times  and  upon  reasonable  notice,   provide  Buyer  and  its
Representatives:

          (i) reasonable access to their respective managerial personnel, to all
     books,  records,  plans,  equipment,   offices  and  other  facilities  and
     properties constituting part of the Assets;

          (ii)  such   historical   financial  and  operating   data  and  other
     information  with  respect  to the  Assets  as Buyer  may from time to time
     reasonably request, to the extent reasonably available;

          (iii) upon request, a copy of each material report,  schedule or other
     document,  if any, filed by Seller with respect to the Assets with the SEC,
     FERC, ACC, ADEQ or any other Governmental Authority;

          (iv)   access  to  all  Assets  for   Inspection   by  Buyer  and  its
     Representatives at reasonable times during regular business hours scheduled
     for such Inspections, and shall provide qualified management,  engineering,
     operations and  maintenance and other  personnel to make  presentations  as
     required, to escort such Persons and to assist in all aspects of conducting
     the  Inspections,  provided  that each of Buyer and Seller shall bear their
     own costs of participating in the Inspections; and

                                       38
<PAGE>

          (v) access to all such other  information in the possession or control
     of  Seller  as  shall  be  reasonably  necessary  to  enable  Buyer  or its
     Representatives  to  verify  the  accuracy  of  the   representations   and
     warranties of Seller contained in this Agreement;  provided,  however, that
     any  such  Inspections  shall  be  conducted  in  such a  manner  as not to
     interfere  unreasonably with the operation of the Assets. In the event that
     Seller's  provision  of  information  under  this  Section  6.2  would  (A)
     constitute a waiver of any legal privilege,  including the  attorney-client
     privilege  or  work  product  privilege,   or  (B)  violate  any  legal  or
     contractual  obligation of Seller to a third party, then Seller shall first
     notify  Buyer  with  respect to the  existence  and  general  nature of the
     restricted  information.  If  the  restricted  information  relates  to the
     Assets,  the  Parties  shall  thereupon  mutually  agree upon a  reasonable
     procedure in order to provide  Buyer with access to the  information  while
     protecting the legitimate  interests of Seller thereto. The mutually agreed
     procedure may include,  without  limitation,  a limited waiver by Seller of
     the relevant  privilege,  Buyer's  agreement to maintain the information in
     strict  confidence,  limited  review or  inspection of the  information  by
     specified individuals, or any combination of the foregoing.

Notwithstanding anything in this Section 6.2(a) to the contrary, with respect to
employee  records Seller will only furnish or provide such access to Transferred
Employee  Records  and will not  furnish  or  provide  access to other  employee
personnel records or medical  information unless required by law or specifically
authorized by the affected employee.

     (b) The Parties  shall  cooperate to schedule  Buyer's  Inspections  of the
Assets so that, to the extent  reasonably  feasible,  any interference  with the
operation of the Business is minimized,  and Buyer may complete its  Inspections
of the Assets within ninety (90) working days of commencement of Inspections and
within six (6) months after the execution of this Agreement.

     (c) Until the  conclusion  of Buyer's  next rate case for the  Business (or
such longer  period as may be required by  applicable  law),  each Party and its
Representatives  shall have  reasonable  access to all of the books and  records
relating  to the Assets and the  Business  (for the  Seller,  only to the extent
relating  to periods  prior to the  Closing  Date),  including  all  Transferred
Employee  Records in the  possession  of Buyer or Seller to the extent that such
access may reasonably be required in connection with the Assumed  Liabilities or
the  Excluded  Liabilities,  or other  matters  relating  to or  affected by the
operation  of the  Assets.  Such  access  shall  be  afforded  by the  Party  in
possession  of any such books and records  upon  receipt of  reasonable  advance
notice and during normal  business  hours.  The Party  exercising  this right of
access shall be solely  responsible for any costs or expenses  incurred by it or
the holder of the  information  with  respect to such  access  pursuant  to this
Section  6.2(c).  If the Party in  possession  of such books and  records  shall
desire to dispose of any books and records  upon or prior to the  expiration  of
such above-stated period (or any such longer period), such Party shall, prior to
such disposition, give the other Party a reasonable opportunity, at the latter's
expense, to segregate and remove such books and records as it may select.

                                       39
<PAGE>

     (d) Buyer  agrees  that,  prior to the  Closing  Date,  neither  it nor its
Representatives  will  contact  any  vendors,  suppliers,  employees,  or  other
contracting  parties of Seller or its  Affiliates  with respect to any aspect of
the Assets or the transactions  contemplated  hereby,  without the prior written
consent of Seller, which consent shall not be unreasonably withheld.

     6.3 Environmental Inspections and Information.

     (a) Buyer may rely on certain Environmental Reports. Seller shall cause the
consultants  listed on Schedule 6.3, who were responsible for such Environmental
Reports, to deliver written confirmation to Buyer prior to the Closing Date that
Buyer may rely on such Environmental Reports.

     (b) Buyer has conducted various  environmental  assessment  activities with
respect to the  Assets,  including  reviewing  existing  environmental  reports,
correspondence,  permits and related materials  regarding the Assets and certain
other  "Phase I" and "Phase  II"  activities  as set forth in the ASTM  protocol
regarding   "Phase  I"  and  "Phase  II"   environmental   assessments.   Seller
acknowledges  that,  between the date of this  Agreement  and the Closing  Date,
Buyer  will  continue  to conduct  Inspections  with  respect  to  environmental
matters,  including  "Phase I" and "Phase II"  environmental  assessments to the
extent Buyer  reasonably  concludes that such  assessments  are warranted by the
Environmental  Reports or the findings of Buyer's  assessments prior to the date
of this  Agreement.  Any such  Inspections  shall be  conducted  as  provided in
Section 6.2.

     (c) If any environmental  inspection conducted by Buyer or Seller before or
after the date of this  Agreement  and before the  Closing  Date  results in the
discovery of one or more Environmental  Conditions that are reasonably likely to
give rise to one or more  Environmental  Claims related to the Assets, for which
Remediation would reasonably be required (an "Adverse Environmental Condition"),
and if the Adverse  Environmental  Condition,  aggregated with all other Adverse
Environmental  Conditions  identified  by Buyer or Seller  prior to the  Closing
Date, is reasonably  likely to give rise to Remediation  expenses of Buyer after
Closing  in  excess  of  $1,500,000  in  the   aggregate   (the   "Environmental
Threshold"),  then either (i) the Base Purchase  Price shall be reduced,  to the
extent such  Adverse  Environmental  Condition  is not  Remediated  prior to the
Closing Date, by a mutually  agreed  amount,  which amount shall be equal to the
excess  of (A) the  estimated  out-of-pocket  costs  and  expenses  which  Buyer
reasonably  can be  expected  to incur to  Remediate,  in  accordance  with Good
Utility Practices,  such Adverse Environmental  Condition after the Closing over
(B) the Environmental  Threshold (the "Environmental  Price Adjustment") or (ii)
if the  Parties  are not  able  to  mutually  agree  on an  Environmental  Price
Adjustment,  Seller shall reimburse Buyer for all actual out-of-pocket costs and
expenses that Buyer  reasonably  incurs after Closing to Remediate  such Adverse
Environmental  Condition in excess of the Environmental  Threshold.  Any Adverse
Environmental Condition which has or is reasonably expected to have an aggregate
economic impact on Buyer, taking into consideration all relevant  circumstances,
in excess of $25,000,000,  shall be conclusively  deemed to be an Asset Material
Asset Effect.  Notwithstanding the foregoing,  any single Adverse  Environmental
Condition which is reasonably  expected to give rise to Remediation  expenses of
less than $25,000 shall not be counted  toward the  Environmental  Threshold and
shall not result in an Environmental Price Adjustment.

                                       40
<PAGE>

     (d)  Buyer  either  has  provided  or shall  provide  to  Seller,  promptly
following  Buyer's  receipt  thereof,  copies of all audits,  reports,  studies,
assessments  and other  information  composed or compiled,  or to be composed or
compiled,  by Buyer or Buyer's  Representatives in connection with environmental
assessment  activities.  Buyer shall treat all such information delivered to, or
composed or compiled by, Buyer or Buyer's  Representative as Environmental  Data
in accordance with the procedures of Section 6.3(e).

     (e) All audits,  reports,  studies and assessments delivered to or prepared
by Buyer  and all  other  information  collected  and  generated  as a result of
Buyer's  environmental due diligence  ("Environmental  Data") will be subject to
the terms and conditions of the Confidentiality  Agreement,  dated June 3, 2002,
between Seller and Buyer, except as otherwise expressly provided in this Section
6.3(e).  Neither  Buyer nor its  Representatives  shall  disclose or release any
Environmental  Data  without  the prior  written  consent of Seller and all such
information  shall  be kept  strictly  confidential.  To the  extent  reasonably
practicable,  the Environmental Data shall be prepared at the request of counsel
to Buyer and, to the fullest extent  permitted by law, shall be the work product
of such counsel and constitute confidential attorney/client communications.  The
Environmental Data shall be transferred among Buyer and its Representatives in a
manner  that  will  preserve,  to  the  extent  reasonably   practicable,   such
privileges.  Buyer  expressly  agrees  that  until  the  Closing,  it  will  not
distribute  the  Environmental  Data to any third party without  Seller's  prior
written  consent  (such  consent  not to be  unreasonably  withheld).  After the
Closing,  Buyer agrees that it will not distribute the Environmental Data to any
third party without Seller's prior written consent, except as required by law or
by express  provisions  of  Buyer's  corporate  compliance  program if Seller is
provided  written  notice  at least ten (10)  days  prior to such  distribution;
provided,  however,  that Buyer may  distribute  the  Environmental  Data to any
potential  purchaser  of any of the  Assets  or an  ownership  interest  therein
(either  directly or through the purchase of an ownership  interest in an entity
holding any of the Assets) only after first notifying the Seller.

     6.4 Confidentiality.

     (a) Each Party shall,  and shall use its  reasonable  best efforts to cause
its Representatives to, (i) keep all Proprietary  Information of any other Party
confidential and not to disclose or reveal any such  Proprietary  Information to
any  person  other  than  such  Party's  Representatives  and  (ii) not use such
Proprietary  Information  other than in connection with the  consummation of the
transactions  contemplated hereby. After the Closing Date and except as provided
in Section  6.3(e),  any Proprietary  Information,  to the extent related to the
Assets  acquired by Buyer,  shall no longer be subject to the  restrictions  set
forth herein.  The obligations of the Parties under this Section 6.4(a) shall be
in full  force and  effect  for three (3) years  from the date  hereof  and will
survive  the  termination  of  this  Agreement,   the  discharge  of  all  other
obligations owed by the Parties to each other and the Closing Date.

     (b)  Notwithstanding  the terms of Section 6.4(a) above,  the Parties agree
that prior to the Closing, Buyer may reveal or disclose Proprietary  Information
to any other Persons in connection with (i) the financing of Buyer's purchase of
the Assets or any equity  participation  in Buyer's  purchase  of the Assets and
(ii)  obtaining  insurance  for the Assets;  provided that such Persons agree in
writing to  maintain  the  confidentiality  of the  Proprietary  Information  in
accordance with this Agreement.

                                       41
<PAGE>

     (c) Upon the other  Party's  prior  written  approval  (which  shall not be
unreasonably  withheld),  any of the Parties may provide Proprietary Information
of the other  Parties  to the SEC,  FERC,  ACC,  ADEQ or any other  Governmental
Authority with jurisdiction or any securities  exchange,  as may be necessary to
obtain Required  Regulatory  Approvals or to comply  generally with any relevant
law or regulation. The disclosing Party will seek confidential treatment for the
Proprietary   Information  provided  to  any  Governmental   Authority  and  the
disclosing Party will notify the other Party as far in advance as is practicable
of its  intention  to  release to any  Governmental  Authority  any  Proprietary
Information.

     6.5 Public  Statements.  Subject to the  requirements  imposed by law,  any
Governmental  Authority or  securities  exchange,  prior to the Closing Date, no
press  release or other public  announcement  or public  statement or comment in
response  to any  inquiry  relating  to the  transactions  contemplated  by this
Agreement shall be issued or made by any Party without the prior approval of the
other Party (which  approval shall not be  unreasonably  withheld).  The Parties
agree to cooperate in preparing any such announcements.

     6.6 Expenses. Except to the extent specifically provided herein, whether or
not the transactions contemplated hereby are consummated, all costs and expenses
incurred in connection  with this  Agreement and the  transactions  contemplated
hereby  shall  be  borne  by  the  Party  incurring  such  costs  and  expenses.
Notwithstanding  anything to the contrary herein,  Buyer will be responsible for
all  filing  fees  under the HSR Act  relating  to the  Assets it would  acquire
hereunder.

     6.7 Further Assurances.

     (a) Subject to the terms and conditions of this Agreement, each Party shall
use its  Commercially  Reasonable  Efforts  to take,  or cause to be taken,  all
actions,  and to do,  or cause to be  done,  all  things  necessary,  proper  or
advisable under applicable laws and regulations to consummate and make effective
the purchase,  sale,  transfer and delivery of the Assets and the  assumption of
the Assumed Liabilities pursuant to this Agreement.  Such actions shall include,
without  limitation,  each Party using its  Commercially  Reasonable  Efforts to
ensure  satisfaction of the conditions  precedent to its obligations  hereunder,
including  obtaining all necessary  consents,  approvals,  and authorizations of
third parties and Governmental  Authorities  required to be obtained in order to
consummate  the  transactions  hereunder,  and to  effectuate  a transfer of the
Transferable  Permits to Buyer. Seller shall cooperate with Buyer in its efforts
to obtain all other  Permits and  Environmental  Permits  necessary for Buyer to
operate the Assets.  None of the Parties  hereto  shall,  without  prior written
consent  of the  other  Party,  take or fail to take  any  action,  which  might
reasonably be expected to prevent or materially impede,  interfere with or delay
the transactions contemplated by this Agreement.

     (b) In the event  that any Asset  shall not have been  assigned,  conveyed,
transferred  and  delivered  hereunder  to Buyer at the Closing,  Seller  shall,
subject  to  Section  6.7(c),  use  Commercially  Reasonable  Efforts to assign,
convey,  transfer and deliver such Assets to Buyer as promptly as is practicable
after the Closing.

     (c) (i) To the extent that Seller's rights under any Assigned  Agreement or
Real Property  Lease may not be assigned  without the consent of another  Person
which consent has not been obtained by the Closing Date,  this  Agreement  shall
not constitute an agreement to assign the same, if an attempted assignment would
constitute a breach thereof or be unlawful.

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<PAGE>

     (ii) Seller  agrees that if any consent to an  assignment  of any  Assigned
Agreement  or Real  Property  Lease shall not be  obtained  or if any  attempted
assignment  would  be  ineffective  or  would  impair  the  Buyer's  rights  and
obligations under the Assigned Agreement or Real Property Lease in question,  so
that  Buyer  would not in effect  acquire  the  benefit  of all such  rights and
obligations,  Seller,  at the Buyer's option and to the maximum extent permitted
by law and such Assigned  Agreement or Real  Property  Lease,  shall,  after the
Closing Date,  appoint Buyer to be Seller's  agent with respect to such Assigned
Agreement or Real Property Lease, or, to the maximum extent permitted by law and
such  Assigned  Agreement or Real  Property  Lease,  enter into such  reasonable
arrangements  with Buyer or take such other  actions as are necessary to provide
Buyer with the same or  substantially  similar  rights and  obligations  of such
Assigned  Agreement  or Real  Property  Lease as Buyer may  reasonably  request.
Seller shall cooperate and shall use  Commercially  Reasonable  Efforts prior to
and after the Closing  Date to obtain an  assignment  to Buyer of each  Assigned
Agreement or Real Property Lease.

     (iii) To the  extent  that  any  fuel  supply  contract  or power  purchase
agreement  is not  assignable  or the  contracting  party  withholds  consent to
assignment,  then  Seller  agrees to continue  to  purchase  fuel  and/or  power
pursuant to such contract(s) and to resell it to Buyer at the purchase price for
the  remainder of the term of such  contract(s),  provided that the term of such
contract(s)  shall not be  extended.  Buyer shall make payment to Seller in this
circumstance on an as-incurred basis.

     (d) To the extent  that  Seller's  rights  under any  warranty  or guaranty
described in Section  2.1(h) may not be assigned  without the consent of another
Person,  which consent has not been obtained by the Closing Date, this Agreement
shall not constitute an agreement to assign the same, if an attempted assignment
would  constitute a breach  thereof,  or be unlawful.  Seller agrees that if any
consent to an assignment of any such warranty or guaranty shall not be obtained,
or if any attempted  assignment  would be  ineffective  or would impair  Buyer's
rights and obligations under the warranty or guaranty in question, so that Buyer
would not in effect  acquire  the  benefit of all such  rights and  obligations,
Seller,  at  Buyer's  option  and  expense,  shall use  Commercially  Reasonable
Efforts,  to the extent  permitted by law and by such  warranty or guaranty,  to
enforce  such  warranty  or  guaranty  for the benefit of Buyer so as to provide
Buyer to the maximum extent  possible with the benefits and  obligations of such
warranty or guaranty.

     6.8 Consents and Approvals.

     (a) As promptly as advisable after the execution of this  Agreement,  Buyer
and  Seller  shall  each  file or  cause  to be filed  with  the  Federal  Trade
Commission  and the  United  States  Department  of  Justice  any  notifications
required to be filed under the HSR Act and the rules and regulations promulgated
thereunder  with respect to the  transactions  contemplated  hereby.  Each Party
shall file any HSR Act  notifications  with respect to this  Agreement  and with
respect to the Arizona Gas  Purchase  Agreement  simultaneously  and in the same
filing.  Buyer and Seller shall use their respective  reasonable best efforts to
respond  promptly to any requests for additional  information  made by either of
such agencies,  and to cause the waiting  periods under the HSR Act to terminate
or  expire  at the  earliest  possible  date  after  the date of  filing of such
notification.  Buyer will pay all filing fees under the HSR Act  relating to the
Assets,  but each of Seller and Buyer will bear its own costs of the preparation
of any such filing.

                                       43
<PAGE>

     (b) The Parties shall cooperate and use all Commercially Reasonable Efforts
to  promptly  prepare  and file  all  necessary  documentation,  to  effect  all
necessary applications,  notices, petitions, filings and other documents, and to
obtain all necessary  permits,  consents,  approvals and  authorizations  of all
Governmental  Authorities  necessary or advisable to consummate the transactions
contemplated  by this Agreement,  including,  without  limitation,  the Required
Regulatory  Approvals.  Buyer  shall  have the right to review  and  approve  in
advance all the information relating to Buyer, on the one hand, and Seller shall
have the right to review and approve in advance all the information  relating to
Seller,  on the other hand,  in either case,  which appear in any filing made in
connection  with the  transactions  contemplated  by this  Agreement.  Buyer and
Seller agree that they will consult and  cooperate  with each other with respect
to  the  obtaining  of all  such  necessary  permits,  consents,  approvals  and
authorizations of Governmental Authorities.

     (c) In  connection  with  applications  and other  filings for the Required
Regulatory Approvals,  and the prosecution of any pending regulatory proceedings
material to the Business Buyer and Seller shall jointly,  and on an equal basis,
coordinate  the  overall  development  of the  positions  to be  taken  and  the
regulatory actions to be requested in such applications and filings for approval
of the sale by the  Seller and the  purchase  by the Buyer of the Assets and the
Business,  of all other matters  contemplated  by this  Agreement  which require
regulatory approval and of all other regulatory matters incidental thereto which
are to be addressed  in such  applications  and  filings.  Efforts to obtain any
necessary approvals (including from the ACC and the FERC) shall be prosecuted by
counsel mutually agreed upon by the Parties,  and acting as joint counsel to the
Parties,  it being  understood,  however,  that (i) all  positions  taken in the
filings with such  Governmental  Authorities shall be consistent with the mutual
understandings of the Parties and (ii) any SEC approvals required by Buyer shall
be prosecuted by Buyer's counsel.

     (d) Seller and Buyer shall  cooperate with each other and promptly  prepare
and file  notifications  with, and request Tax clearances  from, state and local
taxing authorities in any jurisdictions in which a portion of the Purchase Price
may be required to be withheld or in which Buyer would  otherwise  be liable for
any Tax liabilities of Seller pursuant to such state and local Tax law.

     (e) Seller shall have primary  responsibility  for securing the transfer of
the Transferable Permits, effective as of the Closing Date. Buyer shall have the
primary  responsibility for securing the transfer,  reissuance or procurement of
the  Permits  and  Environmental   Permits  (other  than  Transferable  Permits)
effective as of the Closing Date. Seller shall cooperate with Buyer's efforts in
this  regard  and  assist  in  any  transfer  or   reissuance  of  a  Permit  or
Environmental  Permit held by Seller,  or the procurement of any other Permit or
Environmental Permit when so requested by Buyer.

                                       44
<PAGE>

     6.9 Fees and Commissions. Each of Seller and Buyer represent and warrant to
the other that,  except for Morgan Stanley & Co.  Incorporated,  which is acting
for and at the expense of Seller,  and Credit  Suisse First Boston  Corporation,
which is acting  for and at the  expense of Buyer,  no  broker,  finder or other
Person is entitled  to any  brokerage  fees,  commissions  or  finder's  fees in
connection  with the  transactions  contemplated  hereby by reason of any action
taken by the Party making such representation. Each of Seller and Buyer will pay
to the others or otherwise  discharge,  and will  indemnify  and hold the others
harmless from and against,  any and all claims or liabilities  for all brokerage
fees,  commissions  and  finder's  fees  (other than the fees,  commissions  and
finder's  fees  payable to the party  listed  above)  incurred  by reason of any
action  taken  by the  indemnifying  party.  Buyer  has a  preexisting  business
relationship with New Harbor,  Incorporated and agrees to be responsible for any
brokerage  fees,  commissions or finder's fees of New Harbor,  Incorporated,  if
any, arising from the transactions contemplated by this Agreement.

     6.10 Tax Matters.

     (a) All Transfer Taxes  incurred in connection  with this Agreement and the
transactions  contemplated hereby,  including,  without limitation,  (A) Arizona
sales tax; (B) the Arizona  transfer  tax,  conveyance  fees or  conveyances  of
interests  in real  and/or  personal  property;  and (C)  Arizona  sales tax and
transfer  tax on deeds shall be borne as  follows:  fifty  percent  (50%) by the
Buyer and fifty  percent  (50%) by the Seller.  Seller shall file, to the extent
required by, or permissible under, applicable law, all necessary Tax Returns and
other documentation with respect to all such Transfer Taxes, and, if required by
applicable  law,  Buyer shall join in the  execution of any such Tax Returns and
other documentation.  Prior to the Closing Date, to the extent applicable, Buyer
shall provide to Seller  appropriate  certificates  of Tax  exemption  from each
applicable taxing authority.

     (b) With respect to Taxes to be prorated in accordance  with Section 3.4 of
this Agreement,  Buyer shall prepare and timely file all Tax Returns required to
be filed after the Closing  Date with  respect to the Assets,  if any, and shall
duly and timely pay all such Taxes shown to be due on such Tax Returns.  Buyer's
preparation of any such Tax Returns shall be subject to Seller's approval, which
approval shall not be unreasonably  withheld.  Buyer shall make such Tax Returns
available  for Seller's  review and approval no later than fifteen (15) Business
Days  prior to the due date for filing  each such Tax  Return.  Upon  receipt by
Buyer of the tax  bill,  invoice  or other  statement  regarding  such  real and
personal  property  Taxes,  Buyer shall calculate the pro rata share of such tax
bill, invoice or other statement  attributable to Buyer and Seller.  Buyer shall
then forward, as soon as possible, to Seller a copy of such tax bill, invoice or
statement along with the supporting documentation relating to the calculation of
the pro rata share to Seller and Seller will promptly pay to Buyer  Seller's pro
rata share of such tax bill,  invoice or  statement.  In the event  Seller first
receives a tax bill,  invoice or statement  relating to the Assets from a taxing
authority,  Seller shall promptly forward such tax bill, invoice or statement to
Buyer.

     (c) Buyer and Seller shall  provide the other with such  assistance  as may
reasonably be requested by the other Party in connection with the preparation of
any Tax Return,  any audit or other examination by any taxing authority,  or any
judicial or administrative proceedings relating to liability for Taxes, and each
shall retain and provide the  requesting  Party with any records or  information
which may be relevant to such return,  audit,  examination or  proceedings.  Any
information  obtained  pursuant to this Section 6.10(c) or pursuant to any other
Section  hereof  providing for the sharing of  information  or review of any Tax
Return or other instrument  relating to Taxes shall be kept  confidential by the
Parties hereto.

                                       45
<PAGE>

     (d) In the event  that a dispute  arises  between  Buyer and  Seller,  with
respect to Taxes in Sections  6.10(a) and 6.10(b),  or concerning any amount due
under this Section 6.10, the Parties shall attempt in good faith to resolve such
dispute and any agreed upon amount shall be paid to the  appropriate  Party.  If
such  dispute is not  resolved  within  thirty  (30) days,  the  Parties to such
dispute  shall  submit  the  dispute  to the  Independent  Accounting  Firm  for
resolution,  which  resolution  shall be final,  conclusive  and binding on such
Parties.  Notwithstanding  anything in this Agreement to the contrary,  the fees
and expenses of such Independent  Accounting Firm shall be allocated between the
Parties so that the non-disputing  Party's share of such fees and expenses shall
be in the same proportion that the aggregate  amount of such remaining  disputed
amounts so submitted by the disputing Party to such auditor that is successfully
disputed by the disputing Party (as finally determined by such auditor) bears to
the total amount of such remaining disputed amount so submitted by the disputing
Party to such  auditor.  Any  payment  required  to be made as a  result  of the
resolution  of the  dispute  by the  Independent  Accounting  Firm shall be made
within ten days after such resolution,  together with any interest determined by
the Independent Accounting Firm to be appropriate.

     (e) Buyer agrees that Seller may, at Seller's election prior to the Closing
Date,  direct  that all or a portion of the  Purchase  Price be  delivered  to a
"qualified  intermediary" (as defined in Treasury Regulation Section 1.1031(k) -
(g)(4)) as to enable Seller's relinquishment of the Assets to qualify as part of
a like-kind  exchange of property covered by Section 1031 of the Code. If Seller
so elects,  Buyer shall  cooperate  with Seller (but without  being  required to
incur any out-of-pocket costs in the course thereof) in connection with Seller's
efforts to effect such  like-kind  exchange,  which  cooperation  shall include,
without  limitation,  taking such actions as Seller  requests in order to enable
Seller to qualify  such  transfer  as part of a  like-kind  exchange of property
covered  by  Section  1031  of the  Code  (including  any  actions  required  to
facilitate the use of a "qualified intermediary"),  and Buyer agrees that Seller
may assign all or part of its rights and delegate all or part of its obligations
under this Agreement to a person or entity acting as a qualified intermediary to
qualify  the  transfer of the Assets as part of  like-kind  exchange of property
covered by Section 1031 of the Code. Buyer and Seller agree in good faith to use
reasonable efforts to coordinate the transactions contemplated by this Agreement
with any other transactions engaged in by either Buyer or Seller;  provided that
such  efforts  are  not  required  to  include  an  unreasonable  delay  in  the
consummation of the transactions contemplated by this Agreement.

     (f) Prior to the Closing Date,  Buyer and Seller shall use their good faith
efforts to agree upon the allocation (the  "Allocation")  of the Purchase Price,
the Assumed  Liabilities  and other  relevant  items  (including,  for  example,
adjustments to the Base Purchase  Price) to the individual  assets or classes of
assets within the meaning of Section 1060 of the Code. If Buyer and Seller agree
to such  Allocation  prior to Closing,  Buyer and Seller covenant and agree that
(i) the values assigned to the assets by the Parties' mutual  agreement shall be
conclusive  and final for all  purposes,  and (ii) neither Buyer nor Seller will
take any position before any Governmental Authority or in any Proceeding that is
in any way inconsistent with such Allocation.  Notwithstanding the foregoing, if
Buyer and Seller cannot agree to an  Allocation,  Buyer and Seller  covenant and
agree to file, and to cause their respective Affiliates to file, all Tax Returns
and schedules  thereto  (including,  for example,  amended  returns,  claims for
refund,  and those returns and forms required under Section 1060 of the Code and
any Treasury regulations  promulgated  thereunder)  consistent with each of such
Party's good faith Allocations, unless otherwise required because of a change in
any applicable law.

                                       46
<PAGE>

     6.11 Advice of Changes. Prior to the Closing, each Party will timely advise
the other in writing with respect to any matter arising after  execution of this
Agreement  which becomes known to that Party and which, if existing or occurring
at the date of this Agreement,  would have been required to be set forth in this
Agreement,  including any of the Schedules or Exhibits hereto.  Any such written
notice  will  not be  deemed  to have  amended  this  Agreement,  including  the
appropriate  Schedule or Exhibit,  or to have  qualified any  representation  or
warranty contained in this Agreement,  or to have cured any misrepresentation or
breach of warranty that otherwise might have existed  hereunder by reason of the
development.

     6.12 Seller Employees.

     (a) Buyer shall give  Qualifying  Offers of  employment to all employees of
Seller who are  covered by the IBEW Local  Unions  Nos.  387 and 769  collective
bargaining  agreements  with  Seller  (the "IBEW  CBA(s)")  and are  employed in
positions relating to the Business (collectively,  "Union Employees"). Each such
person who becomes  employed by Buyer pursuant to this section shall be referred
to herein as a "Transferred Union Employee".

     (b) Buyer shall give Qualifying  Offers of employment to substantially  all
of the salaried  employees  of Seller who are employed in positions  relating to
the Business (collectively, "Non-Union Employees"). Each such person who becomes
employed  by Buyer  pursuant  to this  section  shall be referred to herein as a
"Transferred Non-Union Employee." Buyer shall reimburse Seller for 50 percent of
the aggregate  Severance  Cost (as defined  below)  relating to those  Non-Union
Employees whose employment is terminated by Seller prior to or as of the Closing
Date.  "Severance  Cost" means the sum of the following costs incurred by Seller
resulting from a Non-Union Employee's termination of employment with Seller: (i)
all cash severance benefits payable pursuant to Seller's severance policy,  (ii)
the cost of  outplacement  services  provided  pursuant  to  Seller's  severance
policy,  (iii)  Seller's  subsidized  portion  of  COBRA  Continuation  Coverage
provided by Seller's health plan in accordance with Seller's  severance  policy,
(iv) the additional severance benefits payable pursuant to arrangements with the
specific  individuals  identified in a schedule  delivered to Buyer prior to the
date hereof; and (v) any retention bonuses paid by Seller to Non-Union Employees
who do not  receive  Qualifying  Offers  of  employment  and who are  deemed  in
Seller's  discretion  to be critical to the ongoing  operation of the  Business.
With respect to the Severance  Cost  components  described in clauses (i), (ii),
(iv) and (v) of the preceding  sentence,  Buyer shall pay such  reimbursement to
Seller at the later of  Closing  or five days  after  receipt  of a list of such
terminated  Non-Union Employees and the amount of such Severance Cost components
with respect to such  employees.  With respect to the Severance  Cost  component
described  in  clause  (iii),  Seller  shall  provide  Buyer  during  the  COBRA
Continuation   Coverage  period  with  a  monthly  schedule  setting  forth  the
cumulative  amount of such cost  component  for the preceding  month,  and Buyer
shall pay such  reimbursement  to Seller  within five days after receipt of each
such schedule.

                                       47
<PAGE>

     (c) All offers of employment made by Buyer pursuant to Sections 6.12(a) and
(b) shall be made in accordance  with all applicable laws and  regulations,  and
for Union Employees, in accordance with the applicable IBEW CBA and shall remain
open for a period of ten (10)  working  days.  Any such offer  which is accepted
within such ten (10) working day period shall thereafter be irrevocable,  except
for good cause, until the earlier of the Closing Date or the termination of this
Agreement pursuant to its terms.  Additionally,  such offers shall be contingent
upon the Non-Union Employee's or Union Employee's  successful completion of drug
testing  pursuant to Buyer's policies and in compliance with the applicable IBEW
CBA.  Following  acceptance of such offers,  Buyer shall provide  written notice
thereof to Seller and Seller  shall  provide  Buyer with access to the files and
records of employees accepting such offers, to the extent permitted by contract,
the applicable IBEW CBA and/or applicable law.

     (d)  The  following   shall  be  applicable  with  respect  to  Transferred
Employees:

          (i) From and after  the  Closing  Date,  Transferred  Employees  shall
     accrue no additional  benefits  under any employee  benefit  plan,  policy,
     program or arrangement of Seller or its Affiliates.

          (ii) For such Transferred  Union Employees,  Buyer shall recognize the
     IBEW as the exclusive collective bargaining representative and shall assume
     the  terms  and  conditions  of the  applicable  IBEW  CBA,  to the  extent
     applicable to such  Transferred  Union  Employees,  until the expiration of
     said  agreement,   and  will  further  comply  with  all  applicable  legal
     obligations  with respect to collective  bargaining under federal labor law
     thereafter.

          (iii) As of the Closing Date, Buyer shall cause Transferred  Non-Union
     Employees  to be  covered by the Buyer  benefit  plans  listed on  Schedule
     6.12(d)(iii),  and shall cause  Transferred  Union Employees to be provided
     with benefits that are consistent with the terms of the applicable IBEW CBA
     or are otherwise  acceptable to the applicable union. The commitments under
     this paragraph shall require the following:

               (A) With  respect to health care plans,  Buyer agrees to waive or
          to cause the waiver of all limitations as to  pre-existing  conditions
          and   actively-at-work   exclusions  and  waiting   periods  for  such
          employees,  except  that Buyer may  require  the  employee  or his/her
          dependents  who,  on the  Closing  Date,  is  then in the  process  of
          satisfying  any similar  exclusion or waiting  period under the Seller
          health care plans to satisfy fully the balance of the applicable  time
          period for such exclusion or waiting period under the applicable Buyer
          plan.  With  respect to the  calendar  year in which the Closing  Date
          occurs, all health care expenses incurred by any such employees and/or
          any eligible  dependent  thereof,  including  without  limitation  any
          alternate  recipient  pursuant  to  qualified  medical  child  support
          orders, in the portion of the calendar year preceding the Closing Date
          that  were  qualified  to  be  taken  into  account  for  purposes  of
          satisfying  any  deductible  or  out-of-pocket  limit under any Seller
          health  care  plans  shall be  taken  into  account  for  purposes  of
          satisfying any deductible or out-of-pocket limit under the health care
          plan of Buyer for such calendar year.

                                       48
<PAGE>

               (B) With respect to service and seniority,  Buyer shall recognize
          each  such  employee's  service  and  seniority  with  Seller  and any
          affiliate  of  Seller  for all  non-pension  purposes,  including  the
          determination    of    eligibility    and   extent   of   service   or
          seniority-related  welfare  benefits  such as  vacation  and  sick pay
          benefits.  Seller  agrees to pay each such  employee  for all vacation
          benefits  banked,  accrued,  and unused,  as of the Closing  Date,  or
          otherwise  according  to Seller's  policies  and  applicable  law. For
          purposes of this Section  6.12(d)(iii)(B),  Transferred  Employees who
          have prior service with Southern Union Company, and who are identified
          on a schedule  delivered to Buyer prior to the date  hereof,  shall be
          treated as service with Seller.

               (C) The Citizens  Pension Plan  ("Seller's  Pension  Plan") shall
          retain all  liabilities  and assets for  pension  benefits  accrued by
          Transferred  Employees  through  the  day  immediately  preceding  the
          Closing  Date,  and Seller  shall cause all such  accrued  benefits to
          become fully vested as of the Closing Date.  Seller  shall,  within 90
          days following the Closing Date, notify Transferred  Employees who are
          entitled to deferred  vested  benefits under Seller's  Pension Plan of
          the amount of such benefits. Buyer shall take all actions necessary to
          cause  the  Buyer's   qualified   pension   plan  listed  on  Schedule
          6.12(d)(iii)   in  which   Transferred   Employees   are  eligible  to
          participate  pursuant to Section  6.12(d)(iii) to provide  benefits no
          less  valuable  than those  provided in Seller's  Pension  Plan and to
          recognize  the  service  that  the  Transferred  Employees  had  under
          Seller's  Pension  Plan for  purposes of such  Transferred  Employees'
          eligibility to participate,  vesting,  attainment of retirement dates,
          subsidized  benefits,  entitlement to optional  forms of payment,  and
          benefit  accrual;  provided,  however  that a  Transferred  Employee's
          benefit  under  Buyer's  Pension  Plan  shall be  offset by his or her
          accrued benefit under Seller's Pension Plan. The offset referred to in
          the preceding  sentence  shall be based on the benefit that would have
          been  available  with respect to such  Transferred  Employee under the
          terms of Seller's  Pension Plan had such Seller's Pension Plan benefit
          commenced on the Transferred  Employee's  annuity  starting date under
          Buyer's  Pension  Plan and been paid in the same  form as the  benefit
          paid  under  Buyer's  Pension  Plan.   Notwithstanding  the  preceding
          sentence,  in the event that a  Transferred  Employee is ineligible to
          commence  receipt of his or her accrued benefit under Seller's Pension
          Plan on his or her annuity starting date under Buyer's Pension Plan or
          in the form elected under the Buyer's  Pension Plan,  the offset shall
          be based on the hypothetical  benefit that is the actuarial equivalent
          (as  determined  using  the  then  current  actuarial  assumptions  of
          Seller's Pension Plan) of the Transferred  Employee's  accrued benefit
          under Seller's Pension Plan, such  hypothetical  benefit being assumed
          to be payable in the same form and with the same annuity starting date
          as the Transferred  Employee's  benefit under Buyer's Pension Plan. At
          Buyer's   request,   Seller  shall  provide  Buyer  with  the  benefit
          calculations  applicable  to a  Transferred  Employee  under  Seller's
          Pension Plan.

                                       49
<PAGE>

               (D)  Buyer  shall  assume  all   liabilities,   obligations   and
          responsibilities with respect to providing  post-retirement health and
          life insurance  benefits  ("Post-Retirement  Welfare Benefits") to (i)
          retirees  of  the  Business  as of  the  Closing  Date  (the  "Current
          Retirees") and (ii)  Transferred  Employees who have satisfied the age
          and  service  eligibility  requirements  for  Post-Retirement  Welfare
          Benefits under the applicable Seller plans (the "Grandfathered  Active
          Employees" and, together with the Current Retirees, the "Grandfathered
          Individuals").  The  Grandfathered  Individuals are listed in Schedule
          6.12(d)(iii)(D).  Buyer  shall  continue  to  provide  to the  Current
          Retirees Post-Retirement Welfare Benefits that are comparable to those
          Post-Retirement  Welfare  Benefits  provided to such Current  Retirees
          immediately prior to the Closing Date, under  cost-sharing  structures
          that are at least  as  favorable  as the  cost-sharing  structures  in
          effect for and available to the Current Retirees  immediately prior to
          the Closing  Date.  Buyer shall  provide to the  Grandfathered  Active
          Employees  Post-Retirement  Welfare  Benefits  that are  comparable to
          those Post-Retirement  Welfare Benefits provided to such Grandfathered
          Active Employees  immediately prior to the Closing Date, commencing at
          the time such Grandfathered Active Employees retire. The Base Purchase
          Price  shall  be  decreased  by the  amount  by  which  the  APBO  (as
          hereinafter  defined)  exceeds two million dollars  ($2,000,000).  The
          "APBO"  means  the  accumulated   post-retirement  benefit  obligation
          (within the meaning of the Statement on Financial Accounting Standards
          No. 106) of the  Grandfathered  Individuals  receiving or eligible for
          the Post-Retirement Welfare Benefits to the extent Buyer has committed
          to provide  such  Post-Retirement  Welfare  Benefits  pursuant to this
          Section 6.12(d)(iii)(D), determined using a discount rate of 6.75% and
          the remaining  assumptions  disclosed in the January 1, 2001 Actuarial
          Valuation  Report dated  September  17, 2002, as set forth on Schedule
          6.12(d)(iii)(D).

               (E)  With  respect  to the  Seller's  401(k)  Savings  Plan  (the
          "Savings  Plan"),  Seller  shall vest  Transferred  Employees in their
          Savings Plan account  balances as of the Closing  Date.  Seller hereby
          represents  to Buyer that the Savings Plan is intended to be qualified
          within the  meaning of Section  401 of the Code.  Buyer shall take all
          actions necessary to cause the Buyer's qualified 401(k) plan listed on
          Schedule  6.12(d)(iii) in which Transferred  Employees are eligible to
          participate  pursuant to Section  6.12(d)(iii)  (x) to  recognize  the
          service  that the  Transferred  Employees  had in the Savings Plan for
          purposes of determining  such  Transferred  Employees'  eligibility to
          participate,  vesting,  attainment of retirement  dates,  contribution
          levels, and, if applicable,  eligibility for optional forms of benefit
          payments, and (y) to accept  direct-rollover  transfers of Transferred
          Employees' account balances in the Savings Plan,  including  transfers
          of loan  balances and related  promissory  notes,  provided  that such
          loans would not be treated as taxable  distributions at any time prior
          to such transfer.

               (F) Within sixty (60) days after the Closing  Date,  Seller shall
          transfer to Buyer's  flexible  benefits plan any balances  standing to
          the credit of Transferred  Employees under Seller's  flexible benefits
          plan as of the day immediately  preceding the Closing Date. As soon as
          practicable  after the Closing  Date,  Seller shall provide to Buyer a
          list of those  Transferred  Employees  that have  participated  in the
          health or dependent care  reimbursement  accounts of Seller,  together
          with their  elections  made prior to the Closing  Date with respect to
          such  account,  and  balances  standing to their  credit as of the day
          immediately preceding the Closing Date.

                                       50
<PAGE>

     (e)  With  respect  to  severance  benefits,  Buyer  shall  provide  to any
Transferred Non-Union Employee who is terminated by Buyer (other than for cause)
prior  to the date  which is one year  following  the  Closing  Date,  severance
benefits at the level set forth in a schedule  provided  to Seller  prior to the
date hereof.  Any employee provided severance benefits under this section may be
required to execute a release of claims against  Seller and Buyer,  in such form
as Buyer shall prescribe, as a condition for the receipt of such benefits.

     (f) Each  Transferred  Non-Union  Employee  who is initially  assigned,  or
assigned  within twelve (12) months of the Closing Date, by Buyer to a principal
place of work that  requires  such  employee to relocate his  residence  will be
reimbursed  by  Buyer  for  all  relocation  expenses  in  accordance  with  the
relocation  benefits  plans set forth in a schedule  provided to Seller prior to
the date  hereof.  For  purposes  of the  foregoing  a  required  relocation  of
residence  shall  include a change in the  principal  place of work that is more
than 30 miles farther from such employee's  principal place of work  immediately
prior to the  Closing  Date and  requires  an average  commute  from his current
residence of at least one hour in each direction.

     (g)  Seller  shall  be  responsible,  with  respect  to the  Business,  for
performing  and  discharging  all  requirements  under  the WARN  Act and  under
applicable  state and local laws and  regulations  for the  notification  of its
employees  of any  "employment  loss"  within the  meaning of the WARN Act which
occurs on or prior to the Closing Date.

     (h) Buyer shall not be  responsible  for, but Seller  shall be  responsible
for, extending COBRA Continuation Coverage to any employees and former employees
of  Seller,  or to any  qualified  beneficiaries  of such  employees  and former
employees,  who become or became entitled to COBRA  Continuation  Coverage on or
before the Closing Date, including those for whom the Closing Date occurs during
their COBRA election period.

     (i)  Seller  or  its  Affiliates  shall  pay or  cause  to be  paid  to all
Transferred  Employees,  all  compensation  (including  vacation pay),  workers'
compensation or other  employment  benefits to which they are entitled under the
terms of the applicable  compensation  or Seller benefit plans or programs as of
the Closing Date. Buyer shall pay to each Transferred Employee all unpaid salary
or  other  compensation  or  employment  benefits  which  have  accrued  to such
employees  following the Closing Date, at such times as provided under the terms
of  the  applicable  compensation  or  benefit  programs.   Notwithstanding  the
foregoing,  if the  Closing  Date is on or after  July 1 of any  calendar  year,
Seller and Buyer shall  pro-rate the  obligation to pay any bonuses  declared by
Seller on or after the Closing Date (but prior to March 1 of the  calendar  year
following  the year in which the  Closing  Date  occurs)  that  would  have been
payable to the  Transferred  Employees had the  Transferred  Employees  remained
employed by Seller or its  Affiliates  throughout the calendar year in which the
Closing Date occurs,  in accordance  with the  provisions  of any policy,  plan,
practice or  arrangement  of Seller under which such bonus would have been paid.
Buyer shall be obligated to pay that  portion of each such bonus  determined  by
multiplying  the amount of such bonus by a fraction,  the  numerator of which is
the  number  of days  from and after the  Closing  Date  through  the end of the
calendar year in which the Closing Date occurs,  and the denominator of which is
365.

                                       51
<PAGE>

     (j) Seller  shall be  responsible  for  maintaining  workers'  compensation
coverage for all Union Employees and Non-Union  Employees for claims relating to
occurrences prior to the Closing Date.

     (k) Individuals  who are otherwise  Union Employees or Non-Union  Employees
but who on any date are not  actively at work due to a leave of absence  covered
by the Family and Medical Leave Act (FMLA), or due to any other authorized leave
of absence, including, without limitation,  short-term disability, or who are on
long-term  disability,  shall nevertheless be treated as "Union Employees" or as
"Non-Union Employees",  as the case may be, on such date if they are able (i) to
return to work within the  protected  period  under the FMLA or such other leave
(which in any event  shall not extend  more than  twelve  (12)  weeks  after the
Closing  Date),  whichever  is  applicable,  and (ii) to perform  the  essential
functions of their job, with or without a reasonable accommodation.

     (l)  Buyer  shall  be  responsible,  with  respect  to  the  Business,  for
performing  and  discharging  all  requirements  under  the WARN  Act and  under
applicable  state and local laws and  regulations  for the  notification  of its
employees  of any  "employment  loss"  within the  meaning of the WARN Act which
occurs following the Closing Date.

     (m) Buyer is  responsible  for  extending  and  continuing  to extend COBRA
Continuation Coverage to all Transferred Employees,  and qualified beneficiaries
of such  employees  who  become  entitled  to such COBRA  Continuation  Coverage
following the Closing Date.

     (n) The provisions of this Section 6.12 shall not be construed as being for
the  benefit  for any person  other than the  Parties  hereto,  and shall not be
enforceable by persons other than such Parties (including,  without limitations,
the Transferred Employees).

     6.13 Risk of Loss.

     (a) From the date  hereof  through the  Closing  Date,  all risk of loss or
damage to the assets included in the Assets shall be borne by Seller, other than
loss  or  damage  caused  by the  acts  or  negligence  of  Buyer  or any  Buyer
Representative, which loss or damage shall be the responsibility of Buyer.

     (b) If, before the Closing Date, all or any portion of the Assets are taken
by eminent  domain,  municipalization  or  condemnation  or are the subject of a
pending  taking which has not been  consummated,  (such event being  called,  in
either case, a "Taking"),  then Seller shall notify Buyer promptly in writing of
such Taking.

          (i) If such Taking relates to Assets of Seller having an aggregate net
     book value in excess of $50,000,000,  then such Taking shall be a "Material
     Taking." Upon a Material Taking, Seller and Buyer shall negotiate to settle
     the loss, if any, resulting from such Material Taking (and such negotiation
     shall include, without limitation,  the negotiation of a fair and equitable
     reduction in the Base Purchase  Price to offset such loss, if any, based on
     consideration  of all  relevant  circumstances).  If Seller and Buyer shall
     fail to agree to settle  the loss,  if any,  resulting  from said  Material
     Taking,  said Material Taking shall be  conclusively  deemed to be an Asset
     Material  Adverse  Effect.  Any Taking  relating  to any Assets of Seller's
     Santa Cruz division shall not be deemed to be a Material Taking.

                                       52
<PAGE>

          (ii) If such Taking is not a Material Taking, then (A) Buyer may elect
     to, in the name of Seller,  negotiate for,  claim,  contest and receive the
     portion  of the  award  properly  allocable  to those  Assets  that are the
     subject  of the  Taking,  (B) to the  extent  the  Taking  shall  have been
     consummated  prior  to  the  Closing,  Seller  shall  be  relieved  of  its
     obligation  to convey to Buyer  those  Assets  that were the subject of the
     Taking,  (C) at the Closing,  Seller will assign to Buyer all of its rights
     to  damages  payable as a result of the  Taking,  and will pay to Buyer all
     damages  previously paid to it in connection with the Taking,  in each case
     to the extent  properly  allocable  to those Assets that are the subject of
     the Taking,  and (D) following  the Closing,  Seller will give to Buyer any
     further assurances of such rights and assignment with respect to the Taking
     as Buyer reasonably may request from time to time.

          (c) (i) If any  casualty  loss or damage  to the  Assets  shall  occur
     before the Closing Date, then the Base Purchase Price shall be reduced,  to
     the extent such loss or damage is not remedied  prior to the Closing  Date,
     by an amount  mutually  acceptable  to the  Parties,  which amount shall be
     equal  to the  estimated  out-of-pocket  costs  and  expenses  which  Buyer
     reasonably  can be expected to incur to repair or  replace,  in  accordance
     with Good Utility Practices,  such lost or damaged Assets after Closing. If
     the actual out-of-pocket costs and expenses which Buyer reasonably incurred
     to repair or replace, in accordance with Good Utility Practices,  such lost
     or damaged  Assets exceeds such estimated  amount,  Seller shall  reimburse
     Buyer for such excess  costs.  If the Parties do not agree to an adjustment
     to the Base  Purchase  Price in  respect  of the  casualty  loss,  then the
     Closing  shall be postponed  for such period of time (not to exceed six (6)
     months),  and Seller shall repair or replace the lost or damaged  Assets in
     accordance  with Good Utility  Practices  and Buyer or its  Representatives
     will have the right to inspect  and  observe  and  approve,  all repairs or
     replacements made by Seller to remedy such casualty loss.

          (ii)  Notwithstanding  anything to the contrary in Section  6.13(c)(i)
     above, if Seller shall have failed to remedy,  cure or otherwise reverse by
     the Closing  Date any  casualty  loss or damage to the Assets such that the
     estimated  out-of-pocket  costs and expenses that Buyer  reasonably  can be
     expected to incur to repair or replace such lost or damaged  Assets exceeds
     $25,000,000,  such loss or  damage  shall be  conclusively  deemed to be an
     Asset Material Adverse Effect.

     6.14 Tax Exempt Financing

     (a) Seller represents that:

          (i) The Exempt Facilities have been financed, and refinanced, in whole
     or in  part,  with  the  proceeds  of the  issuance  and  sale  by  various
     governmental authorities of industrial development revenue bonds or private
     activity bonds the interest on which, with certain exceptions,  is excluded
     from gross income for purposes of Federal income  taxation (such bonds,  as
     currently  outstanding,  the "Revenue  Bonds");  and Seller is the economic
     obligor in respect of such Revenue Bonds;

                                       53
<PAGE>

          (ii) The Revenue Bonds are described in Schedule 6.14(a);

          (iii) The basis for the  exclusion  of interest  on the Revenue  Bonds
     from gross income for Federal  income tax purposes is the use of the Exempt
     Facilities for (A) "the local  furnishing of electric  energy or gas" under
     Sections  142(a)(8)  and  142(f)  of the Code or,  if  applicable,  Section
     103(b)(4)(E)  of the Internal  Revenue Code of 1954,  as amended (the "1954
     Code"),  and in  either  case  the  applicable  Treasury  Regulations  (the
     "Regulations")  thereunder,  or (B) "the  furnishing  of water" or  "sewage
     facilities"  under  Sections  142(a)(4)  and  142(a)(5)  of the Code or, if
     applicable,  Sections 103(b)(4)(G) or 103(b)(4)(E) of the 1954 Code, and in
     either case the applicable Regulations. Seller acknowledges and agrees that
     Buyer has and shall have no responsibility or obligation  hereunder for the
     Exempt Facilities described in clause (B);

          (iv) The use of the  Exempt  Facilities  for a  purpose  other  than a
     qualifying  purpose  indicated in  subsection  (iii) above could impair (A)
     such  exclusion  from gross  income of the  interest on the Revenue  Bonds,
     possibly with retroactive effect,  unless appropriate  remedial action were
     taken (which could include  prompt  defeasance or redemption of the Revenue
     Bonds)  and/or  (B) the  deductibility  of  payments  by Seller or Buyer of
     interest based on the restrictions in Section 150(b) of the Code;

          (v) After August 20, 1996,  at least the  following  bonds exempt from
     tax  under  Section  103 of the Code and in whole or in part  described  in
     Section  142(a)(8) of the Code have been issued with respect to  facilities
     of Seller  for the  "local  furnishing  of  electric  energy  or gas":  The
     Industrial  Development  Authority  of the  County  of  Navajo,  Industrial
     Development  Revenue Bonds (Citizens Utilities Company Project) 1997 Series
     B ($12,380,000),  and The Industrial Development Authority of the County of
     Yavapai,  Industrial  Development Revenue Bonds (Citizens Utilities Company
     Project) 1998 Series ($20,000,000); and

          (vi) Any breach by Buyer of its  obligations  under this  Section 6.14
     could result in the  incurrence by Seller of additional  costs and expenses
     with respect to the Revenue Bonds, including, without limitation, increased
     interest  costs,  loss  of the  interest  deduction  for tax  purposes  and
     transaction costs relating to any refinancing, redemption and/or defeasance
     of all or part of the Revenue Bonds (cumulatively, the "Tax Impact").

     (b) Buyer  agrees that Buyer will  indemnify  Seller for costs  incurred by
Seller in respect of any Tax Impact  that would not have  arisen but for Buyer's
breach of its obligations  under Section 6.14(c) (except as excused elsewhere in
this Section 6.14),  provided that Buyer's agreements and representations as set
out in this  Section  6.14 shall be limited to and apply  solely to those Exempt
Facilities described by Section 6.14(a)(iii)(A).

                                       54
<PAGE>

     (c) After August 20,  1996,  at least the  following  bonds exempt from tax
under  Section  103 of the Code  and  described  in whole or in part in  Section
142(a)(8) of the Code have been issued with respect to  facilities  of Buyer for
the "local furnishing of electric energy": The Industrial  Development Authority
of the County of Pima,  Industrial  Development  Revenue Bonds (Tucson  Electric
Power Company Project) 1997 Series A, B and C ($247,460,000), and The Industrial
Development  Authority of the County of Apache,  Pollution Control Revenue Bonds
(Tucson Electric Power Company  Project) 1998 Series A, B and C  ($200,000,000).
So long as any Revenue Bonds remain  outstanding with respect to electric Exempt
Facilities  in any  county,  Buyer  agrees  that it shall  not use,  or take any
deliberate  act to permit the use of, or fail to take any act within its control
that would prevent the use of, the electric Exempt Facilities within that county
for any  purpose or in any manner  other  than as shall be  consistent  with the
Exempt Facility Operating Protocols (as such Exempt Facility Operating Protocols
may have been  updated,  amended or corrected by Seller for the purpose of their
accuracy  on or before  the  Closing  Date;  provided  that such  changes do not
materially  impact Buyer's operation of the Assets) delivered by Seller to Buyer
on or before the date of this Agreement, unless Buyer:

          (i) has obtained at its own expense an opinion  addressed to Seller of
     nationally  recognized bond counsel reasonably  acceptable to Seller ("Bond
     Counsel") that such use will not impair (x) the exclusion from gross income
     of the  interest  on any issue of  Revenue  Bonds for  Federal  income  tax
     purposes and (y) the  deductibility of Seller's  payments of interest based
     on the restrictions in Section 150(b) of the Code; or

          (ii) has  provided  written  notice to Seller of any act or failure to
     act  either (x) not later  than 45 days  after the  effective  date of such
     action,  or (y) if any of such affected Revenue Bonds are not then eligible
     for optional or mandatory redemption by the terms thereof,  sufficiently in
     advance of such act or failure to act to permit  Seller to request from the
     IRS a  private  letter  ruling to the  effect  that  such  action  does not
     constitute  an event  that would  adversely  affect  the  exclusion  of the
     interest on such  Revenue  Bonds from gross  income for Federal  income tax
     purposes,  to receive a final  ruling to such effect  from the IRS,  and to
     dispose of the Revenue Bonds in a manner not inconsistent  with such ruling
     ("Sufficient Notice"). (Reference is made to Schedule 6.14(a) for a listing
     of the respective optional redemption dates of the Revenue Bonds.)

     (d) Notwithstanding any other provision of this Agreement,  it is expressly
understood and agreed that the provisions of Section  6.14(c) shall not prohibit
Buyer from (and Buyer shall incur no  liability  to Seller for or in  connection
with Buyer)  suspending  the operation of the Exempt  Facilities (in whole or in
part) on a temporary  basis,  or from  terminating  the  operation of the Exempt
Facilities  (in  whole or in part)  on a  permanent  basis  and  shutting  down,
retiring,  abandoning and/or  decommissioning the Exempt Facilities (in whole or
in part); provided, however, that if the Exempt Facilities, in whole or in part,
are  dismantled  and sold,  including  any sale for scrap,  at any time when any
Revenue  Bonds  remain  outstanding,  then the  proceeds  of such sale of Exempt
Facilities  shall within six months from the date of sale be expended to acquire
replacement  property to be used as  described  in the related  Exempt  Facility
Operating Protocol,  unless (I) Buyer has obtained at its own expense an opinion
addressed  to Seller of Bond  Counsel  that the failure to take this action will
not impair (x) the  exclusion  from gross income of the interest on any issue of
Revenue  Bonds for Federal  income tax  purposes  and (y) the  deductibility  of
Seller's payments of interest based on the restrictions in Section 150(b) of the
Code;  (II) the proceeds of such sales are less than $50,000 in a calendar year;
or (III) Buyer has provided Sufficient Notice of such action to Seller.

                                       55
<PAGE>

     (e) Buyer agrees that it shall not issue, or have issued on its behalf, any
tax-exempt  bonds  to  finance  or  refinance  its  acquisition  of  the  Exempt
Facilities, provided that it is expressly understood and agreed that this clause
(e) shall not prohibit  Buyer's use of tax-exempt  bonds to finance or refinance
any  improvement to the Exempt  Facilities made after the date of acquisition or
to any assets other than the Exempt Facilities.

     (f)  Buyer  agrees  to  provide  prompt  written  notice  to  Seller of any
condemnation  of, or casualty  loss with respect to, the Exempt  Facilities,  in
whole or in substantial part, to cooperate in good faith with Seller in Seller's
efforts to ascertain the  consequences of any such eminent domain  proceeding or
casualty  loss for the (A) exclusion of interest on the Revenue Bonds from gross
income for Federal  income tax  purposes and (B) the  deductibility  of Seller's
payments of interest based on the restrictions in Section 150(b) of the Code.

     (g) Seller  agrees that the  Revenue  Bonds shall be redeemed no later than
the  earlier  of (I) their  respective  stated  maturity  dates,  and (II) their
respective first optional  redemption dates on or after the Closing Date. Seller
also agrees that none of the Revenue Bonds shall be refunded.

     (h)  Seller  hereby  represents  that  it  has  performed  all  duties  and
obligations of "Company" under the documents relating to the Revenue Bonds, that
the  representations  and warranties under the documents relating to the Revenue
Bonds remain true and correct, and that there has been no breach of any covenant
or agreement by Seller under the documents relating to the Revenue Bonds. Seller
hereby covenants that, until all of the Revenue Bonds have been redeemed, Seller
will  perform  all duties  and  obligations  of  "Company"  under the  documents
relating to the Revenue  Bonds,  that Seller's  representations  and  warranties
under such  documents  will  remain  true and  correct  and that Seller will not
breach any covenant or agreement of Seller under such  documents;  provided that
Seller's  covenant  in this  sentence  shall  not  extend  to any  such  duties,
obligations, representations,  warrantees, covenants or agreements the necessary
predicate for which is Seller's actual  ownership,  possession or control of the
Exempt  Facilities  from and after the Closing  Date.  Seller  acknowledges  and
agrees  that  although  Seller  from and  after the  Closing  Date will not own,
possess  or  control  the  Exempt  Facilities,  Seller  shall  remain  primarily
obligated  under the  documents  relating to the  Revenue  Bonds and, as between
itself and each issuer of the Revenue  Bonds,  shall  remain  subject to each of
Seller's representations, warranties, covenants and agreements thereunder. Buyer
shall have no liability  under this Section 6.14 unless  interest on the Revenue
Bonds would be excluded from gross income for Federal income tax purposes absent
an act or  failure  to act by Buyer in  contravention  of the  terms of  Section
6.14(c).

     (i) In any case  where  Buyer has  provided  notice to  Seller  under  this
Section  6.14,  Buyer  agrees that it will join and  cooperate  with Seller with
respect to any  request by Seller to the  Internal  Revenue  Service to obtain a
private letter ruling  regarding any Tax Impacts of the act or failure to act by
Buyer that prompted such notice.  Seller will join and cooperate with Buyer with
respect to any  request  by Buyer to the  Internal  Revenue  Service to obtain a
private letter ruling  regarding any Tax Impacts.  The Party seeking the private
letter   ruling  shall  bear  all  costs  of  the  filing,   legal  and  related
out-of-pocket expenses incurred in the course of such request.

                                       56
<PAGE>

     (j) Seller  agrees  that it has sole  responsibility  to make any  required
payments of principal  and  interest on the Revenue  Bonds and that Buyer has no
responsibility  to make such  payments.  Seller  agrees that it will  indemnify,
protect,  defend and hold  harmless  Buyer from and against any claim that Buyer
owes any payment of principal or interest on the Revenue  Bonds.  Seller  agrees
that Buyer shall retain any payments  with respect to any casualty  event or any
condemnation  of the Exempt  Facilities and that,  except as Buyer has otherwise
agreed under  Section  6.14(c),  Buyer shall not be restricted in its use of any
such proceeds.

     (k) If Buyer shall sell,  exchange,  transfer or  otherwise  dispose of the
Exempt  Facilities in whole or substantial  part (aggregate price of $500,000 or
more in a calendar year) to one or more third  parties,  Buyer shall cause to be
included  in the  documentation  relating  to  such  transaction  covenants  and
agreements on the part of such third party  substantially  identical to those on
the part of Buyer contained in this Section 6.14.

     (l) The covenants and agreements on the part of Buyer and Seller  contained
in this  Section  6.14 shall  continue  in effect so long as any of the  Revenue
Bonds shall remain  outstanding.  Seller shall notify Buyer  promptly when there
shall be no Revenue Bonds outstanding.

     (m) Buyer  acknowledges  and agrees that  Seller's bond counsel may rely on
Buyer's  representations,  warranties and covenants as hereinabove  provided for
the purpose of rendering legal opinions, as required by the Indentures of Trust,
the Loan  Agreements and the Tax Regulatory  Agreements  relating to the Revenue
Bonds ("IDRB  Documents") as a precondition to the sale by Seller of such Exempt
Facilities,  to the  effect  that the sale of such  Exempt  Facilities  will not
result in (I) the  inclusion of the  interest on the Revenue  Bonds in the gross
income of the  recipient  for  purposes  of Federal  income  taxation,  and (II)
disallowance  of interest  expense to Seller under  Section  150(b) of the Code.
Seller  acknowledges  and  agrees  that  Buyer  shall  be an  addressee  of  the
above-described  opinion  letters of Seller's  bond  counsel or shall  receive a
reliance  letter from  Seller's bond counsel  authorizing  Buyer to rely on such
opinion letters.

     (n) Nothing in this Agreement is intended to nor shall it be interpreted as
(i) an assignment to, and assumption by, Buyer of any of the IDRB Documents,  or
(ii) as an undertaking or agreement by Buyer to assume,  guarantee or pay any of
Seller's loan or other payment obligations pursuant to the IDRB Documents. Other
than as stated in this Section 6.14, Buyer shall have no liability in respect of
the Revenue Bonds.

     (o) Each of Buyer and Seller shall use its Commercially Reasonable Efforts,
and shall cooperate with the other Party in the other Party's efforts, to obtain
all Consents, bond counsel opinions and IRS rulings as may be required under the
IDRB  Documents  and the Code to enable  Seller to  defease,  prepay,  redeem or
retain until the first possible  redemption  date the IDRB  Indebtedness  and to
sell the Assets to Buyer  without  the result  that the  interest on the Revenue
Bonds will be  included in the gross  income of the  recipient  for  purposes of
Federal income taxation;  provided, however, that Buyer shall have no obligation
in respect of its ownership or operation of the Exempt Facilities (including but
not limited to rates imposed by Buyer in respect of utility service  provided by
the Exempt  Facilities  or by any other  facilities  of Buyer or  affiliates  of
Buyer) other than to comply with the Exempt Facility Operating Protocols.

                                       57
<PAGE>

     6.15 Seller Guarantees and Surety Instruments. Buyer shall use Commercially
Reasonable  Efforts to assist Seller in obtaining full and complete  releases of
the guarantees,  letters of credit, bonds and other surety instruments listed in
Schedule 6.15. In this connection, Buyer agrees to provide a guaranty, letter of
credit,  bond or other surety  instrument  at Closing to replace those listed in
Schedule 6.15.

     6.16 Citizens Marks.  Buyer acknowledges and agrees with Seller that Seller
has the absolute and  exclusive  proprietary  right to the Citizens  Marks,  all
rights to which and the goodwill  represented thereby and pertaining thereto are
being retained by Seller.  Within ninety (90) days after the Closing Date, Buyer
shall cease using any Citizens Mark and shall remove from the Assets any and all
Citizens Marks. Thereafter,  Buyer shall not use any Citizens Mark in connection
with the sale of any  products or services  or  otherwise  in the conduct of the
businesses.  In the event that Buyer breaches this Section 6.16, Seller shall be
entitled  to specific  performance  and to  injunctive  relief  against  further
violations,  as well as any  other  remedies  at law or in equity  available  to
Seller.

     6.17 Title Commitments. Prior to Closing, Seller shall cooperate with Buyer
and use  Commercially  Reasonable  Efforts to assist  Buyer if Buyer  desires to
obtain  American Land Title  Association  ("ALTA") title  insurance  commitments
(collectively, the "Title Commitments," and each a "Title Commitment"), in final
form,  from one or more  title  insurance  companies  (collectively,  the "Title
Company"), committing the Title Company (subject only to the satisfaction of any
industry standard requirements  contained in the Title Commitment) to issue ALTA
(or its  local  equivalent)  form  of  title  insurance  policies  in an  amount
acceptable to the Buyer and the Title Company insuring good, valid, indefeasible
fee simple title to the Real  Property in Buyer,  in all cases,  at Buyer's sole
expense and in the  respective  amounts  that Buyer  requests  prior to Closing,
subject to no  Encumbrances  or other  exceptions to title other than  Permitted
Encumbrances  (collectively  the "Title  Policies").  On or prior to the Closing
Date,  Seller shall execute and deliver,  or cause to be executed and delivered,
to the Title Company, at no cost to Seller, any customary  affidavits,  standard
gap  indemnities,  evidence of corporate  existence and  authority,  and similar
documents  reasonably  requested  by the Title  Company in  connection  with the
issuance of the Title  Commitments  or the Title  Policies;  provided  that such
efforts and Buyer's request for Title Policies or Title Commitments shall, in no
event, result in any delay in the consummation of the transactions  contemplated
by this  Agreement,  except to the extent  caused by or resulting  from Seller's
breach of this  Agreement;  and provided  further,  that nothing in this Section
6.17 shall obligate Seller to execute or deliver any document that affects, in a
manner adverse to Seller, Seller's liability to Buyer as expressed herein and in
the Special Warranty Deed.

     6.18 Joint Use Agreement re: Easements.  To the extent reasonably requested
by either Party, at least sixty (60) days before  Closing,  Buyer and Seller (or
its appropriate  Affiliate) will commence good faith negotiations of a joint use
agreement,  to be fully  executed  and  delivered  by the  Parties  at  Closing,
regarding the shared  Easements to be partially  assigned to Buyer at Closing as
contemplated  in  Schedule  2.2.  Such  joint use  agreement  will be  partially
assignable  by Seller to any  purchaser  of  Seller's or its  Affiliate's  other
utility  plant  permitted to be located on the real property that is the subject
of any such shared Easements.

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     6.19 Leases. If requested by Buyer at least sixty (60) days before Closing,
Buyer and  Seller  (or its  appropriate  Affiliate)  will  commence  good  faith
negotiations  regarding  Buyer's  short-term  lease (not to exceed  one  hundred
eighty (180) days from the Closing Date) of space at the business office at 1760
McCulloch  Boulevard,  Lake Havasu City,  Arizona, a portion of which is used by
Seller  in  connection  with the  Business,  on  commercially  reasonable  terms
acceptable to Buyer and Seller.

     6.20 Post-Execution  Delivery of Schedules.  Within one hundred eighty days
(180) following the date of execution of this Agreement, Seller shall deliver to
Buyer a schedule, to be identified as Schedule 6.20, which sets forth all of the
following  identified by Seller after reasonable  investigation (i) all Permits,
(ii) all material items of Tangible Personal Property (other than  Inventories),
(iii)  quantities of Inventories  recorded in Seller's books and records for the
Business as of the last day of the month  preceding the date of this  Agreement,
together with the net book values of such  Inventories as of such date, (iv) all
Easements held by Seller in connection with the Business, (v) all line extension
agreements and similar construction  arrangements,  railroad crossing agreements
and similar arrangements,  and (vi) all Real Property Leases. Schedule 6.20 will
also  designate  those  Permits  that  require  the  consent  of the  respective
Governmental   Authority   to   transfer   and   those   that   purport   to  be
non-transferable.

                                  ARTICLE VII

                                   CONDITIONS

     7.1 Conditions to  Obligations of Buyer.  The obligation of Buyer to effect
purchase of the Assets and the other transactions contemplated by this Agreement
shall be subject  to the  fulfillment  of the  following  conditions,  or waiver
thereof, by Buyer at or prior to the Closing Date:

     (a) The waiting period under the HSR Act applicable to the  consummation of
the  sale  of  the  Assets  contemplated  hereby  shall  have  expired  or  been
terminated;

     (b) No preliminary or permanent  injunction or other order or decree by any
Governmental Authority which prevents the consummation of the sale of the Assets
contemplated  herein  shall have been  issued and remain in effect  (each  Party
agreeing to use its reasonable best efforts to have any such  injunction,  order
or decree lifted) and no statute,  rule or regulation shall have been enacted by
any state or  federal  government  or  Governmental  Authority  prohibiting  the
consummation of the sale of the Assets;

     (c) Buyer shall have received all of Buyer's Required Regulatory  Approvals
by Final Order, and such Required  Regulatory  Approvals shall not contain terms
and  conditions  that would result in a Regulatory  Material  Adverse Effect for
Buyer or an Asset Material Adverse Effect;

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     (d)  Seller  shall  have  received  all  of  Seller's  Required  Regulatory
Approvals by Final  Order,  and such  Required  Regulatory  Approvals  shall not
contain terms and conditions that would result in a Regulatory  Material Adverse
Effect for Buyer or an Asset Material Adverse Effect;

     (e) Seller shall have performed and complied with each of its covenants and
agreements  contained in this  Agreement  which are required to be performed and
complied with by Seller on or prior to the Closing Date except where the failure
to so  perform or comply,  when taken in the  aggregate,  would not have a Buyer
Material Adverse Effect or an Asset Material Adverse Effect;

     (f)  The  representations  and  warranties  of  Seller  set  forth  in this
Agreement shall be true and correct as of the Closing Date as though made at and
as of the Closing Date, except (i) subject to Section 6.11, to the extent due to
changes expressly  permitted by this Agreement or otherwise in writing by Buyer,
(ii) that  representations  and warranties  made as of, or in respect of, only a
specified date or period shall be true and correct as of, or in respect of, such
date or period and (iii) to the extent that any failure of such  representations
and  warranties to be true and correct as aforesaid  when taken in the aggregate
would not have a Buyer  Material  Adverse  Effect or an Asset  Material  Adverse
Effect (it being  understood and agreed that the economic  impact of any Adverse
Environmental Condition shall not be considered in the determination of an Asset
Material Adverse Effect except as otherwise provided in Section 6.3);

     (g) No Asset Material Adverse Effect shall have occurred and be continuing;

     (h) Seller shall have  delivered,  caused to be  delivered,  or be standing
ready to deliver, to Buyer at the Closing, Seller's closing deliveries described
in Section 3.5;

     (i) Buyer shall have  received any consents of third  parties  required for
the  assignment to Buyer of any of the Assigned  Agreements  other than consents
that,  if not obtained,  would not have an Asset  Material  Adverse  Effect or a
Buyer Material Adverse Effect,  in form and substance  reasonably  acceptable to
Buyer; and

     (j) Buyer shall be reasonably  satisfied that the consummation of the asset
purchase and sale  transaction  contemplated  by the Asset  Purchase  Agreement,
dated as of the date hereof,  between  Seller and Buyer  relating to purchase by
Buyer of Seller's gas utility business in the State of Arizona (the "Arizona Gas
Purchase Agreement"), will occur concurrently with the Closing.

     7.2  Conditions to  Obligations  of Seller.  The  obligations  of Seller to
effect the sale of the Assets and the other  transactions  contemplated  by this
Agreement  shall be subject to the fulfillment of the following  conditions,  or
the waiver thereof, by Seller at or prior to the Closing Date:

     (a) The waiting period under the HSR Act applicable to the  consummation of
the  sale  of  the  Assets  contemplated  hereby  shall  have  expired  or  been
terminated;

     (b) No preliminary or permanent  injunction or other order or decree by any
Governmental Authority which prevents the consummation of the sale of the Assets
contemplated  herein shall have been issued and remain in effect (each of Seller
and  Buyer  agreeing  to use  its  reasonable  best  efforts  to have  any  such
injunction,  order or decree  lifted) and no statute,  rule or regulation  shall
have been enacted by any state or federal  government or Governmental  Authority
in the United States prohibiting the consummation of the sale of the Assets;

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<PAGE>

     (c)  Seller  shall  have  received  all  of  Seller's  Required  Regulatory
Approvals by Final  Order,  and such  Required  Regulatory  Approvals  shall not
contain terms and conditions that would have an Asset Material Adverse Effect or
a Seller Material Adverse Effect;

     (d) Seller shall have received any consents of third  parties  required for
the  assignment to Buyer of any of the Assigned  Agreements  other than consents
that, if not obtained, would not have a Seller Material Adverse Effect;

     (e) Buyer shall have  performed and complied with each of its covenants and
agreements  contained in this  Agreement  which are required to be performed and
complied  with by Buyer on or prior to the Closing Date except where the failure
to so perform or comply,  when taken in the  aggregate,  would not have a Seller
Material Adverse Effect;

     (f) The representations and warranties of Buyer set forth in this Agreement
shall be true and correct as of the Closing Date as though made at and as of the
Closing  Date,  except (i) subject to Section 6.11, to the extent due to changes
expressly  permitted by this  Agreement or otherwise in writing by Seller,  (ii)
that  representations  and  warranties  made as of,  or in  respect  of,  only a
specified date or period shall be true and correct as of, or in respect of, such
date or period and (iii) to the extent that any failure of such  representations
and  warranties to be true and correct as aforesaid  when taken in the aggregate
would not have a Seller Material Adverse Effect;

     (g) Buyer shall have assumed,  as set forth in and subject to Section 6.12,
all of the applicable obligations under the IBEW CBA(s);

     (h) Buyer shall have delivered, caused to be delivered or standing ready to
deliver,  to Seller at the  Closing,  Buyer's  closing  deliveries  described in
Section 3.6;

     (i) Seller  shall be  reasonably  satisfied  that the  consummation  of the
Arizona Gas Purchase Agreement will occur concurrently with the Closing; and

     (j) Seller shall have received  opinions from Seller's Bond Counsel,  dated
the Closing Date, substantially in the form attached hereto as Exhibit E.

                                  ARTICLE VIII

                                 INDEMNIFICATION

     8.1 Indemnification of Seller by Buyer. Subject to Section 8.3, Buyer shall
indemnify, defend and hold harmless Seller, its officers, directors,  employees,
shareholders,  Affiliates  and agents  (each,  a "Seller  Indemnitee")  from and
against any and all  Indemnifiable  Losses  asserted  against or suffered by any
Seller Indemnitee (each, a "Seller  Indemnifiable Loss") in any way relating to,
resulting  from or arising out of or in connection  with (i) any breach by Buyer
of any covenant or agreement of Buyer contained in this Agreement or any failure
or  inaccuracy  of any  representation  or warranty of Buyer  contained  in this
Agreement,  (ii) the Assumed  Liabilities,  (iii) any loss or damages  resulting
from or arising solely out of any  Inspection of the Assets,  and (iv) any Third
Party  Claims  against a Seller  Indemnitee  to the extent  arising out of or in
connection  with  Buyer's  ownership  or operation of the Assets on or after the
Closing Date.

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<PAGE>

     8.2 Indemnification of Buyer by Seller.

     (a)  Subject  to  Section  8.3,  Seller  shall  indemnify,  defend and hold
harmless Buyer, its officers, directors, employees, shareholders, Affiliates and
agents (each, a "Buyer  Indemnitee")  from and against any and all Indemnifiable
Losses  asserted  against or suffered by any Buyer  Indemnitee  (each,  a "Buyer
Indemnifiable Loss") in any way relating to, resulting from or arising out of or
in  connection  with (i) any breach by Seller of any  covenant or  agreement  of
Seller   contained  in  this   Agreement  or  failure  or   inaccuracy   of  any
representation  or  warranty of Seller  contained  in this  Agreement,  (ii) the
Excluded  Liabilities,  (iii)  noncompliance  by Seller  with any bulk  sales or
transfer  laws as provided  in Section  10.12,  and (iv) any Third Party  Claims
against  a  Buyer  Indemnitee  arising  out of or in  connection  with  Seller's
ownership or operation of the Excluded Assets on or after the Closing Date.

     (b)  Subject  to  Sections  8.3(a),  (e),  (f)  and  (g)  and to the  other
provisions of this Section  8.2(b) and so long as Buyer complies with the Exempt
Facilities  Operating  Protocols  relating  to an issue of  outstanding  Revenue
Bonds,  Seller  agrees  to  indemnify,   defend  and  hold  harmless  the  Buyer
Indemnitees  from and against Buyer's Tax Losses (as defined below) upon a final
decree or judgment of any federal  court or a final  action by the IRS (a "Final
Determination") that the related Exempt Facilities are "tax-exempt bond financed
property" under Section 168(g)(5) of the Code by reason of such issue of Revenue
Bonds remaining  outstanding  from and after the Closing Date. No such decree or
action shall be  considered to be a Final  Determination  unless Seller has been
given written notice and, if it is so desired and is legally  allowed,  has been
afforded the  opportunity to contest the same either  directly or in the name of
Buyer,  and until  conclusion of any appellate  review,  if sought.  The maximum
aggregate  amount of Buyer's Tax Losses for which  Seller  shall be obligated to
indemnify  the Buyer  Indemnitees  both (i) under this  Section  8.2(b) and (ii)
under the  corresponding  Section  8.2(b) of the Arizona Gas Purchase  Agreement
shall be  $1,500,000.  "Buyer's  Tax Losses"  shall mean the amount equal to the
present value  (calculated using a discount rate of 10 percent per annum) of the
difference  (multiplied by the applicable  combined federal and State of Arizona
corporate tax rate of Buyer  Indemnitee)  for each affected tax year between the
respective  dollar amounts of (x) depreciation of the related Exempt  Facilities
allowed  under  Section  168(g) of the Code,  and (y) the  depreciation  of such
Exempt  Facilities  that would be allowable under Section 168 of the Code if the
Exempt  Facilities were not "tax-exempt  bond financed  property." The indemnity
granted by Seller in this  Section  8.2(b) shall  terminate at 5:00 p.m.,  local
time in New York,  New York,  on the seventh  anniversary  of the Closing  Date,
provided that such termination shall not affect Seller's  obligations under this
Section 8.2(b) if Buyer provided Seller with proper notice of the claim or event
for which indemnification is sought prior to such termination.

     8.3 Certain Limitations on Indemnification.

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<PAGE>

     (a) Notwithstanding anything to the contrary contained herein:

          (i) any  Indemnitee  shall  use  Commercially  Reasonable  Efforts  to
     mitigate all losses,  damages and the like  relating to a claim under these
     indemnification  provisions,  including  availing  itself of any  defenses,
     limitations, rights of contribution, claims against third persons and other
     rights at law or equity. The Indemnitee's  Commercially  Reasonable Efforts
     shall include the reasonable  expenditure of money to mitigate or otherwise
     reduce or eliminate  any loss or expenses for which  indemnification  would
     otherwise be due, and the Indemnifying Party shall reimburse the Indemnitee
     for the Indemnitee's reasonable expenditures in undertaking the mitigation;
     and

          (ii) any  Indemnifiable  Loss shall be net of the dollar amount of any
     insurance or other proceeds  actually  received by the Indemnitee or any of
     its Affiliates  with respect to the  Indemnifiable  Loss. Any Party seeking
     indemnity  hereunder  shall use  Commercially  Reasonable  Efforts  to seek
     coverage  (including both costs of defense and indemnity)  under applicable
     insurance policies with respect to any such Indemnifiable Loss.

     (b)  Except  as   otherwise   provided   in  this   Section   8.3(b),   the
representations,  warranties,  covenants and agreements of the Parties set forth
in this  Agreement  shall survive the Closing Date for a period of eighteen (18)
months,  and all  representations,  warranties,  covenants and agreements of the
Parties under this Agreement and the related indemnities granted in this Article
VIII shall terminate at 5:00 p.m., local time in New York City, New York, on the
day that is  eighteen  (18)  months  after the  Closing  Date.  The  expiration,
termination or  extinguishment of any covenant or agreement shall not affect the
Parties'  obligations under Section 8.1 or 8.2 hereof if the Indemnitee provided
the  Indemnifying  Party  with  proper  notice  of the  claim or event for which
indemnification   is   sought   prior  to  such   expiration,   termination   or
extinguishment. Notwithstanding the foregoing provisions of this Section 8.3(b),
the representations,  warranties, covenants and agreements contained in Sections
3.3(e),  6.2(c), 6.3(c), 6.3(e), 6.4(a), 6.10, 6.12, 6.14, 6.16, and in Articles
VIII and X, will  survive  the  Closing  in  accordance  with their  terms.

     (c)  Notwithstanding  anything to contrary in this  Agreement,  in no event
shall Buyer indemnify Seller  Indemnitees or Seller indemnify Buyer Indemnitees,
or otherwise be liable in any way whatsoever to said Indemnitees, for any Losses
otherwise subject to indemnification by the Indemnifying Party (determined after
giving  effect to the other  provisions  of this  Section  8.3)  until the Buyer
Indemnitees  or the  Seller  Indemnitees,  as the  case  may be,  have  incurred
otherwise  indemnifiable  Losses that in the aggregate exceed a threshold amount
equal to one percent (1%) of the Purchase Price, after which Buyer or Seller, as
the case may be,  shall  then be liable for all  Losses  incurred  by the Seller
Indemnitees  or  the  Buyer  Indemnitees,  as  applicable.  The  limitations  on
indemnification  set forth in this Section  8.3(c) shall not apply to any losses
asserted  against or suffered by an Indemnitee in any way relating to, resulting
from or arising out of or in connection  with the failure of (i) the appropriate
Party to make the payment  required to be made by it in accordance  with Section
3.3(d),  (ii) Buyer to discharge Assumed  Liabilities other than those specified
in Sections 2.3(e) and 2.3(i),  (iii) Seller to discharge  Excluded  Liabilities
other than those  specified  in  Sections  2.4(d),  2.4(g),  2.4(h),  2.4(j) and
2.4(n),  (iv) Seller to make any payment to Buyer if and to the extent  required
by Section 3.3(e), 6.3(c), 6.10(b), 6.13(c) or 8.2(b), and (v) Buyer to make any
payment to Seller if and to the extent  required  by Section  6.12(b).  Any such
losses also shall be  disregarded  when  determining  whether the  threshold set
forth in this Section 8.3(c) has been exceeded.

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<PAGE>

     (d) Notwithstanding anything to the contrary in this Agreement, in no event
shall  Seller  indemnify  the  Buyer   Indemnitees  or  Buyer  indemnify  Seller
Indemnitees,  or be otherwise liable in any way whatsoever to said  Indemnitees,
for any Losses otherwise subject to  indemnification  by the Indemnifying  Party
(determined  after giving  effect to the other  provisions  of this Section 8.3)
that in the  aggregate  exceed an  amount  equal to fifty  percent  (50%) of the
Purchase Price.

     (e) Except to the extent  otherwise  provided in Section 3.3  (relating  to
adjustments  to  the  Base  Purchase   Price),   Section  6.3(c)   (relating  to
post-Closing  reimbursement of excess environmental  Remediation costs), Section
6.10(b)  (relating to post-Closing  reimbursements  for Taxes),  Section 6.12(b)
(relating to post-Closing  reimbursements for Severance Costs),  Section 6.13(c)
(relating  to  post-Closing  reimbursement  of  excess  costs  and  expenses  of
repairing  lost or damaged  Assets),  and  Section  6.16  (relating  to specific
performance and injunctive  relief with respect to Citizens  Marks),  the rights
and remedies of Seller and Buyer under this Article  VIII are  exclusive  and in
lieu of any and all other rights and remedies which each of Seller and Buyer may
have under this Agreement or otherwise for monetary relief,  with respect to (i)
all  post-Closing  claims relating to this Agreement,  the events giving rise to
this Agreement and the transactions  provided for herein or contemplated  hereby
or thereby, or (ii) the Assumed Liabilities or the Excluded Liabilities,  as the
case may be.  Notwithstanding  any language contained in any Ancillary Agreement
(including the Special  Warranty Deed),  the  representations  and warranties of
Seller set forth in this  Agreement  will not be merged into any such  Ancillary
Agreement and the indemnification  obligations of Seller, and the limitations on
such  obligations,  set forth in this Agreement shall control.  No provision set
forth in any such Ancillary Agreement shall be deemed to enlarge, alter or amend
the terms or provisions of this Agreement.

     (f)  Notwithstanding  anything to the contrary  contained  herein, no Party
(including  an  Indemnitee)  shall be entitled  to recover  from any other Party
(including an Indemnifying  Party) for any  liabilities,  damages,  obligations,
payments,  losses,  costs, or expenses under this Agreement any amount in excess
of the actual compensatory  damages,  court costs and reasonable  attorney's and
other  advisor fees  suffered by such Party.  Each of Buyer and Seller waive any
right to recover  punitive,  incidental,  special,  exemplary and  consequential
damages  arising  in  connection  with or with  respect to this  Agreement.  The
provisions of this Section 8.3(d) shall not apply to indemnification for a Third
Party Claim.

     (g) The  limitations set forth in this Section 8.3 do not apply to fraud or
willful misconduct of a Party.

     (h) No amount shall be recovered  from a Party for the breach or untruth of
any of such Party's representations, warranties, covenants or agreements, or for
any other matter,  to the extent that the other such Party had knowledge of such
breach,  untruth or other matter at or prior to the Closing, nor shall the other
Party be entitled to rescission with respect to any such matter.

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     8.4 Defense of Claims.

     (a) If any Indemnitee  receives  notice of the assertion or commencement of
any Third  Party  Claim made or brought by any Person who is not a Party to this
Agreement or any  Affiliate of a Party to this  Agreement  with respect to which
indemnification is to be sought from an Indemnifying Party, the Indemnitee shall
give such Indemnifying  Party reasonably  prompt written notice thereof,  but in
any event such notice shall not be given later than ten (10) calendar days after
the Indemnitee's  receipt of notice of such Third Party Claim. Such notice shall
describe  the nature of the Third  Party  Claim in  reasonable  detail and shall
indicate the estimated  amount, if practicable,  of the Indemnifiable  Loss that
has been or may be sustained by the Indemnitee. The Indemnifying Party will have
the right to participate in or, by giving written notice to the  Indemnitee,  to
elect to assume  the  defense  of any  Third  Party  Claim at such  Indemnifying
Party's expense and by such Indemnifying Party's own counsel,  provided that the
counsel for the  Indemnifying  Party who shall conduct the defense of such Third
Party Claim shall be reasonably  satisfactory to the Indemnitee.  The Indemnitee
shall cooperate in good faith in such defense at such  Indemnitee's own expense.
If an  Indemnifying  Party elects not to assume or to participate in the defense
of any Third Party Claim,  the  Indemnitee  may  compromise or settle such Third
Party Claim over the objection of the  Indemnifying  Party,  which settlement or
compromise shall conclusively establish the loss for which the Indemnified Party
may seek indemnification from the Indemnifying Party pursuant to this Agreement.

     (b) (i) If,  within ten (10)  calendar  days after an  Indemnitee  provides
written  notice  to the  Indemnifying  Party  of any  Third  Party  Claims,  the
Indemnitee  receives  written  notice  from the  Indemnifying  Party  that  such
Indemnifying  Party has  elected to assume the defense of such Third Party Claim
as provided in Section 8.4(a), the Indemnifying Party will not be liable for any
legal expenses  subsequently  incurred by the Indemnitee in connection  with the
defense thereof; provided, however, that if the Indemnifying Party shall fail to
take  reasonable  steps  necessary to defend  diligently  such Third Party Claim
within twenty (20) calendar days after receiving notice from the Indemnitee that
the Indemnitee  believes the  Indemnifying  Party has failed to take such steps,
the  Indemnitee may assume its own defense and the  Indemnifying  Party shall be
liable for all reasonable expenses thereof.

     (ii) Without the prior written consent of the Indemnitee,  the Indemnifying
Party shall not enter into any  settlement  of any Third Party Claim which would
lead to liability or create any financial or other obligation on the part of the
Indemnitee  for  which  the  Indemnitee  is  not  entitled  to   indemnification
hereunder. If a firm offer is made to settle a Third Party Claim without leading
to liability or the creation of a financial or other  obligation  on the part of
the  Indemnitee  for which the  Indemnitee  is not  entitled to  indemnification
hereunder and the Indemnifying  Party desires to accept and agree to such offer,
the  Indemnifying  Party shall give  written  notice to the  Indemnitee  to that
effect.  If the  Indemnitee  fails to consent to such firm offer within ten (10)
calendar days after its receipt of such notice,  the Indemnifying Party shall be
relieved of its  obligations to defend such Third Party Claim and the Indemnitee
may contest or defend such Third Party Claim at its own expense.  In such event,
the maximum  liability  of the  Indemnifying  Party as to such Third Party Claim
will be the amount of such settlement  offer plus reasonable  costs and expenses
paid or incurred by Indemnitee up to the date of said notice.

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<PAGE>

     (c) Any claim by an  Indemnitee on account of an  Indemnifiable  Loss which
does not result from a Third Party Claim (a "Direct Claim") shall be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof,  stating
the  nature of such claim in  reasonable  detail and  indicating  the  estimated
amount,  if  practicable,  but in any event such notice shall not be given later
than ten (10)  calendar days after the  Indemnitee  becomes aware of such Direct
Claim,  and the  Indemnifying  Party shall have a period of thirty (30) calendar
days within which to respond to such Direct  Claim.  If the  Indemnifying  Party
does not respond within such thirty (30) calendar day period,  the  Indemnifying
Party shall be deemed to have accepted  such claim.  If the  Indemnifying  Party
rejects such claim, the Indemnitee will be free to seek enforcement of its right
to indemnification under this Agreement.

     (d) If the amount of any Indemnifiable  Loss, at any time subsequent to the
making of an  indemnity  payment in  respect  thereof,  is reduced by  recovery,
settlement or otherwise under or pursuant to any insurance  coverage or pursuant
to any claim,  recovery,  settlement  or payment  by,  from or against any other
entity,  the amount of such reduction (less any out-of-pocket  costs incurred in
connection  therewith and the cost of any adjusted premium charges to the extent
directly relating to the claim for such Indemnifiable  Loss ("Recovery  Costs"),
together with interest  thereon from the date of payment thereof at the publicly
announced prime rate then in effect of Citibank, shall promptly be repaid by the
Indemnitee to the Indemnifying Party.

     (e) A failure to give timely  notice as provided in this  Section 8.4 shall
not affect the rights or obligations of any Party hereunder  except if, and only
to the extent that, as a result of such failure, the Party which was entitled to
receive such notice was actually prejudiced as a result of such failure.

                                   ARTICLE IX

                                   TERMINATION

     9.1 Termination.

     (a) This  Agreement may be terminated at any time prior to the Closing Date
by mutual written consent of Seller and Buyer.

     (b) This  Agreement may be terminated by Seller or Buyer if (i) any federal
or state court of competent jurisdiction shall have issued an order, judgment or
decree permanently restraining,  enjoining or otherwise prohibiting the Closing,
and such order,  judgment or decree shall have become final and  nonappeallable;
(ii) any  statute,  rule,  nonappeallable  order or  regulation  shall have been
enacted or issued by any Governmental Authority which prohibits the consummation
of the  Closing;  or (iii) the Closing  shall have not occurred on or before the
day which is fifteen  (15)  months from the date of this  Agreement,  subject to
such  extensions  (not to exceed  six  months) as may be  required  by Seller to
repair or replace lost or damaged Assets in accordance with Section 6.13(c) (the
"Termination  Date");  provided that the right to terminate this Agreement under
this Section 9.1(b)(iii),  and any other Section,  shall not be available to any
Party whose failure to fulfill any obligation  under this Agreement has been the
cause of, or resulted in the event  giving  rise to the  applicable  termination
right.

                                       66
<PAGE>

     (c) Except as otherwise  provided in this Agreement,  this Agreement may be
terminated  by Buyer if any of the  Buyer  Required  Regulatory  Approvals,  the
receipt of which is a condition to the  obligation  of Buyer to  consummate  the
Closing as set forth in Section  7.1(c),  shall have been denied (and a petition
for rehearing or refiling of an application  initially denied without  prejudice
shall  also have  been  denied)  or, if such  Required  Regulatory  Approval  is
obtained,  contains  terms or conditions  that would have a Regulatory  Material
Adverse Effect for Buyer (after Buyer's petition for rehearing objecting to such
terms and conditions has been denied) or an Asset Material  Adverse  Effect,  in
either  case that is not cured or  otherwise  addressed  in a manner  reasonably
acceptable to Buyer by the Closing Date.

     (d) Except as otherwise  provided in this Agreement,  this Agreement may be
terminated by Seller if any of the Seller  Required  Regulatory  Approvals,  the
receipt of which is a condition to the  obligation of Seller to  consummate  the
Closing as set forth in Section  7.2(c),  shall have been denied (and a petition
for rehearing or refiling of an application  initially denied without  prejudice
shall  also have  been  denied)  or, if such  Required  Regulatory  Approval  is
obtained,  contains  terms or conditions  that would have a Regulatory  Material
Adverse Effect for Seller (after  Seller's  petition for rehearing  objecting to
such terms and conditions has been denied),  in either case that is not cured or
otherwise  addressed in a manner reasonably  acceptable to Seller by the Closing
Date.

     (e) This Agreement may be terminated by Buyer if there has been a violation
or breach by Seller of any  covenant,  representation  or warranty  contained in
this  Agreement  provided  that such  violation  or breach  would  have an Asset
Material  Adverse Effect or a Buyer Material Adverse Effect that is not cured or
otherwise addressed by Seller in a manner reasonably  acceptable to Buyer by the
Closing Date and such violation or breach has not been waived by Buyer.

     (f) This  Agreement  may be  terminated  by  Seller,  if  there  has been a
violation  or  breach  by  Buyer of any  covenant,  representation  or  warranty
contained in this Agreement  provided that such violation or breach would have a
Seller Material Adverse Effect, (including,  without limitation, Buyer's failure
to pay the Purchase  Price on the Closing Date) and such  violation or breach is
not cured or otherwise  addressed by Buyer in a manner reasonably  acceptable to
Seller by the Closing Date,  and such violation or breach has not been waived by
Seller.

     9.2 Procedure and Effect of  Termination.  In the event of  termination  of
this  Agreement by either or both Seller and Buyer  pursuant to this Article IX,
written notice thereof shall forthwith be given by the terminating  Party to the
other Party,  whereupon the liabilities of the Parties hereunder will terminate,
except as otherwise  expressly  provided in this  Agreement  (including  Section
9.3),  and  thereafter  none of the Parties shall have any recourse  against any
other  Party by reason  of this  Agreement.  If prior to  Closing  either  Party
resorts to legal proceedings to enforce this Agreement,  the prevailing Party in
such proceedings  shall be entitled to recover all costs incurred by such Party,
including  reasonable  attorney's fees, in addition to any other relief to which
such Party may be entitled;  provided,  however, and notwithstanding anything to
the  contrary in this  Agreement,  in no event shall either Party be entitled to
receive any punitive,  indirect or consequential  damages. If a Party terminates
this Agreement  pursuant to this Article IX, the Arizona Gas Purchase  Agreement
shall be automatically terminated,  without any further liability to the parties
thereto (including payment of liquidated damages or termination fees pursuant to
Section 9.3 of the Arizona Gas Purchase  Agreement,  and both Parties agree that
if the Arizona Gas Purchase  Agreement is  terminated  pursuant to Article IX of
the  Arizona Gas  Purchase  Agreement,  this  Agreement  shall be  automatically
terminated, without any further liability to the parties thereto.

                                       67
<PAGE>

     9.3 Liquidated Damages; Termination Fees.

     (a) Seller  shall pay to Buyer  $10,000,000  if (i) Buyer  terminates  this
Agreement  pursuant to Section  9.1(e) or (ii) Buyer  terminates  this Agreement
pursuant to Section 9.1(c) due to a Regulatory  Material Adverse Effect on Buyer
which is due in whole or in  substantial  part to  concern  by the ACC about the
condition  of the Assets and which is  reasonably  expected to have an aggregate
economic impact on Buyer, taking into consideration all relevant  circumstances,
in excess of $25,000,000.

     (b) Buyer shall pay to Seller  $25,000,000  if (i) Seller  terminates  this
Agreement  pursuant to Section  9.1(f),  (ii) Seller  terminates  this Agreement
pursuant to Section 9.1(d) because the requisite  Required  Regulatory  Approval
from the ACC or the FERC has not been  obtained  due in whole or in  substantial
part to concerns about Buyer's  financial  qualifications  or  capabilities,  or
(iii) Buyer  terminates this Agreement  pursuant to Section 9.1(c),  because the
requisite  Required  Regulatory  Approval  from the ACC or the FERC has not been
obtained,  due in  whole  or in  substantial  part  to  concerns  about  Buyer's
financial  qualifications  or  capabilities,  or has been  obtained and contains
financial terms and conditions that are unacceptable to Buyer.

     (c) Buyer may  terminate  this  Agreement  upon  payment  of a  $25,000,000
termination fee upon any of the following events:

          (i) There shall have occurred an Asset Material  Adverse Effect having
     or reasonably expected to have a financial or economic impact,  taking into
     account all relevant considerations, in excess of $25,000,000;

          (ii)  Regulatory  Exceptions  (after  Buyer's  petition for  rehearing
     objecting to such  Regulatory  Exceptions  has been denied) shall have been
     imposed  against  Buyer  having a financial  or  economic  impact on Buyer,
     taking into account all relevant  considerations  in excess of $25,000,000;
     or

          (iii) There shall have  occurred a casualty  loss to the Assets having
     an aggregate financial or economic impact, taking into account all relevant
     considerations, in excess of $25,000,000.

     (d) Seller may  terminate  this  agreement  upon  payment of a  $10,000,000
termination  fee if there  shall have  occurred  a  casualty  loss to the Assets
having or reasonably expected to have an aggregate financial or economic impact,
taking into account all relevant considerations, in excess of $25,000,000.

                                       68
<PAGE>

     (e) In view of the  difficulty of  determining  the amount of damages which
may result to the  non-terminating  Party from a termination  pursuant to any of
Sections  9.3(a)  through  9.3(d) or  pursuant  to any of the  Sections  of this
Agreement  referenced in Section 9.3(a) through  9.3(d),  and the failure of the
terminating Party to consummate the transactions contemplated by this Agreement,
Buyer and Seller have  mutually  agreed that each of the  payments  set forth in
Section  9.3(a)  through  9.3(d) shall be made to the  non-terminating  Party as
liquidated  damages,  and not as a penalty,  and this Agreement shall thereafter
become null and void except for those  provisions  which by their terms  survive
termination of this Agreement. In the event of any such termination, the Parties
have  agreed  that each of the  payments  set forth in  Section  9.3(a)  through
Section 9.3(d) shall be the  non-terminating  Party's sole and exclusive remedy.
ACCORDINGLY,  THE PARTIES HEREBY  ACKNOWLEDGE  THAT (1) THE EXTENT OF DAMAGES TO
THE  NON-TERMINATING  PARTY  CAUSED BY THE  FAILURE  OF THIS  TRANSACTION  TO BE
CONSUMMATED  WOULD BE  IMPOSSIBLE OR EXTREMELY  DIFFICULT TO ASCERTAIN,  (2) THE
AMOUNT OF THE LIQUIDATED DAMAGES PROVIDED FOR IN EACH OF SECTIONS 9.3(a) THROUGH
9.3(d) ARE FAIR AND REASONABLE ESTIMATES OF SUCH DAMAGES UNDER THE CIRCUMSTANCES
AND (3) RECEIPT OF SUCH LIQUIDATED DAMAGES BY THE NON-TERMINATING PARTY DOES NOT
CONSTITUTE A PENALTY.  THE PARTIES  HEREBY  FOREVER WAIVE AND AGREE TO FOREGO TO
THE FULLEST  EXTENT UNDER  APPLICABLE LAW ANY AND ALL RIGHTS THEY HAVE OR IN THE
FUTURE  MAY HAVE TO  BRING  ANY  ACTION  OR  ARBITRAL  PROCEEDING  DISPUTING  OR
OTHERWISE  OBJECTING TO ANY OR ALL OF THE  FOREGOING  PROVISIONS OF THIS SECTION
9.3.

     (f) All  payments  under this  Section  9.3 shall be from payor to payee by
wire  transfer of  immediately  available  funds to a bank account in the United
States of  America  designated  in  writing  by payee not later  than  three (3)
business days following payor's receipt of such account designation from payee.

                                   ARTICLE X

                            MISCELLANEOUS PROVISIONS

     10.1 Amendment and Modification. This Agreement may be amended, modified or
supplemented only by written agreement of the Parties.

     10.2 Waiver of Compliance;  Consents.  Except as otherwise provided in this
Agreement,  any  failure of any of the  Parties to comply  with any  obligation,
covenant,  agreement or condition  herein may be waived by the Party entitled to
the benefits thereof only by a written  instrument  signed by the Party granting
such  waiver,  but any such waiver of such  obligation,  covenant,  agreement or
condition  shall not  operate as a waiver of, or estoppel  with  respect to, any
subsequent failure to comply therewith.

     10.3 [Intentionally Omitted]

     10.4 Notices.  All notices and other  communications  hereunder shall be in
writing  and shall be  deemed  given if  delivered  personally  or by  facsimile
transmission with completed transmission acknowledgment,  or mailed by overnight
delivery via a nationally  recognized  courier or registered or certified  first
class mail (return receipt  requested),  postage prepaid, to the recipient Party
at its  address  (or at such other  address or  facsimile  number for a Party as
shall be specified by like notice;  provided;  however, that notices of a change
of address shall be effective only upon receipt thereof):

                                       69
<PAGE>

                       (a) If to Seller, to:

                           Citizens Communications Company
                           1460 Poydras Street, Suite 1800
                           New Orleans, LA 70112
                           Attention:  Kenneth L. Cohen
                           Telephone:  (504) 299-4501
                           Telecopier:  (504) 544-5822

                           with a copy to:

                           Citizens Communications Company
                           High Ridge Park
                           Stamford, CT 06905
                           Attention:  L. Russell Mitten
                           Telephone:  (203) 614-5047
                           Telecopier:  (203) 614-4651

                           and:

                           Fleischman and Walsh, L.L.P.
                           1400 Sixteenth Street, N.W.
                           Washington, D.C. 20036
                           Attention:  Jeffry L. Hardin
                           Telephone:  (202) 939-7914
                           Telecopier:  (202) 387-3467

                       (b) if to Buyer, to:

                           Tucson Electric Power Company
                           One South Church Avenue, Suite 100
                           Tucson, Arizona 85701
                           Attention:  Vincent Nitido, Jr.
                           Telephone:  (520) 884-3670
                           Telecopier:  (520) 884-3612

                           with a copy to:

                           Thelen Reid & Priest LLP
                           40 West 57th Street
                           New York, NY  10019
                           Attention:  J. Anthony Terrell
                           Telephone:  (212) 603-2108
                           Attention:  John T. Hood
                           Telephone:  (212) 603-2140
                           Telecopier:  (212) 603-2001

                                       70
<PAGE>

     10.5 Assignment.  This Agreement and all of the provisions  hereof shall be
binding upon and inure to the benefit of the Parties hereto and their respective
successors  and  permitted  assigns,  but neither this  Agreement nor any of the
rights,  interests  or  obligations  hereunder  shall be  assigned  by any Party
hereto, including by operation of law, without the prior written consent of each
other  Party,  nor is this  Agreement  intended to confer upon any other  Person
except the  Parties  hereto  any  rights,  interests,  obligations  or  remedies
hereunder;  provided, however, in the event of any such assignment by a Party by
operation of law without the consent of the other Party,  this Agreement and all
the provisions hereof shall be binding upon the Person receiving such assignment
by operation of law. Notwithstanding the foregoing,  Buyer may (i) assign any or
all of its rights and  obligations  hereunder to a UniSource  Designee,  or (ii)
make a security  assignment to any lender providing  financing in respect of the
Buyer's  acquisition of the Assets.  Upon receipt of notice by Seller from Buyer
of any such assignment to a UniSource Designee,  such assignee will be deemed to
have assumed,  ratified, agreed to be bound by and perform all such obligations,
and all references herein to "Buyer" shall thereafter be deemed to be references
to such assignee, in each case without the necessity for further act or evidence
by the  Parties  hereto  or  such  assignee;  provided,  however,  that  no such
assignment  shall  relieve or discharge  UniSource  from any of its  obligations
hereunder.

     10.6 Governing  Law. This  Agreement  shall be governed by and construed in
accordance  with the law of the  State of  Arizona  (without  giving  effect  to
conflict of law  principles)  as to all  matters,  including  but not limited to
matters of validity,  construction,  effect, performance and remedies (except to
such matters of real estate law that must be governed by the law of the State of
Arizona).  THE  PARTIES  HERETO  AGREE  THAT  VENUE IN ANY AND ALL  ACTIONS  AND
PROCEEDINGS  RELATED TO THE  SUBJECT  MATTER OF THIS  AGREEMENT  SHALL BE IN THE
STATE AND FEDERAL  COURTS IN AND FOR PHOENIX,  ARIZONA,  WHICH COURTS SHALL HAVE
EXCLUSIVE  JURISDICTION  FOR SUCH PURPOSE,  AND THE PARTIES  HERETO  IRREVOCABLY
SUBMIT TO THE EXCLUSIVE  JURISDICTION OF SUCH COURTS AND  IRREVOCABLY  WAIVE THE
DEFENSE  OF AN  INCONVENIENT  FORUM TO THE  MAINTENANCE  OF ANY SUCH  ACTION  OR
PROCEEDING.  SERVICE OF PROCESS  MAY BE MADE IN ANY  MANNER  RECOGNIZED  BY SUCH
COURTS.  EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL
WITH  RESPECT TO ANY ACTION OR CLAIM  ARISING OUT OF ANY  DISPUTE IN  CONNECTION
WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

     10.7  Counterparts.   This  Agreement  may  be  executed  in  two  or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

     10.8 Interpretation.  The articles, section and schedule headings contained
in this  Agreement are solely for the purpose of reference,  are not part of the
agreement  of the  Parties  and  shall  not in any way  affect  the  meaning  or
interpretation of this Agreement.

                                       71
<PAGE>

     10.9  Schedules  and  Exhibits.   Except  as  otherwise  provided  in  this
Agreement,  all Exhibits and Schedules referred to herein are intended to be and
hereby  are  specifically  made a part of this  Agreement.  Any  matter  or item
disclosed  on any  Schedule  shall not be  deemed to give rise to  circumstances
which result in an Asset Material  Adverse  Effect or a Material  Adverse Effect
solely by reason of it being so disclosed. Any matter or item disclosed pursuant
to any  Schedule  shall be deemed to be disclosed  for all  purposes  under this
Agreement  reasonably  related thereto and any matter  disclosed in one Schedule
will be deemed  disclosed with respect to another Schedule if such disclosure is
made in such a way as to make its relevance  with respect to such other Schedule
readily apparent.

     10.10 Entire Agreement.  This Agreement,  the Ancillary  Agreements and the
Exhibits, Schedules, documents,  certificates and instruments referred to herein
or therein,  embody the entire agreement and understanding of the Parties hereto
in respect of the  transactions  contemplated  by this  Agreement.  There are no
restrictions, promises, representations,  warranties, covenants or undertakings,
other than those  expressly  set forth or referred  to herein or  therein.  This
Agreement  and the  Ancillary  Agreements  supersede  all prior  agreements  and
understandings between the Parties other than the Confidentiality Agreement with
respect to such transactions.

     10.11 U.S. Dollars.  Unless otherwise stated,  all dollar amounts set forth
herein are United States (U.S.) dollars.

     10.12 Bulk Sales Laws. Buyer acknowledges that, notwithstanding anything in
this Agreement to the contrary, Seller will not comply with the provision of the
bulk  sales  laws  of any  jurisdiction  in  connection  with  the  transactions
contemplated  by this Agreement.  Buyer hereby waives  compliance by Seller with
the  provisions of the bulk sales laws of all  applicable  jurisdictions  to the
extent permitted by law.

     10.13 Construction of Agreement. The terms and provisions of this Agreement
represent the results of  negotiations  between Buyer and Seller,  each of which
has been  represented  by counsel of its own choosing,  and neither of which has
acted  under  duress  or  compulsion,  whether  legal,  economic  or  otherwise.
Accordingly, the terms and provisions of this Agreement shall be interpreted and
construed in accordance with their usual and customary  meanings,  and Buyer and
Seller hereby waive the  application in connection with the  interpretation  and
construction  of this  Agreement of any rule of law to the effect that ambiguous
or  conflicting  terms  or  provisions  contained  in this  Agreement  shall  be
interpreted or construed  against the Party whose attorney prepared the executed
draft or any earlier draft of this  Agreement.  It is understood and agreed that
neither  the  specification  of any  dollar  amount in the  representations  and
warranties contained in this Agreement nor the inclusion of any specific item in
the  Schedules  or Exhibits is intended to imply that such  amounts or higher or
lower amounts, or the items so included or other items, are or are not material,
and none of the Parties shall use the fact of the setting of such amounts or the
fact of any  inclusion  of any such item in the  Schedules  or  Exhibits  in any
dispute or controversy between the Parties as to whether any obligation, item or
matter is or is not material for purposes hereof.

                                       72
<PAGE>

     10.14  Severability.  If any term or other  provision of this  Agreement is
invalid,  illegal or  incapable  of being  enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the  economic or legal  substance  of
the transactions  contemplated  hereby is not affected in any manner  materially
adverse to any Party. Upon such  determination  that any term or other provision
is invalid,  illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this  Agreement so as to effect the  original  intent of
the  Parties as  closely as  possible  in an  acceptable  manner to the end that
transactions contemplated hereby are fulfilled to the greatest extent possible.

     10.15 Third Party Beneficiary.  No provision of this Agreement shall create
any third party beneficiary  rights in any employee or former employee of Seller
(including  any  beneficiary  or  dependant  thereof)  in respect  of  continued
employment  or resumed  employment,  and no  provision of this  Agreement  shall
create any rights in any such  Persons  in respect of any  benefits  that may be
provided,   directly  or  indirectly,   under  any  employee   benefit  plan  or
arrangement.

                                       73

<PAGE>

     IN WITNESS  WHEREOF,  Buyer and Seller  have caused  this  Agreement  to be
signed by their  respective duly authorized  officers as of the date first above
written.

UNISOURCE ENERGY CORPORATION                CITIZENS COMMUNICATIONS COMPANY

By: /s/ Michael J. DeConsini                By:  /s/ Kenneth L. Cohen
   -------------------------                   --------------------------
Name: Michael J. DeConsini                  Name: Kenneth L. Cohen
     -----------------------                     ------------------------
Title: Senior Vice President                Title:  Vice President
      ----------------------                      -----------------------

<PAGE>

                         LIST OF EXHIBITS AND SCHEDULES
                         ------------------------------

EXHIBITS

Exhibit A       Form of Assignment and Assumption Agreement
Exhibit B       Form of Bill of Sale
Exhibit C       Special Warranty Deed
Exhibit D       Form of Seller General Counsel Opinion
Exhibit E       Form of Seller Bond Counsel Opinion
Exhibit F       Form of Buyer General Counsel Opinion

SCHEDULES

1.1             Seller Employees on Whose Knowledge Buyer May Rely
2.2             Excluded Assets
2.3(g)          Governmental Orders
2.3(i)          Assumed Actions and Proceedings
4.3(a)          Seller Conflicts, Defaults and Violations
4.3(b)          Seller Required Regulatory Approvals
4.4             Seller Insurance
4.5             Seller Real Property Leases
4.6             Seller Environmental Matters
4.7             Seller Labor Matters
4.8             Seller Benefit Plans
4.9             Seller Real Property
4.10            Seller Condemnation Matters
4.11(a)         Certain Seller Material Agreements
4.11(b)         Certain Seller Material Agreements Requiring Consent to Transfer
4.11(c)         Defaults Under Certain Material Agreements
4.12            Legal Proceedings Involving Seller
4.13            Seller Permit Violations
4.14            Seller Tax Matters
4.15            Seller Intellectual Property Exceptions
4.20            Seller Financial Statements
5.3(a)          Buyer Conflicts, Defaults and Regulations
5.3(b)          Buyer Required Regulatory Approvals
5.6             Legal Proceedings Involving Buyer
6.1(a)          Exceptions to Conduct of Business and Operation of the Assets
6.3             Environmental Consultants on Which Buyer will Rely
6.12(d)(iii)    Buyer Benefit Plans
6.12(d)(iii)(D) Retirees
6.14(a)         Seller Revenue Bonds
6.15            Seller Surety Instruments--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                                              Exhibit 10.15
                                                              -------------

                               PURCHASE AGREEMENT

                                 by and between

                     CITIZENS TELECOM SERVICES COMPANY LLC,

                                   as Seller,

                                       and

                                 PEPSICO, INC.,

                                  as Purchaser

                           Premises:        5600 Headquarters Drive
                                            Plano, Texas

                           Date:            January 31, 2003

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                               PURCHASE AGREEMENT
                               ------------------

     THIS PURCHASE  AGREEMENT  (this  "Contract") is made and entered into as of
this 31st day of January,  2003 (the "Effective  Date") by and between  CITIZENS
TELECOM SERVICES COMPANY llc, a Delaware limited liability  company  ("Seller"),
whose principal place of business is located at Three High Ridge Park, Stamford,
Connecticut  06905 and PEPSICO,  INC., a North Carolina  corporation  and/or its
permitted  successors,  affiliates and assigns  ("Purchaser"),  whose  principal
place of  business  is located at 700  Anderson  Hill Road,  Purchase,  New York
10577-1444.

                                    ARTICLE I

                                    PROPERTY
                                    --------

     Section  1.01.  Property.  Seller  hereby  agrees  to sell  and  convey  to
Purchaser,  and Purchaser hereby agrees to purchase from Seller,  upon the terms
and conditions set forth herein, the following properties and assets:

          (a) That certain tract of real property located in Plano,  Texas, more
     particularly  described in Exhibit A attached hereto and made a part hereof
     for all  purposes,  together  with  (i) all and  singular  the  rights  and
     appurtenances pertaining to such real property,  including all right, title
     and interest of Seller, if any, in and to any easements,  adjacent streets,
     alleys and  rights-of-way  and all oil and mineral rights and reservations,
     and (ii) all of Seller's  right,  title and  interest in any and all water,
     water rights or similar  rights or privileges  (including  tap rights),  if
     any,  appurtenant to or used in connection  with the ownership or operation
     of such real property (all of the foregoing being hereinafter  collectively
     referred to as the "Real Property").

          (b) All  improvements,  structures  and fixtures now  constructed  and
     completed  with respect to and  situated on the Real  Property and owned by
     Seller,  including  without  limitation  that certain  building and related
     facilities  (containing  approximately 254,653 rentable square feet/285,000
     gross square feet (without any representation or warranty as to such square
     footage)) located at 5600 Headquarters Drive,  Plano, Texas,  together with
     all of Seller's  right,  title and interest in all parking  areas,  loading
     dock  facilities,  landscaping  and  other  improvements,   structures  and
     fixtures owned by Seller located on the Real Property (all of the foregoing
     being hereinafter collectively referred to as the "Improvements").

          (c) All of Seller's interest in all leases covering all or any portion
     of the Real Property and/or the Improvements (collectively,  the "Leases"),
     together  with all  security  deposits,  prepaid  rents and  similar  items
     attributable  to periods after Closing,  any  receivables  attributable  to
     periods after Closing for common area maintenance,  taxes, insurance and/or
     other items, if any, due and payable under any lease for all or any portion
     of the Real Property and/or the Improvements, and to the extent assignable,
     all of Seller's right,  title and interest in all parking  agreements,  all
     contract rights approved by Purchaser (including service contracts) and all
     other  intangible  rights which are appurtenant to the Real Property and/or
     the  Improvements  (all of the  foregoing  being  hereinafter  collectively
     referred to as the "Intangible Property").

                                      -1-
<PAGE>

          (d) All of Seller's  right,  title and interest,  if any, in all plans
     and specifications,  equipment, furniture, furnishings, machinery, heating,
     plumbing,  ventilation and air conditioning systems and equipment,  carpet,
     tile,  floor  coverings,   security  devices,   sprinkler  systems,  office
     supplies,  telephone  exchange numbers,  leasing files and records,  tenant
     credit  reports,  PBX Systems,  audio systems,  keys,  computers,  servers,
     cables,  modems,  maintenance equipment and supplies and all other tangible
     personal  property  situated on the Real  Property  and used in  connection
     therewith or with the Improvements  along with Seller's  interest as lessee
     in any  rented or leased  personal  property,  to the  extent  approved  by
     Purchaser,  including  without  limitation,  all of the  personal  property
     listed on Exhibit G attached hereto and made a part hereof for all purposes
     (all of the foregoing  being  hereinafter  collectively  referred to as the
     "Personal Property").

All of the  foregoing  items  purchased  under this  Contract  are  collectively
referred to as the "Property".

                                   ARTICLE II

                                 PURCHASE PRICE
                                 --------------

     Section 2.01.  Purchase Price. The purchase price (the "Purchase Price") is
an amount equal to  TWENTY-SIX  MILLION FIVE HUNDRED  THIRTY-TWO  THOUSAND  FIVE
HUNDRED AND NO/100 DOLLARS ($26,532,500.00). The sum of ONE MILLION FIVE HUNDRED
THOUSAND AND NO/100 DOLLARS ($1,500,000.00) (the "Cash Portion") will be paid by
Purchaser  to Seller at the  Closing (as  hereinafter  defined) in cash or other
immediately  available wire transferred funds. The balance of the Purchase Price
shall be evidenced by a promissory note (the "Note").  The Note shall be secured
by a deed of trust (the "Deed of Trust"). In the event PepsiCo, Inc. assigns the
Contract  pursuant to Section  12.05  hereof,  PepsiCo,  Inc.  shall execute and
deliver at the Closing a guaranty (the  "Guaranty").  The forms of the Note, the
Deed of Trust and the  Guaranty  shall be as set forth in  Exhibits  H, I and J,
respectively, attached hereto and made a part hereof for all purposes.

     Section 2.02.  Earnest Money.  Purchaser will, within two (2) business days
after the Effective  Date,  deposit the amount of ONE HUNDRED fifty THOUSAND AND
NO/100  DOLLARS  ($150,000.00)  as earnest  money  hereunder  (the  "Purchaser's
Deposit"),  with Republic Title of Texas,  Inc. (the "Title  Company").  As used
herein, the term "Earnest Money Deposit" means the Purchaser's Deposit, together
with all interest  accrued from time to time thereon.  The  Purchaser's  Deposit
may,  at the  option  of  Purchaser,  be in the form of cash,  certified  check,
cashier's check or other  immediately  available  funds.  The Title Company must
hold the Earnest Money Deposit in an interest-bearing account, with all interest
being paid to Purchaser or Seller,  as the case may be, in  accordance  with the
terms of this  Contract.  At the  Closing,  the Earnest  Money  Deposit  will be
applied toward the Cash Portion of the Purchase Price, but otherwise the Earnest
Money Deposit will be held by the Title Company,  and returned to Purchaser,  or
delivered to Seller, in accordance with the terms of this Contract.  In addition
to the Earnest Money  Deposit,  Purchaser has,  concurrently  with its execution
hereof,  delivered  to Seller a check in the amount of FIFTY AND NO/100  DOLLARS
($50.00) (the  "Independent  Contract  Consideration"),  which amount Seller and
Purchaser agree has been bargained for as consideration  for Seller's  execution
and delivery of this Contract.  The  Independent  Contract  Consideration  is in
addition to and independent of any other  consideration  or payment provided for
in this Contract and is non-refundable in all events.

                                      -2-
<PAGE>

                                   ARTICLE III

                                  REVIEW ITEMS
                                  ------------

     Section 3.01. Survey. Seller shall deliver to Purchaser, within twenty (20)
days following the Effective  Date, a new or recertified  survey of the Property
(the  "Survey")  dated no earlier  than thirty (30) days prior to the  Effective
Date. The Survey must comply with the "Minimum Standard Detail  Requirements for
ALTA/ACSM  Land Title  Surveys" as adopted in 1992  (revised  1999) and meet the
accuracy  requirements of an Urban Survey, as defined therein, and include items
1-4, 6 (setbacks only),  7(a),  7(b)(1),  and 8-10,  11(a) (visible  evidence of
utilities  only),  12-14 and 16 of Table A thereof.  The surveyor shall show all
building set-back lines as shown on the recorded  subdivision plats which define
the  boundaries of the Survey and all building  set-back  lines  required  under
applicable  zoning  regulations.  Further,  the surveyor must certify to Seller,
Purchaser and the Title Company,  by the  surveyor's  placement and execution on
the face of the Survey of a surveyor's  certificate in the form attached  hereto
as  Exhibit F and made a part  hereof.  If the legal  description  on the Survey
differs  from that  attached  hereto as  Exhibit A,  Seller  agrees to execute a
quitclaim deed to Purchaser  transferring  whatever right, interest and interest
Seller might own in the legal description contained on the Survey.

     Section 3.02. Title Review Items. Seller shall deliver to Purchaser, within
five (5) days  following the Effective  Date, a Texas form  commitment for title
insurance (the "Title Commitment"),  issued by the Title Company which shall set
forth the state of title to the Real  Property  and the  Improvements  and shall
list all  exceptions,  including  all liens,  easements,  claims,  encumbrances,
rights-of-way, covenants, encroachments,  reservations,  restrictions, and other
conditions  or matters  affecting  the Real  Property  which would  appear in an
owner's  policy of title  insurance  if one were issued,  together  with legible
copies of all items, matters, and documents referred to in the Title Commitment.
The Title Commitment must contain the expressed  commitment of the Title Company
to issue the Owner  Policy to  Purchaser  in the amount of the  Purchase  Price,
insuring the title to the Real Property as is specified in the Title Commitment.
All items set forth or disclosed in the Title Commitment and Survey not objected
to by Purchaser  prior to the end of the Review  Period or which Seller does not
agree to remove,  in Seller's  sole  discretion,  shall be referred to herein as
"Permitted Exceptions". Seller shall not have any obligation to remove any items
reflected by the Title  Commitment  or Survey except as provided in Section 4.04
hereof and those matters which Seller agrees in writing to cure in response to a
letter from Purchaser delivered prior to the end of the Review Period specifying
matters to be cured by Seller.

                                      -3-
<PAGE>

     Section  3.03.  Other Review Items.  Seller must,  within five (5) business
days  following the  Effective  Date,  deliver to Purchaser  copies of the items
shown on Schedule 3.03 to this Contract to the extent in Seller's possession and
control.

     Section 3.04. Inspection/ Confidentiality.  Purchaser has the right, at all
reasonable  times  (after  giving  at least  four (4)  hours  advance  notice to
Seller), to conduct on-site inspections of the Property and physical inspections
and  tests  of  the  Property  during  the  Review  Period,  including,  without
limitation,  the right to enter and inspect all  portions  of the  Property,  to
interview any service contractors and to inspect and audit all of Seller's books
and records relating to the Property; provided, however, Purchaser agrees not to
cause any damage to the  Property.  The parties  agree that no invasive  testing
(other than test  borings for  environmental  testings  [provided,  further,  no
borings shall be done within the Improvements or any paving improvements without
Seller's prior consent], asbestos sampling or radon testing) may be conducted by
Purchaser on the Property  without the written  consent of Seller,  such consent
not to be unreasonably withheld or delayed. Seller hereby directs the manager of
the Property to cooperate  with the reasonable  requests of Purchaser.  Seller's
property  manager  or other  designated  Seller  representative  must be present
during  Purchaser's  on-site  inspections  and  service  contractor  interviews.
Purchaser shall, at its sole cost and expense, repair any damage to the Property
caused by Purchaser's  inspection or testing  thereof,  and shall  indemnify and
hold harmless Seller from and against any and all claims, actions, suits, liens,
damages,  liabilities,  losses and  expenses,  including,  but not  limited  to,
attorney fees, and damage to personal property or personal injury, to the extent
directly  attributable  to any acts performed in exercising  Purchaser's  rights
under this Article III. Purchaser further agrees to maintain the confidentiality
of all matters disclosed therein or thereby, and not to disclose the same to any
person, except (a) to potential investors; (b) to Purchaser's agents, attorneys,
employees  and  contractors  who are  advising,  consulting  with or  performing
services  for  Purchaser in  connection  with its  proposed  acquisition  of the
Property; and (c) in response to a valid subpoena or court order. The provisions
of this  Section  3.04 shall  survive the Closing  and any  termination  of this
Contract.

                                   ARTICLE IV

                                  REVIEW PERIOD
                                  -------------

     Section 4.01.  Review  Period.  Subject to extension as provided in Section
4.05 below, Purchaser has from the Effective Date until 5:00 p.m., Dallas, Texas
time, on the forty-fifth  (45th) day following the Effective  Date,  being March
17, 2003 (the "Review Period") to review and approve the due diligence items and
to conduct such inspections,  interviews,  tests and audits as Purchaser, in its
sole discretion, deems appropriate.

     Section  4.02.  Purchaser's  Notice.  Purchaser  shall  have  the  right to
terminate  this  Contract  for  any or no  reason,  in  its  sole  and  absolute
discretion,  prior to the expiration of the Review Period. If Purchaser fails to
deliver  Seller written notice (the "Waiver  Notice")  waiving this  termination
right on or before the end of the Review  Period,  this Contract shall be deemed
automatically terminated. Purchaser's failure to deliver the Waiver Notice on or
before the expiration of the Review Period shall be deemed Purchaser's  election
to terminate this Contract under this Section 4.02.

                                      -4-
<PAGE>

     Section 4.03.  Termination.  If Purchaser elects to terminate this Contract
in its entirety in accordance with, and subject to the terms of this Article IV,
the  parties  hereto  shall   thereupon  be  relieved  of  all  liabilities  and
obligations hereunder, unless a provision provided for herein provides that such
liability  shall continue  notwithstanding  the termination of this Contract and
such provision shall therefore survive such  termination,  and the Earnest Money
Deposit  must be refunded  fully and  promptly to  Purchaser.  Seller  expressly
acknowledges  and agrees  that,  if Purchaser  requests the Title  Company on or
before the  expiration  of the Review Period to return the Earnest Money Deposit
as a result of  Purchaser's  election to terminate  this Contract  under Section
4.02 and/or  Section  4.05,  then the Title  Company shall have no obligation to
independently  determine  whether Purchaser has the right to receive the Earnest
Money  Deposit,  and  the  Title  Company  may  rely  solely  upon  the  written
instructions  set  forth  in  any  written  notice  delivered  by  Purchaser  in
connection  with such  election,  without  the  joinder,  approval or consent of
Seller.  Purchaser  will promptly  return to Seller any due diligence  materials
delivered by Seller.  Purchaser  will also furnish  Seller,  promptly  following
Purchaser's  receipt,   with  the  final  reports  issued  by  any  third  party
consultants  retained at  Purchaser's  request.  Such  reports will be delivered
without representation, warranty or recourse against Purchaser.

     Section 4.04. Seller's Obligation to Remove Liens. Notwithstanding anything
to the contrary in this Contract,  Seller must remove at or prior to the Closing
any  mortgages,   deeds  of  trust,  notices  of  commencement,   mechanics  and
materialman's  liens  created,  suffered  or incurred  against  the  Property by
Seller,  and  Seller's  failure or refusal to remove same at or prior to Closing
shall be a default under this Contract;  provided,  however, Seller shall not be
in default under this  Contract in the event Seller  furnishes the Title Company
with such bonds,  indemnities or other assurances  sufficient to cause the Title
Company to issue the Owner  Policy to  Purchaser  without  exception to any such
liens.

     Section 4.05.  Environmental Audit. Purchaser has the right, at Purchaser's
cost, to have a Phase I environmental study of the Property performed during the
Review  Period.  In  addition,  in the  event the  Phase I  environmental  study
conducted on behalf of Purchaser  recommends that a Phase II environmental study
be performed on the Property  because of any conditions  discovered or reflected
in the  Phase  I  environmental  study,  Purchaser  shall  have  the  right,  at
Purchaser's  cost,  to have a  Phase  II  environmental  study  of the  Property
performed during the Review Period. Any intrusive testing is subject to Seller's
approval, such approval not to be unreasonably withheld,  delayed or conditioned
so long as such invasive  testing is not performed within the  Improvements.  In
the  event  (i) the  Phase I  environmental  study  recommends  that a Phase  II
environmental  study be performed on the Real Property because of any conditions
discovered  or  reflected in the Phase I  environmental  study,  (ii)  Purchaser
elects,  in Purchaser's sole discretion,  to conduct such Phase II environmental
investigation,  and (iii) Purchaser sends Seller written notice of such election
prior to the end of the  original  Review  Period,  then the Review  Period will
automatically be extended one (1) time by an additional thirty (30) days.

                                      -5-
<PAGE>

     Section  4.06.   Service   Contracts.   Seller  agrees  that  all  service,
maintenance,  and management contracts  (collectively,  the "Service Contracts")
must be  terminated  by Seller,  at Seller's sole cost, on or before the Closing
Date unless Purchaser otherwise elects, by written notice delivered to Seller at
least  thirty  (30) days  prior to  Closing,  to assume  same.  On or before the
Closing  Date,  Seller shall  provide  Purchaser  with  written  evidence of the
termination of such Service Contracts which Purchaser does not elect to assume.

                                    ARTICLE V

                            GOOD AND MARKETABLE TITLE
                            -------------------------

     Section  5.01.  Conveyance.  At the Closing,  Seller will convey fee simple
title to the Real  Property  and the  Improvements  to Purchaser by the Deed (as
hereinafter  defined)  and title to the  Personal  Property  and the  Intangible
Property by the Bill of Sale (as hereinafter defined), free and clear of any and
all deeds of trust, mortgages or other liens or indebtedness;  subject, however,
to the following (collectively, the "Permitted Exceptions"):

          (a) General real estate taxes for the year in which the Closing occurs
     and subsequent years not yet due and payable.

          (b) All easements, restrictions, rights-of-way, party wall agreements,
     encroachments,  covenants,  reservations,  agreements,  leases,  tenancies,
     licenses,  conditions and other matters affecting all or any portion of the
     Property to the extent  defined as  "Permitted  Exceptions"  under  Section
     3.02.

     Section  5.02.  Owner  Policy.  At the Closing,  Purchaser  must be able to
obtain a  standard  Texas  form  Owner  Policy of Title  Insurance  (the  "Owner
Policy")  issued by the Title Company in Purchaser's  favor in the amount of the
Purchase Price,  insuring  Purchaser's fee simple title to the Real Property and
the  Improvements  in accordance with the provisions of Section 3.02 and subject
only to the standard  printed  exceptions (as modified as hereinafter set forth)
and the  Permitted  Exceptions.  The Owner  Policy must  contain  the  following
modifications:  (i) the exception for taxes in the Owner Policy shall be limited
to real  estate  taxes for the  calendar  year in which the  Closing  occurs and
subsequent years to the extent not yet due and payable, and subsequent taxes and
assessments by any taxing  authority for prior years due to change of land usage
or  ownership  (however,  Purchaser  shall have no  liability  for any  rollback
taxes); (ii) there shall be no exception for "visible and apparent easements" or
words to that  effect;  and (iii)  there  shall be no  exception  for "rights of
parties in possession".

                                   ARTICLE VI

                                    CLOSING
                                    -------

     Section  6.01.  Closing.  The  purchase  and  sale  of  the  Property  (the
"Closing")  will be held through  escrow at the offices of the Title Company and
will occur,  subject to  satisfaction  of all conditions  precedent set forth in
this  Contract,  at 11:00 a.m.  Dallas,  Texas time on the fifteenth  (15th) day
following  the end of the Review  Period,  being April 1, 2003, or at such other
time and place as the parties may agree.

                                      -6-
<PAGE>

     Section 6.02. Seller's  Obligations.  At the Closing,  Seller shall execute
and deliver to Purchaser, and/or cause the execution and delivery by all parties
other than Purchaser of, the following with respect to the Property:

          (a) That  certain  special  warranty  deed  (the  "Deed")  in the form
     attached hereto as Exhibit B and made a part hereof for all purposes.

          (b) That certain bill of sale and  assignment  ("Bill of Sale") in the
     form attached hereto as Exhibit C and made a part hereof for all purposes.

          (c)  That  certain  affidavit  (the  "FIRPTA  Affidavit")  in the form
     attached hereto as Exhibit D and made a part hereof for all purposes.

          (d) To the extent not  previously  delivered to  Purchaser  and to the
     extent  being  assigned  to  Purchaser   under  this   Contract,   original
     counterparts  (to the extent  available -  otherwise  copies  certified  by
     Seller to be true and correct to Seller's  knowledge) of all Leases,  lease
     files  (including all  correspondence,  applications  and credit  reports),
     currently effective letters of intent with prospective  tenants,  operating
     agreements,    reciprocal   easement   agreements,   options,   warranties,
     guarantees, permits and other agreements related to the Property, including
     all modifications, supplements or amendments to each of the foregoing.

          (e) All keys to the Property in the possession of Seller.

          (f) To the extent  necessary to permit the Title Company to remove any
     exception in the Owner Policy for  mechanics' and  materialmen's  liens and
     general rights of parties in possession, an affidavit as to debts and liens
     and parties in possession executed by Seller, made to the Title Company and
     in a form  reasonably  acceptable  to the Title  Company,  along with a GAP
     Affidavit and any other items reasonably required by the Title Company.

          (g) Seller's  certification  that all  representations  and warranties
     made by Seller under this  Contract  are true,  complete and correct in all
     material  respects as of the Closing Date (if accurate or, if not accurate,
     a description  of the basis for such  inaccuracy).  Such  certificate  will
     survive for a period of one (1) year following the Closing Date.

          (h)  Appropriate  evidence of Seller's  authority  to  consummate  the
     transactions  contemplated by this Contract as may be required by the Title
     Company or Purchaser.

                                      -7-
<PAGE>

          (i)  Assignments  of all  warranties  relating to the Property and all
     improvements  thereon,  including those relating to the construction of the
     building and all components thereof (to the extent same are assignable).

          (j) Such disclosure form,  affidavits and other  instruments as may be
     required (or which is otherwise  customary) to be executed by a seller upon
     any transfer of real estate in the state in which the Property is located.

     Section 6.03.  Purchaser's  Obligations.  At the Closing,  Purchaser  shall
deliver  the Cash  Portion  of the  Purchase  Price to Seller in cash or by wire
transfer of immediately available funds, and shall execute and deliver to Seller
the following with respect to the Property:

          (a) The Note.

          (b) The Deed of Trust.

          (c) The Bill of Sale.

          (d)  Appropriate  evidence of Purchaser's  authority to consummate the
     transactions  contemplated by this Contract as may be required by the Title
     Company or Seller,  including a legal opinion from Purchaser's  in-house or
     outside  counsel to Seller  regarding  the authority to enter into the loan
     evidenced by the Note and execute all  documents in  connection  therewith,
     including without limitation,  the Note, the Deed of Trust and the Guaranty
     (if the Guaranty is executed).

          (e) Such disclosure forms,  affidavits and other instruments as may be
     required  (or which is otherwise  customary)  to be executed by buyers upon
     any transfer of real estate in the State in which the Property is located.

          (f) The Guaranty,  if PepsiCo, Inc. has assigned the Contract pursuant
     to Section 12.05 hereof, and evidence of PepsiCo's  authority to enter into
     the Guaranty.

     Section 6.04. Management Transition. From and after the date hereof, Seller
will provide  Purchaser  with copies of all  management  reports  concerning the
Property and any reports  which are in the nature of capital  appropriations  or
describe capital  expenditures on the Property,  as and when received by Seller.
Seller  agrees that  Purchaser  may contact  Seller and its property  manager to
obtain  copies of and to discuss any such  reports and to discuss the  operation
and  maintenance  of the  Property.  Seller shall allow  Purchaser's  management
personnel  and  agents to work with  Seller's  property  manager  commencing  no
earlier  than  five  (5) days  prior to the  Closing  Date  for the  purpose  of
installing a computer at the  Property,  loading  information  onto  Purchaser's
computer  network,  determining the exact amount of unpaid and prepaid bills and
otherwise  preparing to take over management of the  Improvements.  Seller shall
also reasonably cooperate with Purchaser following the Closing to effectuate the
transition in operation and management of the Property.

                                      -8-
<PAGE>

     Section 6.05.  Possession.  Possession of the Property must be delivered by
Seller to Purchaser at the Closing, subject only to the Permitted Exceptions.

     Section 6.06. Section 1031 Exchange.  Either party ("exchanging party") may
consummate  the  purchase  of the  Property  as part of a  so-called  like  kind
exchange (the  "Exchange")  pursuant to ss. 1031 of the Internal Revenue Code of
1986,  as amended (the  "Code"),  provided  that:  (a) the Closing  shall not be
delayed or  affected by reason of the  Exchange  nor shall the  consummation  or
accomplishment of the Exchange be a condition precedent or condition  subsequent
to the exchanging  party's  obligations under this Contract;  (b) the exchanging
party shall effect the Exchange  through an assignment of this Contract,  or its
rights  under this  Contract,  to a qualified  intermediary  and the other party
("accommodating  party")  shall not be  required  to take an  assignment  of the
purchase  agreement for the  relinquished  property or be required to acquire or
hold title to any real property for purposes of consummating  the Exchange;  and
(c) the exchanging party shall pay any additional costs that would not otherwise
have been incurred by the exchanging  party or the  accommodating  party had the
exchanging  party  not  consummated  its  purchase  through  the  Exchange.  The
accommodating  party shall not by this agreement or acquiescence to the Exchange
(i) have its rights under this Contract  affected or diminished in any manner or
(ii) be responsible  for  compliance  with or be deemed to have warranted to the
exchanging party that the Exchange in fact complies with ss. 1031 of the Code.

                                   ARTICLE VII

                               CLOSING ADJUSTMENTS
                               -------------------

     Section 7.01. General Prorations.  The following will be apportioned at the
Closing:

          (a) Rents,  if any, as and when collected (the term "rents" as used in
     this  Contract   including  base  rent,   percentage   rent,   common  area
     maintenance,  parking,  tax,  insurance and other  payments due and payable
     under the Leases for all or any portion of the Improvements,  together with
     all taxes thereon) and all other income  generated by all or any portion of
     the  Property,  including  parking  revenue.  There will be no proration of
     rents accrued but not collected as of the Closing Date.

          (b) Taxes and other assessments  (including personal property taxes on
     the Personal Property),  for the current calendar year shall be prorated to
     the Closing Date,  and thus  Purchaser  shall receive a credit  against the
     Purchase  Price at Closing equal to Seller's pro rata portion of such taxes
     and standby  fees,  and  Purchaser  shall assume the  liability to pay such
     taxes (and  Purchaser  shall pay such  taxes) on or before the  delinquency
     date  thereof.  Special  assessments  certified  by any  municipal  utility
     district or other taxing  authority  prior to the Closing Date,  payable in
     installments,  must be paid in their  entirety  by Seller at or before  the
     Closing.  If the tax rate or assessed  valuation  or both have not yet been
     fixed,  the proration shall be based on the prior year's  assessment  after
     adjustment  for any  increase in value or tax rate  reasonably  expected by
     Purchaser's tax consultant;  provided that the parties hereto agree that to
     the extent the actual  taxes for the current year differ from the amount so
     apportioned  at the  Closing,  the parties  hereto will make all  necessary
     adjustments  by  appropriate  payments  between  themselves  following  the
     Closing, and this provision shall survive delivery of the Deed.

                                      -9-
<PAGE>

          (c) Payments under any Service  Contracts which Purchaser  approves in
     writing and agrees to assume at the Closing.

          (d)  Gas,  electricity  and  other  utility  charges,  if  any,  to be
     apportioned on the basis of the last meter reading.

          (e) Other operating  expenses of the Property  actually paid by Seller
     and  accepted by  Purchaser  with respect to the month in which the Closing
     occurs, to the extent not included in clause (a) above.

In making such  apportionments,  Purchaser will receive credit for all rents and
other income paid with respect to the day of the Closing,  and Purchaser will be
charged for taxes and other  expenses  incurred  with  respect to the day of the
Closing.  All  apportionments  are to be subject to post-closing  adjustments as
necessary to reflect later relevant information not available at the Closing and
to correct any errors made at the Closing with  respect to such  apportionments;
provided,  however,  that  such  apportionments  shall be  deemed  final and not
subject to further  post-closing  adjustments if no such  adjustments  have been
requested  in  writing  after a period of sixty  (60) days from such time as all
necessary information is available to make a complete and accurate determination
of such apportionments.  All apportionments  (regardless of whether all relevant
information  has been  received  or  errors  have  been  made) are final and not
subject to further  post-closing  adjustment as of June 30 of the year following
the year in which the Closing Date occurs.

     Section 7.02. Specific Prorations.  Anything  hereinabove  contained to the
contrary notwithstanding:

          (a) Seller  shall  retain and be  entitled  to receive any tax refunds
     issued after  Closing to the extent  applicable  to the period prior to the
     Closing,  but not  otherwise.  After  Closing,  Seller may not initiate nor
     demand  Purchaser  initiate or continue any  litigation to collect such tax
     refunds.

          (b) As to gas,  electricity and other utility  charges,  Seller may on
     written  notice to Purchaser on or before the Closing Date elect to pay one
     or  more  of  said  items  accrued  to  the  date  hereinabove   fixed  for
     apportionment  directly to the person or entity  entitled  thereunto and to
     the extent Seller so elects, such item shall not be apportioned  hereunder,
     and  Seller's  obligation  to pay such item  directly  in such  case  shall
     survive the delivery of the Deed; provided,  however,  that Seller will not
     take any  action  or fail to take any  action  which  would  result  in the
     cessation or termination of utility service to the Property.

          (c)  Seller and  Purchaser  agree  that all rents  received  after the
     Closing  after  reasonable  third party  out-of-pocket  costs of collection
     (excluding any management fees or leasing  expenses),  if any,  incurred by
     Purchaser shall be applied first to current rentals, and then to delinquent
     rentals, if any, in the inverse order of their maturity, and Purchaser will
     promptly  deliver to Seller any such  delinquent  rentals  owed  Seller and
     received  following  the Closing.  Seller may not initiate (nor demand that
     Purchaser initiate) legal or other proceedings for collection of delinquent
     rentals  against  tenants or any other tenants in occupancy at the Closing.
     Seller will deliver to Purchaser,  within five (5) business days  following
     receipt, any rents received by Seller after the Closing and attributable to
     the period from and after the Closing.

                                      -10-
<PAGE>

          (d) At the  Closing,  Seller  shall credit to the account of Purchaser
     against  the  Purchase  Price (i) any  security  deposit (to the extent not
     properly  applied  against  tenant  delinquencies)  reflected as being made
     under any  leases  executed  with  respect  to the  Property  or  otherwise
     actually  collected by Seller,  together with all interest,  if any,  which
     must be paid thereon to any tenant  thereunder;  and (ii) all prepaid rents
     and other  charges  paid in advance  by any  tenants  of the  Property  and
     attributable  to the  period  from and  after  the  Closing.  Any  security
     deposits  not in the  form  of  cash  (e.g.,  letters  of  credit)  must be
     transferred and reissued in Purchaser's  name and delivered to Purchaser at
     the Closing, at Seller's sole cost and, if not so reissued,  Purchaser will
     receive a cash  credit at  Closing  which  will be repaid by  Purchaser  to
     Seller when the letters of credit are so reissued.

          (e) Any leasing  commissions  and tenant  improvement  allowances  due
     under  any  Leases in effect  as of the  Effective  Date  shall be the sole
     obligation of Seller.  Any such leasing  commissions and tenant improvement
     allowances  relating to leases executed  between the Effective Date and the
     Closing  Date  shall be the sole  obligation  of  Seller  unless  Purchaser
     approve such lease, in which event such expenses shall be the obligation of
     Purchaser.

     Section 7.03. Transaction Costs. Purchaser shall be responsible for (a) all
attorneys' fees and expenses of Purchaser's counsel; (b) any inspection or other
costs  incurred  by  Purchaser  as  a  result  of   Purchaser's   due  diligence
investigations;  (c) one-half of any escrow fees  charged by the Title  Company;
(d) the cost of any  endorsements  requested  by  Purchaser  to the Owner Policy
(including  without  limitation,  the deletion of the "survey exception" (except
for shortages in area));  and (e) the cost of a mortgagee  title policy insuring
Seller's  lien  under  the Deed of Trust  and any  recording  fees and  expenses
incurred with respect to the Deed of Trust.  Seller shall be responsible for (i)
all  attorneys'  fees and  expenses  of Seller's  counsel;  (ii) the cost of the
Survey; (iii) the cost of the Owner Policy,  except for any endorsements thereto
requested by Purchaser;  (iv) the cost to record the Deed and other conveyancing
documents; and (v) one-half of any escrow fees charged by the Title Company. All
other  transaction  costs  actually  incurred shall be apportioned in accordance
with local custom for commercial sales in the Dallas/Ft. Worth metropolitan area
and in the  absence  of any such  custom,  must be paid  one-half  by Seller and
one-half by Purchaser.

                                      -11-
<PAGE>

     Section 7.04. Brokerage  Commissions.  Seller shall pay a commission to The
Staubach Company and to Cushman & Wakefield of Texas,  Inc.  (collectively,  the
"Brokers"),  in the amount of $685,000.00  shared  equally  between The Staubach
Company and Cushman & Wakefield of Texas,  Inc.  Such  commission  shall only be
owed if, as and when Closing  actually  occurs and not  otherwise.  In addition,
when the Note is paid in full,  Purchaser  shall  pay The  Staubach  Company  an
additional commission (the "Additional  Commission") equal to $467,500.00 Except
for Brokers,  Seller and Purchaser  acknowledge and agree that neither has dealt
with any other real estate broker, agent or salesman, and any other fees or real
estate  commissions  occasioned by the  execution  and/or  consummation  of this
Contract shall be the sole  responsibility  of the party  contracting  therefor.
Each such party agrees to indemnify, protect, defend and hold harmless the other
party  for  the  payment  of  the   above-described   commissions  owed  by  the
indemnifying  party, and from any and all other fees or real estate  commissions
claimed by any brokers or agents claiming by, through or under the  indemnifying
party. By their  signatures  hereto,  Brokers  represent to Seller and Purchaser
that (i) Brokers  will look solely to Seller for payment of Brokers'  commission
(other than the  Additional  Commission)  and solely to Purchaser for payment of
the  Additional  Commission;   and  (ii)  Brokers  have  not  entered  into  any
arrangement  with any other  party  whereby  such other party is entitled to any
commission  or finder's fee in  connection  with this  transaction,  and Brokers
agree that should any claim be made for brokerage  commissions  or finder's fees
by any other  party by,  through  or on  account of any acts of Brokers or their
representatives,  Brokers shall hold Purchaser and Seller free and harmless from
and against any and all loss, cost, damage and expense in connection  therewith.
If the  transaction  envisioned  hereby  fails to  close  and fund for any or no
reason,  including without  limitation  either parties'  default,  neither party
shall have any  obligation for the payment to Brokers or any other person of any
commission or similar type fee hereunder, or otherwise.

     Section  7.05.  Survival.  The  terms of this  Article  shall  survive  the
termination  of this  Contract  and the Closing  and  delivery of the Deed for a
period of one (1) year thereafter.

                                  ARTICLE VIII

                            TERMINATION AND REMEDIES
                            ------------------------

     Section  8.01.  Purchaser's  Default.  If Purchaser  fails to close for any
reason, except Seller's default or the permitted termination of this Contract by
Purchaser pursuant to Article IV or Seller as herein expressly provided,  Seller
shall be entitled,  as Seller's sole and  exclusive  remedy,  to terminate  this
Contract and to request the Title Company to deliver the Earnest Money  Deposit,
together with all accrued and unpaid  interest  thereon,  to Seller.  Seller and
Purchaser acknowledge and agree that delivery of the Earnest Money Deposit shall
be deemed liquidated damages for Purchaser's  breach of this Contract,  it being
further agreed that the actual damages to Seller in the event of such breach are
impractical to ascertain and the Earnest Money Deposit is a reasonable  estimate
thereof.  Seller has no right to specifically  enforce  Purchaser's  obligations
under this Contract nor to seek or otherwise collect any actual,  out-of-pocket,
lost profit, punitive,  consequential,  treble, or other damages from or against
Purchaser.  In no event  shall  any  officer,  director,  agent or  employee  of
Purchaser  or  its  partners  be  personally   liable  for  any  of  Purchaser's
obligations under this Contract or the documents to be delivered at the Closing.
Purchaser's  indemnity obligation under Section 3.04 will not be subject to this
Section 8.01 (except the previous sentence hereof).

                                      -12-
<PAGE>

     Section  8.02.   Seller's  Default.   If  any  of  Seller's  warranties  or
representations  are  knowingly  made  in a  materially  false,  misleading  and
inaccurate  manner,  or  if  Seller  fails  to  close  for  any  reason,  except
Purchaser's  default or the  permitted  termination  of this  Contract by either
Seller or  Purchaser  (other than under this Section  8.02) as herein  expressly
provided,  Purchaser  shall be  entitled,  as  Purchaser's  sole  and  exclusive
remedies,  to either (a) terminate  this Contract upon written  notice to Seller
and to request the Title Company to return the Earnest Money  Deposit,  together
with all  accrued  interest  thereon,  to  Purchaser  or (b) pursue an action to
enforce specific  performance of Seller's  obligations  under this Contract.  If
Seller's  default is willful,  Purchaser may as  Purchaser's  sole and exclusive
remedies,  either  (i)  enforce  specific  performance  or (ii)  terminate  this
Contract,  receive  the return of the  Earnest  Money  Deposit,  and collect its
actual  out-of-pocket  expenses  from Seller  incurred in  connection  with this
Contract. In no event shall any officer,  director,  agent or employee of Seller
be personally liable for any of Seller's  obligations under this Contract or the
documents to be delivered at the Closing.

                                   ARTICLE IX

                    REPRESENTATIONS, WARRANTIES AND COVENANTS
                    -----------------------------------------

     Section  9.01.  Seller's  Representations.  Seller  hereby  represents  and
warrants  to  Purchaser,  except  as set  forth in that  certain  schedule  (the
"Disclosure  Schedule")  attached hereto as Exhibit E and made a part hereof for
all purposes, as follows:

          (a) Seller is a duly organized,  validly  existing  limited  liability
     company in good  standing  under the laws of the State of Delaware.  Seller
     has the full right and authority to enter into this Contract and consummate
     the sale,  transfers and assignments  contemplated by it herein and each of
     the persons  signing  this  Contract and any other  document or  instrument
     contemplated  hereby  on behalf of  Seller  is  authorized  to do so.  This
     Contract has been duly authorized, executed and delivered by Seller, and is
     and at  the  time  of the  Closing  will  be a  legal,  valid  and  binding
     obligation  of  Seller   enforceable   against   Seller,   except  as  such
     enforceability  may be limited by bankruptcy,  insolvency,  reorganization,
     moratorium or similar laws of general application  affecting the rights and
     remedies of creditors. All the documents executed by Seller which are to be
     delivered  to  Purchaser at the Closing are and at the time of Closing will
     be duly  authorized,  executed and delivered by Seller,  and are and at the
     time of Closing will be legal,  valid,  and binding  obligations  of Seller
     enforceable against Seller, except as such enforceability may be limited by
     bankruptcy,  insolvency,  reorganization,  moratorium  or  similar  laws of
     general application affecting the rights and remedies of creditors.

          (b) Seller has  received no written  notice of (and  otherwise  has no
     knowledge  of) any plan or study by any  governmental  authority  or agency
     which in any way will materially  impair the continued use and operation of
     the Property as currently used and operated.

                                      -13-
<PAGE>

          (c) Seller has  received no written  notice of (and  otherwise  has no
     knowledge of) any current, proposed or threatened eminent domain or similar
     proceeding,  or private  purchase in lieu of such  proceeding,  which would
     affect the Property in any way whatsoever.

          (d) To the best of Seller's knowledge, Seller has no knowledge of, and
     Seller has  received no written  notice of, any  violation  of any federal,
     state, county, city or any other laws,  ordinances,  rules and regulations,
     including,  but not limited to, those  relating to  environmental,  zoning,
     land use and division,  building,  fire, health and safety matters,  of any
     government  or any  agency,  body or  subdivision  thereof  bearing  on the
     construction of the Improvements and on the operation,  ownership or use of
     the Property (collectively, "Applicable Laws").

          (e) Seller has  received no written  notice of any pending  litigation
     which does or would affect the Property or Seller's  ability to fulfill all
     of its obligations under this Contract. To Seller's knowledge,  there exist
     no writs,  injunctions,  decrees, orders or judgments outstanding,  nor any
     lawsuits,   claims,   proceedings,   citations,   directives,   summons  or
     investigations,   pending  or  threatened  in  writing,   relating  to  the
     ownership,  use,  maintenance or operation of the Property by any person or
     entity.  Except as set forth in the  Disclosure  Schedule,  there  are,  to
     Seller's  knowledge,  no outstanding  claims on Seller's insurance policies
     which claims relate to the Property.

          (f) The execution, delivery and performance of this Contract by Seller
     (i) does not and will not conflict with or result in a breach of or default
     under the  organizational  documents  of Seller,  (ii) to the  knowledge of
     Seller,  does not and will not  conflict  with or result in a breach of any
     condition or provision of, or constitute a default under,  or result in the
     acceleration,  creation or  imposition of any lien,  charge or  encumbrance
     upon any of the Property by reason of the terms of any contract,  mortgage,
     lien,  agreement,  indenture,  instrument,  decree or judgment to which the
     Seller is a party or which is binding upon Seller.

          (g) Seller has not entered  into any and there are no leases  relating
     to any portion of the  Property;  and no person (other than Seller) has any
     right of  possession  to the  Property  or any part  thereof.  There are no
     leasing  commissions  or tenant  finish costs or  allowances  due under any
     Leases which would be payable by Purchaser after the Closing.

          (h) Seller is not a foreign corporation,  foreign partnership, foreign
     trust or foreign estate (as defined in the Internal Revenue Code ("Code")),
     and is not subject to the provisions of Sections 897(a) or 1445 of the Code
     related to the withholding of sales proceeds to foreign persons.

          (i) Seller  has  delivered  to  Purchaser  complete  copies of Service
     Contracts  and,  to  Seller's  knowledge,  Seller  has  delivered  or  made
     available  all  other due  diligence  materials  requested  in  writing  by
     Purchaser  which are in  Seller's  possession  and to  Seller's  knowledge,
     Seller has not failed to make available, at a reasonably accessible central
     location,  to Purchaser for  inspection  any books,  records,  reports,  or
     engineering  or other studies  relevant to the  construction,  maintenance,
     leasing, or operation of the Property which are in Seller's possession.

                                      -14-
<PAGE>

          (j) "As  Is",  "Where  Is".  Except  as  otherwise  set  forth in this
     Contract or in the Deed and any other closing  documents to be executed and
     delivered by Seller at Closing (and  without  limiting any  representations
     and warranties set forth herein or therein), Seller makes no representation
     or warranty, express or implied or arising by operation of law with respect
     to any matter concerning the Property,  including without  limitation,  the
     following:  (i) title (other than the special warranty of title included in
     the Deed), (ii) habitability,  merchantability or suitability or fitness of
     the  Property  for a  particular  purpose  or use,  (iii)  the  nature  and
     condition of the Property,  including without limitation,  water,  drainage
     and grading, soil and geology,  zoning,  utility availability or hook-up or
     easement  rights,   sewage  facilities   (including,   without  limitation,
     availability or nonavailability of appropriate water and sewer capacity) or
     other governmental rights or obligations,  (iv) completeness or accuracy of
     permits,  surveys or reports concerning the Property, (v) tax consequences,
     (vi) compliance of the Property with applicable  environmental  laws, rules
     and regulations  (collectively,  "Environmental Laws"), (vii) the existence
     of  asbestos,  oil,  petroleum  or  chemical  liquids or solids,  liquid or
     gaseous  products or hazardous  substances as those terms and similar terms
     are defined or used in applicable Environmental Laws, (viii) the nature and
     extent of  rights-of-way  and licenses,  or (ix)  compliance  with any law,
     ordinance  or  regulation  of any  governmental  entity or body.  PURCHASER
     HEREBY  ACKNOWLEDGES  AND AGREES THAT PURCHASER HAS OR WILL HAVE,  PRIOR TO
     THE  END OF THE  REVIEW  PERIOD,  THOROUGHLY  INSPECTED  AND  EXAMINED  THE
     PROPERTY AS DEEMED  NECESSARY  BY PURCHASER TO EVALUATE THE PURCHASE OF THE
     PROPERTY.  PURCHASER HEREBY FURTHER  ACKNOWLEDGES AND AGREES THAT PURCHASER
     IS RELYING  AND WILL RELY  SOLELY  UPON THE  INSPECTION,  EXAMINATION,  AND
     EVALUATION  OF THE PROPERTY AND SELLER'S  PROPERTY  FILES BY PURCHASER  AND
     THAT  PURCHASER  IS  PURCHASING  THE PROPERTY ON AN "AS IS," "WHERE IS" AND
     "WITH ALL FAULTS" BASIS, WITHOUT REPRESENTATIONS, WARRANTIES AND COVENANTS,
     EXPRESS OR IMPLIED,  OF ANY KIND OR NATURE OTHER THAN THOSE  EXPRESSLY  SET
     FORTH IN THIS CONTRACT OR ANY DOCUMENT  EXECUTED BY SELLER PURSUANT TO THIS
     CONTRACT  BEFORE  OR AT THE  CLOSING  AND  DELIVERED  TO  PURCHASER  AT THE
     CLOSING.  PURCHASER FURTHER AGREES THAT THE PURCHASE PRICE IS BASED IN PART
     UPON THE FACT THAT THE CONVEYANCE TO BE MADE BY SELLER IS WITHOUT  WARRANTY
     OR REPRESENTATION OTHER THAN AS EXPRESSLY SET FORTH IN THIS CONTRACT OR ANY
     DOCUMENT EXECUTED AND DELIVERED BY SELLER AT THE CLOSING. The provisions of
     this Section 9.01(j) shall survive Closing.

                                      -15-
<PAGE>

     Section 9.02. Purchaser's Representations.  Purchaser hereby represents and
warrants  to  Seller,  as of the date  hereof  and as of the  Closing  Date,  as
follows:

          (a) Purchaser is a corporation,  duly organized,  validly existing and
     in good standing under the laws of the State of North Carolina, and has all
     requisite  power and  authority to carry on its business as now  conducted.
     Neither the  execution  and the delivery of this  Contract by Purchaser nor
     Purchaser's  performance  of its  obligations  hereunder  will  result in a
     violation  or breach of any term or  provision  or  constitute a default or
     accelerate the  performance  required under any other agreement or document
     to which  Purchaser is a party or otherwise bound and will not constitute a
     violation of any law,  ruling,  regulation  or order to which  Purchaser is
     subject.  This  Contract  constitutes  a valid and  binding  obligation  of
     Purchaser  enforceable  in  accordance  with  its  terms,  except  as  such
     enforceability  may be limited by bankruptcy,  insolvency,  reorganization,
     moratorium or similar laws of general application  affecting the rights and
     remedies of creditors.

          (b)  Purchaser  has the capacity and complete  authority to enter into
     and perform this Contract, and no consent,  approval or other action by any
     person or entity (other than the person  signing this Contract on behalf of
     Purchaser  and any approval to be obtained by  Purchaser  during the Review
     Period) will be needed  thereafter to authorize  Purchaser's  execution and
     performance of this Contract.

     Section 9.03. Discovery. If either Seller or Purchaser discovers,  prior to
or at the  Closing,  that any  representation  or warranty of the other party is
false,  misleading or inaccurate in any material respect,  the discovering party
may, at its option,  terminate  this  Contract  and the parties  hereto shall be
relieved of all liabilities  and  obligations  hereunder and (a) if Purchaser is
the discovering  party,  Purchaser shall be entitled to the immediate  return of
the Earnest Money Deposit,  together with all accrued interest  thereon,  and to
pursue its remedies  under Section 8.02 of this  Contract;  and (b) if Seller is
the  discovering  party  after the end of the  Review  Period,  Seller  shall be
entitled to pursue its  remedies  under  Section 8.01 of this  Contract.  If the
discovering  party  elects to proceed to Closing such party cannot later bring a
claim against the other as to such  discovered  matter,  it being agreed that in
such event,  the  discovering  party shall have waived all claims related to the
discovered  matter.  Notwithstanding  anything in this Contract to the contrary,
with respect to any claims made by Purchaser  against Seller under this Contract
for matters discovered after Closing,  (i) the amount in controversy must exceed
$10,000  in order  for  Purchaser  to  assert a claim  against  Seller  and (ii)
Purchaser shall be limited to Purchaser's  actual damages incurred on account of
Seller's   breach,   and  Seller  shall  not  be  liable  for  any  punitive  or
consequential  damages.  Representations  and  warranties  under this Article IX
shall fully  survive  the  Closing  for a period of one (1) year after  Closing;
however,  Purchaser shall have two (2) years in which to bring an action against
Seller  for said  breach of  representation  or  warranty  first  discovered  by
Purchaser  after  Closing,  provided that Purchaser  shall have notified  Seller
within said one (1) year survival period of the breach of said representation or
warranty

                                      -16-
<PAGE>

     Section 9.04. Operating  Covenants.  Seller agrees to maintain the Property
prior to the Closing in a manner  consistent  with its current  procedures,  and
shall  not,   without  the  prior  written  consent  of  Purchaser  (not  to  be
unreasonably withheld or delayed), do any of the following:

          (a) Enter into any contract that will not be fully performed by Seller
     on or  before  the  Closing  Date  or  that  will  not  be  susceptible  of
     cancellation  by  Purchaser  on or after the Closing  Date upon thirty (30)
     days or less prior written notice,  without cost or liability to Purchaser,
     or amend,  modify or supplement  any existing  contract  (other than leases
     which  are  subject  to clause  (b)  below) or  agreement  in any  material
     respect.

          (b) Enter into any lease of the Property without Purchaser's consent.

          (c) Fail to maintain its current insurance  covering Seller's interest
     in the Property or advise Purchaser  promptly of the occurrence of any fire
     or other casualty affecting the Property.

          (d) Sell, assign or create any right, title or interest  whatsoever in
     or to the Property  (including any so-called  "back-up" contracts which are
     expressly  prohibited)  or create  any lien  thereon,  other  than liens or
     encumbrances  noted in the Title Commitment,  without promptly  discharging
     same or otherwise complying with the terms of Section 4.04.

          (e)  Intentionally  take any  action  which  would  have the effect of
     violating any of the  representations and warranties of Seller contained in
     this Contract.

     Section 9.05. Conditions  Precedent.  Purchaser is not obligated to perform
under  this  Contract  unless  all of the  following  conditions  precedent  are
satisfied  as of the Closing  Date (or waived in writing by  Purchaser)  and are
otherwise true and correct in all material respects as of the Closing Date:

          (a) There has been no material adverse change in the matters reflected
     in the Title  Commitment  or the  Survey  (provided  that any change in the
     matters  reflected in the Title  Commitment  or the Survey is not caused by
     any action of Purchaser or its agents or representatives).

          (b) All of  Seller's  representations  and  warranties  are  true  and
     correct in all material respects.

          (c)  Seller  has  performed  all of  its  covenants,  agreements,  and
     obligations  under this Contract in all material  respects and is otherwise
     not in default.

Notwithstanding  the  generality of the  foregoing,  Seller shall use reasonable
efforts to  satisfy  all of the  foregoing  conditions  precedent.  If Seller is
unable to satisfy all of the foregoing conditions  precedent,  Purchaser may, as
Purchaser's  sole and  exclusive  remedies,  (i)  waive  one or more  conditions
precedent and proceed to the Closing or (ii)  terminate this Contract by written
notice to Seller and receive a refund of the Earnest Money Deposit. If Purchaser
elects to close, Purchaser will be deemed to have waived any conditions actually
known by Purchaser to be unsatisfied at the Closing.

                                      -17-
<PAGE>

                                    ARTICLE X

                                     NOTICES
                                     -------

     Section 10.01. Notices. Any notice, demand or other communication which may
or is required to be given under this  Contract  must be in writing and must be:
(a) personally delivered; (b) transmitted by United States postage prepaid mail,
registered or certified  mail,  return  receipt  requested;  (c)  transmitted by
reputable overnight courier service, such as Federal Express; or (d) transmitted
by legible facsimile (with answer back  confirmation) to Purchaser and Seller as
listed  below.  Except as  otherwise  specified  herein,  all  notices and other
communications  shall  be  deemed  to have  been  duly  given on (i) the date of
receipt if delivered  personally,  (ii) five (5) business days after the date of
posting  if  transmitted  by  registered  or  certified  mail,   return  receipt
requested,  (iii) the first (1st)  business  day after the date of  deposit,  if
transmitted  by  reputable  overnight  courier  service,  or  (iv)  the  date of
transmission  with confirmed answer back if transmitted by facsimile,  whichever
shall first occur. Any notice sent by facsimile shall also be sent by one of the
other methods set forth above,  but the  effective  date of such fax notice will
remain as set forth in clause (iv) above.  A notice or other  communication  not
given as herein  provided  shall only be deemed given if and when such notice or
communication  and any specified copies are actually  received in writing by the
party and all other  persons to whom they are required or permitted to be given.
Purchaser and Seller may change its address for purposes  hereof by notice given
to the other parties in accordance with the provisions of this Section, but such
notice  shall  not be deemed to have  been  duly  given  unless  and until it is
actually  received by the other parties.  Notices hereunder shall be directed as
follows:

         If to Purchaser:   PepsiCo, Inc.
                            700 Anderson Hill Road
                            Purchase, New York 10577-1444
                            Attention:  Ken O'Gara
                            Telephone:  (914) 253-2063
                            Facsimile:  (914) 253-3545
                            E-mail:  ken.o'gara@pepsi.com

                                      -18-
<PAGE>

         With copies to:    Stutzman, Bromberg, Esserman & Plifka
                            A Professional Corporation
                            2323 Bryan Street, Suite 2200
                            Dallas, Texas  75201
                            Attention:  Michael J. Rowan
                            Telephone:  (214) 969-4900
                            Facsimile:  (214) 969-4999
                            E-mail:  rowan@sbep-law.com

         And:               Law Department
                            Frito-Lay, Inc.
                            7701 Legacy Drive
                            Plano, Texas 75024
                            Attention:  Kelly M. Tullier
                            Telephone:  (972) 334-3809
                            Facsimile:  (972) 334-3871
                            E-mail:  Kelly.Tullier@fritolay.com

         If to Seller:      Citizens Communications Company
                            Administrative Offices
                            Three High Ridge Park
                            Stamford, Connecticut 06905
                            Attention:  Russ Mitten, General Counsel
                            Telephone:  (203) 614-5047
                            Facsimile:  (203) 614-4651
                            E-mail:  rmitten@czn.com

         With a copy to:    Citizens Communications Company
                            Administrative Offices
                            Three High Ridge Park
                            Stamford, Connecticut 06905
                            Attn: Dean Jackson, VP of Business Support Services
                            Telephone:  (203) 614-5028
                            Facsimile:  (203) 614-6743
                            E-mail:  djackson@czn.com

         And:               Locke Liddell & Sapp LLP
                            2200 Ross Avenue, Suite 2200
                            Dallas, Texas  75201-6776
                            Attention:  Mark M. Sloan
                            Telephone:  (214) 740-8715
                            Facsimile:  (214) 740-8800
                            E-mail:  msloan@lockeliddell.com

                                      -19-
<PAGE>

Notwithstanding  the foregoing,  any notices delivered by one party to the other
party under  Article IV may be sent by facsimile  and will be deemed given as of
the date and time shown on the confirmation slip (or, if busy,  delivery attempt
slip)  generated  by the sender's  facsimile  machine.  Purchaser's  or Seller's
counsel may deliver any notice  required or  otherwise  permitted to be given by
Purchaser  or Seller  hereunder  with the same  effect as if given  directly  by
Purchaser or Seller.

                                   ARTICLE XI

                                  RISK OF LOSS
                                  ------------

     Section 11.01.  Minor Damage. In the event of "minor" loss or damage [being
defined for the purpose of this Contract as damage to the Property such that the
Property could be repaired or restored,  in the opinion of an architect mutually
acceptable to Seller and Purchaser (with any fees, costs or expenses  pertaining
to such  opinion to be borne  equally by Purchaser  and Seller),  to a condition
substantially  identical to that of the Property  immediately prior to the event
of  damage  at a cost  equal to or less  than  $250,000,  or  which is  actually
restored  by  Seller  prior to the  Closing  Date to a  condition  substantially
identical  to that of the  Property  immediately  prior to the event of damage],
neither Seller nor Purchaser  shall have the right to terminate this Contract as
to the  Property  due to such damage but Seller  shall  assign to  Purchaser  at
Closing all of Seller's  right,  title and  interest to any claims and  proceeds
Seller may have with respect to any casualty  insurance policies relating to the
Property,  and the  Purchase  Price  shall be reduced by an amount  equal to the
deductible  amount  under such  policies.  Nothing  contained in this Article XI
shall  operate  to  restrict  in any way  Purchaser's  right to  terminate  this
Contract pursuant to Article IV.

     Section  11.02.  Major  Damage.  In the event of a  "major"  loss or damage
(being  defined  as  any  loss  or  damage  which  is  not  "minor"  as  defined
hereinabove),  Purchaser  shall have the option of terminating  this Contract by
written notice to Seller, in which event Seller and Purchaser shall thereupon be
released  from any and all  liability  hereunder.  If  Purchaser  elects  not to
terminate  this  Contract,  Purchaser and Seller shall proceed with the Closing,
provided  Seller shall assign all of Seller's  right,  title and interest to any
claims and proceeds  Seller may have with respect to any casualty,  rent loss or
other insurance policies relating to the Property, and Purchaser shall receive a
credit against the Purchase Price in an amount equal to the aggregate  amount of
any deductible(s) under the insurance policies assigned to Purchaser.

     Section 11.03.  Vendor and Purchaser  Risk.  Except as set forth in Section
11.01 and Section 11.02,  Seller shall bear the full risk of loss until Closing.
Upon the Closing,  full risk of loss with respect to the Property  shall pass to
Purchaser.

     Section  11.04.  Condemnation.  If before the Closing any  condemnation  or
eminent  domain  proceedings  are  threatened  or  initiated  against all or any
material  portion of the Property and, in the  reasonable  opinion of Purchaser,
such condemnation or eminent domain proceedings would materially  interfere with
the current use of the Property, then Purchaser may terminate this Contract upon
written  notice to Seller and Seller and Purchaser  shall  thereupon be released
from any and all further  liability  hereunder.  If Purchaser  does not elect to
terminate  this Contract  within ten (10) business days after receipt of written
notice of the  commencement  of any such  proceedings,  or if, in the reasonable
opinion of Purchaser,  such condemnation or eminent domain proceedings would not
materially  interfere  with Seller's  current use of the Property,  Seller shall
assign to  Purchaser  at the Closing all rights and interest of Seller in and to
any  condemnation  awards  payable  or to  become  payable  on  account  of such
condemnation or eminent domain proceedings.

                                      -20-
<PAGE>

                                   ARTICLE XII

                                  MISCELLANEOUS
                                  -------------

     Section 12.01. Entire Agreement; Confidentiality. This Contract constitutes
the  entire  agreement  between  the  parties  hereto and  supersedes  any prior
understanding,  letter of intent  or  written  or oral  agreements  between  the
parties  concerning  the Property.  The terms,  covenants and conditions of this
Contract  shall be kept  confidential  and no press  release or other  publicity
regarding the terms of this Contract or Purchaser's  acquisition of the Property
shall be  authorized  by either party  without the other  party's  prior written
consent,  provided  that the  foregoing  shall not prohibit (a)  Purchaser  from
disclosing  the  terms  hereof  to  any  potential  investor;  (b)  Seller  from
disclosing  the  terms  hereof  to  its  shareholders,   creditors,   regulatory
authorities  or  rating  agencies  or any  purchasers  of the  Note;  or (c) any
disclosures  required in connection with any proposed  financing of the Purchase
Price, or any portion  thereof or otherwise  required by applicable law or court
order.  The terms of this Section  12.01 shall survive any  termination  of this
Contract.

     Section 12.02. No Rule of  Construction.  This Contract has been drafted by
both Seller and Purchaser and no rule of  construction  shall be invoked against
either party with respect to the authorship hereof or of any of the documents to
be delivered by the respective parties at the Closing.

     Section 12.03.  Multiple  Counterpart;  Governing Law. This Contract may be
executed in multiple  counterparts each of which shall be deemed an original but
together  shall   constitute  one  and  the  same   instrument.   THE  VALIDITY,
INTERPRETATION AND PERFORMANCE OF THIS CONTRACT SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF TEXAS WITHOUT REGARD TO CONFLICTS OF LAWS  PRINCIPLES AND THE STATE
OR FEDERAL DISTRICT COURTS LOCATED IN DALLAS OR COLLIN COUNTY,  TEXAS SHALL HAVE
JURISDICTION OVER ALL LEGAL ACTION CONCERNING OR RELATING TO THIS CONTRACT.

     Section  12.04.  Attorneys'  Fees. In the event of any  litigation or other
proceeding  brought by either party  hereunder,  the  prevailing  party shall be
entitled to recover its reasonable attorneys' fees and costs of suit.

     Section 12.05.  Assignment.  Except as hereinafter provided,  this Contract
may not be assigned by  Purchaser.  This  Contract  may be assigned by Purchaser
without the prior written  consent of Seller to any affiliate or entity related,
directly or indirectly,  to Purchaser,  provided Purchaser gives Seller at least
five (5) days prior to Closing (i)  written  notice of such  assignment,  (ii) a
copy of the instrument  assigning  Purchaser's rights and obligations under this
Contract and (iii) corporate and authority documents for the assignee evidencing
the  assignee's  existence  and  good  standing  and  authority  to  assume  the
obligations of Purchaser  under this  Contract.  Any such  assignment  shall not
relieve Purchaser of its duties and obligations hereunder; provided, further, in
the event of an assignment of this  Contract,  PepsiCo,  Inc.  shall execute and
deliver the Guaranty to Seller at the Closing.  The Earnest  Money  Deposit will
remain on deposit with the Title  Company  following any such  assignment.  This
Contract  and all  rights  hereunder  shall  inure  to and be  binding  upon the
respective heirs, personal representatives,  successors and permitted assigns of
Seller and Purchaser.

                                      -21-
<PAGE>

     Section  12.06.  Interpretation.  This  Contract  shall,  unless  otherwise
specified herein, be subject to the following rules of  interpretation:  (a) the
singular  includes the plural and the plural the singular;  (b) words  importing
any gender  include the other  genders;  (c)  references  to persons or entities
include  their  permitted  successors  and  assigns;  (d) words and terms  which
include a number of constituent parts,  things or elements,  including the terms
Improvements,  Permitted Exceptions,  Personal Property, Intangible Property and
Property,  shall be construed as referring  separately to each constituent part,
thing or element thereof, as well as to all of such constituent parts, things or
elements as a whole; (e) references to statutes are to be construed as including
all rules and regulations  adopted  pursuant to the statute  referred to and all
statutory provisions  consolidating,  amending or replacing the statute referred
to; (f)  references to agreements  and other  contractual  instruments  shall be
deemed to include all subsequent  amendments  thereto or changes therein entered
into in  accordance  with their  respective  terms;  (g) the words  "approve" or
"consent"  or "agree" or  derivations  of said words or words of similar  import
mean, unless otherwise expressly provided herein or therein, the prior approval,
consent,  or  agreement  in writing of the person  holding the right to approve,
consent or agree with respect to the matter in question, and the words "require"
or  "judgment"  or  "satisfy" or  derivations  of said words or words of similar
import mean the requirement, judgment or satisfaction of the person who may make
a requirement  or exercise  judgment or who must be satisfied,  which  approval,
consent,  agreement,   requirement,   judgment  or  satisfaction  shall,  unless
otherwise  expressly  provided  herein or therein,  be in the sole and  absolute
discretion of the person  holding the right to approve,  consent or agree or who
may make a  requirement  or  judgment  or who must be  satisfied;  (h) the words
"include"  or  "including"  or words of  similar  import  shall be  deemed to be
followed by the words "without  limitation";  (i) the words "hereto" or "hereby"
or "herein" or "hereof" or  "hereunder,"  or words of similar  import,  refer to
this Contract in its entirety; (j) references to sections, articles,  paragraphs
or  clauses  are to the  sections,  articles,  paragraphs  or  clauses  of  this
Contract; and (k) numberings and headings of sections, articles,  paragraphs and
clauses are  inserted as a matter of  convenience  only and shall not affect the
construction of this Contract.

     Section 12.07. Exhibits. The exhibits attached hereto shall be deemed to be
an integral part of this Contract.

     Section 12.08.  Modifications.  This Contract cannot be changed orally, and
no executory agreement shall be effective to waive, change,  modify or discharge
it in whole or in part  unless  such  executory  agreement  is in writing and is
signed  by  the  parties  against  whom  enforcement  of  any  waiver,   change,
modification or discharge is sought. Any such modification need not be joined in
by Broker or the Title Company.

                                      -22-
<PAGE>

     Section 12.09. Reporting Person.  Purchaser and Seller hereby designate the
Title Company as the  "reporting  person"  pursuant to the provisions of Section
6045(e) of the Internal Revenue Code of 1986, as amended.

     Section 12.10.  Time of Essence.  Time is of the essence to both Seller and
Purchaser in the performance of this Contract,  and they have agreed that strict
compliance  by both of them is  required  as to any  date  and/or  time  set out
herein, including,  without limitation, the dates and times set forth in Article
IV and Article VI of this  Contract.  If the final day of any period of time set
out in any provision of this Contract  falls upon a Saturday,  Sunday or a legal
holiday  under the laws of the State in which the Property is located,  then and
in such event,  the time of such period  shall be extended to the next day which
is not a Saturday, Sunday or legal holiday.

     Section 12.11. Dispute Resolution.  If a dispute arises between the parties
that is not settled in the ordinary course of business,  then at the election of
either party and upon due notice to the other, resolution of the dispute will be
pursued by negotiation,  each party appointing an appropriately authorized point
person to negotiate  with the point  person of the other.  If the dispute is not
resolved by negotiation  within  fifteen (15) days after the notice  therefor is
given,  plus such  extensions  of time as the  parties  may  agree,  then at the
election  of either  party and upon due notice to the other,  the  parties  will
pursue resolution in good faith through  confidential and non-binding  mediation
or other alternate form of dispute resolution under such rules and procedures as
the parties may agree for fifteen (15) days after the notice  therefor is given,
plus  such  extensions  of  time  as the  parties  may  agree,  before  pursuing
resolution through all legally available means. Neither party shall be deemed to
have waived any rights or remedies at law or in equity,  and both parties  agree
to maintain the  business  relationship  of the parties to the  greatest  extent
reasonably  practical  during the thirty (30) days, plus such additional time as
the parties may agree,  provided in this section for  negotiation  and alternate
dispute  resolution,  but nothing herein shall be construed as preventing either
party  from  pursuing  any  remedy at law or in equity  as may be  necessary  to
protect intellectual property intersets.

                       [SEE FOLLOWING PAGE FOR SIGNATURES]

                                      -23-

<PAGE>

     IN WITNESS WHEREOF, this Contract has been executed by Purchaser and Seller
as of (but not necessarily on) the date and year first above written.

                        PURCHASER:
                        ---------

                        PEPSICO, INC.,
                        a North Carolina corporation

                        By: /s/  Kenneth J. O'Gara
                           ---------------------------------
                        Name:  Kenneth J. O'Gara
                              ------------------------------
                        Title: V.P. Global Real Estate Services
                               --------------------------------

                                      -24-

<PAGE>

                        SELLER:
                        ------

                        CITIZENS TELECOM SERVICES
                        COMPANY LLC
                        a Delaware limited liability company

                        By: /s/ John H. Casey, III
                           -----------------------------------------
                        Name:  John H. Casey, III
                             ---------------------------------------
                        Title: President and Chief Operating Officer
                              --------------------------------------

                                      -25-
<PAGE>

                              TITLE COMPANY JOINDER
                              ---------------------

     The Title  Company  joins  herein in order to  evidence  its  agreement  to
perform the duties and obligations of the Title Company set forth herein and the
accompanying  escrow  instructions  and to  acknowledge  receipt  of (a) a fully
executed copy of this Contract;  and (b) the Purchaser's Deposit,  together with
Purchaser's  investment  instructions  with respect  thereto.  The Title Company
acknowledges  that any demand  made by  Purchaser  for the return of the Earnest
Money  Deposit  received on or before the last day of the Review Period need not
be joined in by Seller in order to be effective.

         Date:  February 5, 2003.

                                     REPUBLIC TITLE OF TEXAS, INC.

                                     By: /s/ Paulette Hubbard
                                        -----------------------------
                                     Name:  Paulette Hubbard
                                          ---------------------------
                                     Title: Senior Vice President
                                           --------------------------

                                      -26-

<PAGE>

                                 BROKER JOINDER
                                 --------------

     Broker joins herein in order to (a) acknowledge receipt of a fully executed
copy  of  this  Contract;  and  (b)  evidence  Broker's  consent  to the  terms,
limitations,  restrictions  and  covenants set forth in Section 7.04 and Section
12.01, but not otherwise.

         Date: January 31, 2003.

                                    CUSHMAN & WAKEFIELD OF TEXAS, INC.

                                    By: /s/ Rick Hughes
                                        ------------------------------
                                    Name:  Rick Hughes
                                        ------------------------------
                                    Title: Senior Director
                                          ----------------------------

                                      -27-
<PAGE>

                                 BROKER JOINDER
                                 --------------

     Broker joins herein in order to (a) acknowledge receipt of a fully executed
copy  of  this  Contract;  and  (b)  evidence  Broker's  consent  to the  terms,
limitations,  restrictions  and  covenants set forth in Section 7.04 and Section
12.01, but not otherwise.

         Date: January 31, 2003.

                                      THE STAUBACH COMPANY

                                      By:  /s/ Larry M. Toon
                                         ---------------------------
                                      Name:  Larry M. Toon
                                           -------------------------
                                      Title:  Senior Vice President
                                            ------------------------

                                      -28-

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