Document:

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                                                                  Exhibit 10.96

                                                               EXECUTION VERSION

                        PINNACLE WEST CAPITAL CORPORATION

                                  $200,000,000

                                  SENIOR NOTES

                       UNCOMMITTED MASTER SHELF AGREEMENT

                          Dated as of February 28, 2006

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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                           <C>
1.  AUTHORIZATION OF ISSUE OF NOTES........................................    1

2.  PURCHASE AND SALE OF NOTES.............................................    1
    2A.  Facility..........................................................    1
    2B.  Issuance Period...................................................    2
    2C.  Periodic Spread Information.......................................    2
    2D.  Request for Purchase..............................................    2
    2E.  Rate Quotes.......................................................    3
    2F.  Acceptance........................................................    3
    2G.  Market Disruption.................................................    3
    2H.  Closing...........................................................    4
    2I.  Fees..............................................................    5

3.  CONDITIONS OF CLOSING..................................................    6
    3A.  Certain Documents.................................................    6
    3B.  Opinion of Purchaser's Special Counsel............................    7
    3C.  Representations and Warranties; No Default........................    7
    3D.  Purchase Permitted by Applicable Laws.............................    7
    3E.  Legal Matters.....................................................    8
    3F.  Payment of Fees...................................................    8
    3G.  Proceedings.......................................................    8
    3H.  Private Placement Numbers.........................................    8

4.  PREPAYMENTS............................................................    8
    4A.  Required Prepayments..............................................    8
    4B.  Optional Prepayment With Yield-Maintenance Amount.................    8
    4C.  Notice of Optional Prepayment.....................................    8
    4D.  Application of Prepayments........................................    9
    4E.  Retirement of Notes...............................................    9

5.  AFFIRMATIVE COVENANTS..................................................    9
    5A.  Financial Statements; Notice of Defaults..........................    9
    5B.  Information Required by Rule 144A.................................   11
    5C.  Inspection of Property............................................   11
    5D.  Maintenance of Property; Insurance................................   12
    5E.  Conduct of Business and Maintenance of Existence..................   12
    5F.  Compliance with Laws..............................................   13
    5G.  Covenant to Secure Notes Equally..................................   13
    5H.  Ownership of APS..................................................   13
    5I.  Additional Covenants and Additional Defaults......................   13

6.  NEGATIVE COVENANTS.....................................................   13
    6A.  Debt..............................................................   13
    6B.  Consolidations; Mergers and Sales of Assets.......................   13
    6C.  Terrorism Sanction Regulations....................................   14
</TABLE>

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<TABLE>
<S>                                                                           <C>
7.  EVENTS OF DEFAULT......................................................   14
    7A.  Acceleration......................................................   14
    7B.  Rescission of Acceleration........................................   16
    7C.  Notice of Acceleration or Rescission..............................   17
    7D.  Other Remedies....................................................   17

8.  REPRESENTATIONS, COVENANTS AND WARRANTIES..............................   17
    8A.  Organization......................................................   17
    8B.  Financial Statements..............................................   17
    8C.  Actions Pending...................................................   18
    8D.  Outstanding Indebtedness..........................................   18
    8E.  Title to Properties...............................................   18
    8F.  Taxes.............................................................   19
    8G.  Conflicting Agreements and Other Matters..........................   19
    8H.  Offering of Notes.................................................   19
    8I.  Use of Proceeds...................................................   19
    8J.  ERISA.............................................................   20
    8K.  Governmental Consent..............................................   20
    8L.  Compliance with Environmental and Other Laws......................   20
    8M.  Foreign Assets Control Regulations, Etc...........................   21
    8N.  Permits and Other Operating Rights................................   21
    8O.  Utility Company Status............................................   21
    8P.  Investment Company Status.........................................   21
    8Q.  Disclosure........................................................   22
    8R.  Rule 144A.........................................................   22
    8S.  Hostile Tender Offers.............................................   22

9.  REPRESENTATIONS OF THE PURCHASERS......................................   22
    9A.  Nature of Purchase................................................   22
    9B.  Source of Funds...................................................   22
    9C.  Accredited Investor...............................................   24

10. DEFINITIONS; ACCOUNTING MATTERS........................................   24
    10A. Yield-Maintenance Terms...........................................   24
    10B. Other Terms.......................................................   25
    10C. Accounting Principles, Terms and Determinations...................   33

11. MISCELLANEOUS..........................................................   33
    11A. Note Payments.....................................................   33
    11B. Expenses..........................................................   34
    11C. Consent to Amendments.............................................   34
    11D. Form, Registration, Transfer and Exchange of Notes; Lost Notes....   35
    11E. Persons Deemed Owners; Participations.............................   36
    11F. Survival of Representations and Warranties; Entire Agreement......   36
    11G. Successors and Assigns............................................   36
    11H. Independence of Covenants.........................................   36
    11I. Notices...........................................................   37
</TABLE>

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<TABLE>
<S>                                                                           <C>
    11J. Payments Due on Non-Business Days.................................   37
    11K. Severability......................................................   37
    11L. Descriptive Headings..............................................   37
    11M. Satisfaction Requirement..........................................   38
    11N. Governing Law.....................................................   38
    11O. Severalty of Obligations..........................................   38
    11P. Counterparts......................................................   38
    11Q. Binding Agreement.................................................   38
    11R. Waiver of Jury Trial; Consent to Jurisdiction.....................   38
    11S. Confidential Information..........................................   39
</TABLE>

PURCHASER SCHEDULE

SCHEDULE 8G - LIST OF AGREEMENTS RESTRICTING DEBT

EXHIBIT A-1 - FORM OF NOTE

EXHIBIT A-2 - FORM OF SERIES A NOTE

EXHIBIT B   - FORM OF REQUEST FOR PURCHASE

EXHIBIT C   - FORM OF CONFIRMATION OF ACCEPTANCE

EXHIBIT D   - FORM OF FUNDS DELIVERY INSTRUCTION LETTER

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                        PINNACLE WEST CAPITAL CORPORATION
                        400 NORTH 5TH STREET, 19TH FLOOR
                             PHOENIX, ARIZONA 85004

                                                         As of February 28, 2006

To: Prudential Investment Management, Inc.
       (herein called "PRUDENTIAL")

    Each Prudential Affiliate (as hereinafter defined)
       which becomes bound by certain provisions of this
       Agreement as hereinafter provided (the "PURCHASERS")

    c/o Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

Ladies and Gentlemen:

          The undersigned, Pinnacle West Capital Corporation (the "COMPANY"),
hereby agrees with you as follows:

          1. AUTHORIZATION OF ISSUE OF NOTES. The Company will authorize the
issue of its senior promissory notes (the "NOTES") from time to time in
accordance with the provisions of this Agreement in the aggregate principal
amount of up to $200,000,000, to be dated the date of issue thereof; to mature,
in the case of each Note so issued, no more than 5 years after the date of
original issuance thereof; to bear interest on the unpaid balance thereof from
the date thereof at the rate per annum, and to have such other particular terms,
as shall be set forth, in the case of each Note so issued, in the Confirmation
of Acceptance with respect to such Note delivered pursuant to paragraph 2F; and
to be substantially in the form of Exhibit A-1 attached hereto. The term "NOTES"
as used herein shall include each Note delivered pursuant to any provision of
this Agreement and each Note delivered in substitution or exchange for any such
Note pursuant to any such provision. Notes which have (i) the same final
maturity, (ii) the same principal prepayment dates, (iii) the same principal
prepayment amounts (as a percentage of the original principal amount of each
Note), (iv) the same interest rate, and (v) the same original date of issuance
are herein called a "SERIES" of Notes. Capitalized terms used herein have the
meanings specified in paragraph 10.

          2. PURCHASE AND SALE OF NOTES.

          2A. FACILITY. Prudential is willing to consider, in its sole
discretion and within limits which may be authorized for purchase by Prudential
Affiliates from time to time, the purchase of Notes pursuant to this Agreement.
The willingness of Prudential to consider such purchase of Notes is herein
called the "FACILITY". At any time, the aggregate principal amount of Notes
stated in paragraph 1, minus the aggregate principal amount of Notes purchased
and sold pursuant to this Agreement prior to such time, minus the aggregate
principal amount of Accepted Notes (as hereinafter defined) which have not yet
been purchased and sold hereunder prior to such time is herein called the
"AVAILABLE FACILITY AMOUNT" at such time. NOTWITHSTANDING THE WILLINGNESS OF
PRUDENTIAL TO CONSIDER

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PURCHASES OF NOTES BY PRUDENTIAL AFFILIATES, THIS AGREEMENT IS ENTERED INTO ON
THE EXPRESS UNDERSTANDING THAT NEITHER PRUDENTIAL NOR ANY PRUDENTIAL AFFILIATE
SHALL BE OBLIGATED TO MAKE OR ACCEPT OFFERS TO PURCHASE NOTES, OR TO QUOTE
RATES, SPREADS OR OTHER TERMS WITH RESPECT TO SPECIFIC PURCHASES OF NOTES, AND
THE FACILITY SHALL IN NO WAY BE CONSTRUED AS A COMMITMENT BY PRUDENTIAL OR ANY
PRUDENTIAL AFFILIATE.

          2B. ISSUANCE PERIOD. Notes may be issued and sold pursuant to this
Agreement until the earlier of (i) December 31, 2007 and (ii) the fifteenth day
after Prudential shall have given to the Company, or the Company shall have
given to Prudential, written notice stating that it elects to terminate the
issuance and sale of Notes pursuant to this Agreement (or if such fifteenth day
is not a Business Day, the Business Day next preceding such fifteenth day). The
period during which Notes may be issued and sold pursuant to this Agreement is
herein called the "ISSUANCE PERIOD".

          2C. PERIODIC SPREAD INFORMATION. Provided no Default or Event of
Default exists, not later than 9:30 A.M. (New York City local time) on a
Business Day during the Issuance Period if there is an Available Facility Amount
on such Business Day, the Company may request by telecopier or telephone, and
Prudential will, to the extent reasonably practicable, provide to the Company on
such Business Day (or, if such request is received after 9:30 A.M. (New York
City local time) on such Business Day, on the following Business Day),
information (by telecopier or telephone) with respect to various spreads at
which Prudential Affiliates might be interested in purchasing Notes of different
average lives; provided, however, that the Company may not make such requests
more frequently than once in every five Business Days or such other period as
shall be mutually agreed to by the Company and Prudential. The amount and
content of information so provided shall be in the sole discretion of Prudential
but it is the intent of Prudential to provide information which will be of use
to the Company in determining whether to initiate procedures for use of the
Facility. Information so provided shall not constitute an offer to purchase
Notes, and neither Prudential nor any Prudential Affiliate shall be obligated to
purchase Notes at the spreads specified. Information so provided shall be
representative of potential interest only for the period commencing on the day
such information is provided and ending on the earlier of the fifth Business Day
after such day and the first day after such day on which further spread
information is provided. Prudential may suspend or terminate providing
information pursuant to this paragraph 2C for any reason, including its
determination that the credit quality of the Company has declined since the date
of this Agreement.

          2D. REQUEST FOR PURCHASE. The Company may from time to time during the
Issuance Period make requests for purchases of Notes (each such request being a
"REQUEST FOR PURCHASE"). Each Request for Purchase shall be made to Prudential
by telecopier or overnight delivery service, and shall (i) specify the aggregate
principal amount of Notes covered thereby, which shall not be less than
$5,000,000 and not be greater than the Available Facility Amount at the time
such Request for Purchase is made, (ii) specify the principal amounts, final
maturities, principal prepayment dates and amounts of the Notes covered thereby,
(iii) specify the use of proceeds of such Notes, (iv) specify the proposed day
for the closing of the purchase and sale of such Notes, which, unless otherwise
agreed by Prudential, shall be a Business Day during the

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Issuance Period not less than 10 days and not more than 25 days after the making
of such Request for Purchase, (v) specify the number of the account and the name
and address of the depository institution to which the purchase prices of such
Notes are to be transferred on the Closing Day for such purchase and sale, (vi)
certify that, except as specified in such Request for Purchase, the
representations and warranties contained in paragraph 8 are true on and as of
the date of such Request for Purchase and that there exists on the date of such
Request for Purchase no Event of Default or Default, (vii) specify the
Designated Spread for such Notes and (viii) be substantially in the form of
Exhibit B attached hereto. Each Request for Purchase shall be in writing and
shall be deemed made when received by Prudential.

          2E. RATE QUOTES. Not later than five Business Days after the Company
shall have given Prudential a Request for Purchase pursuant to paragraph 2D,
Prudential may, but shall be under no obligation to, provide to the Company by
telephone or telecopier, in each case between 9:30 A.M. and 1:30 P.M. New York
City local time (or such later time as Prudential may elect) interest rate
quotes for the several principal amounts, maturities and principal prepayment
schedules of Notes specified in such Request for Purchase. Each quote shall
represent the interest rate per annum payable on the outstanding principal
balance of such Notes, at which a Prudential Affiliate would be willing to
purchase such Notes at 100% of the principal amount thereof.

          2F. ACCEPTANCE. Within 30 minutes after Prudential shall have provided
any interest rate quotes pursuant to paragraph 2E or such shorter period as
Prudential may specify to the Company (such period being the "ACCEPTANCE
WINDOW"), the Company may, subject to paragraph 2G, elect to accept such
interest rate quotes as to any portion not less than $5,000,000 aggregate
principal amount of the Notes specified in the related Request for Purchase.
Such election shall be made by an Authorized Officer of the Company notifying
Prudential by telephone or telecopier within the Acceptance Window that the
Company elects to accept such interest rate quotes, specifying the Notes (each
such Note being an "ACCEPTED NOTE") as to which such acceptance (an
"ACCEPTANCE") relates. The day the Company notifies an Acceptance with respect
to any Accepted Notes is herein called the "ACCEPTANCE DAY" for such Accepted
Notes. Any interest rate quotes as to which Prudential does not receive an
Acceptance within the Acceptance Window shall expire, and no purchase or sale of
Notes hereunder shall be made based on such expired interest rate quotes.
Subject to paragraph 2G and the other terms and conditions hereof, the Company
agrees to sell to a Prudential Affiliate, and Prudential agrees to cause the
purchase by a Prudential Affiliate of, the Accepted Notes at 100% of the
principal amount of such Notes. As soon as practicable following the Acceptance
Day, the Company, Prudential and each Prudential Affiliate which is to purchase
any such Accepted Notes will execute a confirmation of such Acceptance
substantially in the form of Exhibit C attached hereto (a "CONFIRMATION OF
ACCEPTANCE"). If the Company should fail to execute and return to Prudential
within two Business Days following receipt thereof a Confirmation of Acceptance
with respect to any Accepted Notes, Prudential may at its election at any time
prior to its receipt thereof cancel the closing with respect to such Accepted
Notes by so notifying the Company in writing.

          2G. MARKET DISRUPTION. Notwithstanding the provisions of paragraph 2F,
if Prudential shall have provided interest rate quotes pursuant to paragraph 2E
and thereafter prior to the time an Acceptance with respect to such quotes shall
have been notified to Prudential in

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accordance with paragraph 2F the domestic market for U.S. Treasury securities or
derivatives shall have closed or there shall have occurred a general suspension,
material limitation, or significant disruption of trading in securities
generally on the New York Stock Exchange or in the domestic market for U.S.
Treasury securities or derivatives, then such interest rate quotes shall expire,
and no purchase or sale of Notes hereunder shall be made based on such expired
interest rate quotes. If the Company thereafter notifies Prudential of the
Acceptance of any such interest rate quotes, such Acceptance shall be
ineffective for all purposes of this Agreement, and Prudential shall promptly
notify the Company that the provisions of this paragraph 2G are applicable with
respect to such Acceptance.

          2H. CLOSING.

          2H(1). SERIES A CLOSING. The Company hereby agrees to sell to the
Purchasers and, subject to the terms and conditions set forth herein, each
Purchaser agrees to purchase from the Company under the Facility 5.91% Senior
Notes due February 28, 2011 (the "SERIES A NOTES") in the aggregate principal
amount set forth opposite its name on the Purchaser Schedule attached hereto at
100% of such aggregate principal amount. The Series A Notes shall be
substantially in the form of Exhibit A-2 attached hereto. The Company will
deliver to Prudential, at the offices of Prudential Capital Group at 2200 Ross
Avenue, Suite 4200E, Dallas, Texas, 75201 or, at the request of Prudential, at
the offices of Baker Botts L.L.P. at 2001 Ross Avenue, Suite 600, Dallas, Texas
75201, one or more Notes registered in the name of the Purchasers, evidencing
the aggregate principal amount of Series A Notes to be purchased by the
Purchasers and in the denomination or denominations specified in the Purchaser
Schedule attached hereto against payment of the purchase price thereof by
transfer of immediately available funds to the credit of the Company's account
at JPMorgan Chase AZ, Phoenix, Arizona, Account Number 22703938 (ABA No.
122100024) on the date of closing, which shall be February 28, 2006, or any
other date upon which the Company and Prudential may mutually agree in writing
(the "SERIES A CLOSING").

          2H(2). SUBSEQUENT CLOSINGS. Not later than 11:30 A.M. (New York City
local time) on the Closing Day for any Accepted Notes, the Company will deliver
to each Purchaser listed in the Confirmation of Acceptance relating thereto at
the offices of Prudential Capital Group at 2200 Ross Avenue, Suite 4200E,
Dallas, Texas 75201 the Accepted Notes to be purchased by such Purchaser in the
form of one or more Notes in authorized denominations as such Purchaser may
request for each Series of Accepted Notes to be purchased on the Closing Day,
dated the Closing Day and registered in such Purchaser's name (or in the name of
its nominee), against payment of the purchase price thereof by transfer of
immediately available funds for credit to the Company's account specified in the
Request for Purchase of such Notes.

          2H(3). RESCHEDULED CLOSINGS. If the Company fails to tender to any
Purchaser the Accepted Notes to be purchased by such Purchaser on the scheduled
Closing Day for such Accepted Notes as provided above in this paragraph 2H, or
any of the conditions specified in paragraph 3 shall not have been fulfilled by
the time required on such scheduled Closing Day, the Company shall, prior to
1:00 P.M., New York City local time, on such scheduled Closing Day notify
Prudential (which notification shall be deemed received by each Purchaser) in
writing whether (x) such closing is to be rescheduled (such rescheduled date to
be a Business Day during the Issuance Period not less than one Business Day and
not more than 30 Business Days after

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such scheduled Closing Day (the "RESCHEDULED CLOSING DAY") and certify to
Prudential (which certification shall be for the benefit of each Purchaser) that
the Company reasonably believes that it will be able to comply with the
conditions set forth in paragraph 3 on such Rescheduled Closing Day and that the
Company will pay the Delayed Delivery Fee in accordance with paragraph 2I(2) or
(y) such closing is to be canceled as provided in paragraph 2I(3). In the event
that the Company shall fail to give such notice referred to in the preceding
sentence, Prudential (on behalf of each Purchaser) may at its election, at any
time after 1:00 P.M., New York City local time, on such scheduled Closing Day,
notify the Company in writing that such closing is to be canceled as provided in
paragraph 2I(3). Notwithstanding anything to the contrary appearing in this
Agreement, the Company may elect to reschedule a closing with respect to any
given Accepted Notes on not more than one occasion, unless Prudential shall have
otherwise consented in writing.

          2I. FEES.

          2I(1). ISSUANCE FEE. The Company will pay to Prudential in immediately
available funds a fee (the "ISSUANCE FEE") on each Closing Day (other than the
Series A Closing) in an amount equal to 0.125% of the aggregate principal amount
of Notes sold on such Closing Day.

          2I(2). DELAYED DELIVERY FEE. If the closing of the purchase and sale
of any Accepted Note is delayed for any reason beyond the original Closing Day
for such Accepted Note, the Company will pay to the Purchaser of such Accepted
Note on the Cancellation Date or actual closing date of such purchase and sale a
fee (the "DELAYED DELIVERY FEE") calculated as follows:

                           (BEY - MMY) X DTS/360 X PA

where "BEY" means Bond Equivalent Yield, i.e., the bond equivalent yield per
annum of such Accepted Note, "MMY" means Money Market Yield, i.e., the yield per
annum on a commercial paper investment of the highest quality selected by
Prudential on the date Prudential receives notice of the delay in the closing
for such Accepted Note having a maturity date or dates the same as, or closest
to, the Rescheduled Closing Day or Rescheduled Closing Days (a new alternative
investment being selected by Prudential each time such closing is delayed);
"DTS" means Days to Settlement, i.e., the number of actual days elapsed from and
including the original Closing Day with respect to such Accepted Note to but
excluding the date of such payment; and "PA" means Principal Amount, i.e., the
principal amount of the Accepted Note for which such calculation is being made.
In no case shall the Delayed Delivery Fee be less than zero. Nothing contained
herein shall obligate any Purchaser to purchase any Accepted Note on any day
other than the Closing Day for such Accepted Note, as the same may be
rescheduled from time to time in compliance with paragraph 2H.

          2I(3). CANCELLATION FEE. If the Company at any time notifies
Prudential in writing that the Company is canceling the closing of the purchase
and sale of any Accepted Note, or if Prudential notifies the Company in writing
under the circumstances set forth in the penultimate sentence of paragraph 2H(3)
that the closing of the purchase and sale of such Accepted Note

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is to be canceled, or if the closing of the purchase and sale of such Accepted
Note is not consummated on or prior to the last day of the Issuance Period (the
date of any such notification, or the last day of the Issuance Period, as the
case may be, being the "CANCELLATION DATE"), the Company will pay the Purchasers
in immediately available funds an amount (the "CANCELLATION FEE") calculated as
follows:

                                     PI X PA

where "PI" means Price Increase, i.e., the quotient (expressed in decimals)
obtained by dividing (a) the excess of the ask price (as determined by
Prudential) of the Hedge Treasury Note(s) on the Cancellation Date over the bid
price (as determined by Prudential) of the Hedge Treasury Notes(s) on the
Acceptance Day for such Accepted Note by (b) such bid price; and "PA" has the
meaning specified in paragraph 2I(2). The foregoing bid and ask prices shall be
as reported by TradeWeb LLC (or, if such data for any reason ceases to be
available through TradeWeb LLC, any publicly available source of similar market
data). Each price shall be rounded to the second decimal place. In no case shall
the Cancellation Fee be less than zero.

          3. CONDITIONS OF CLOSING. The obligation of any Purchaser to purchase
and pay for any Notes is subject to the satisfaction, on or before the Closing
Day for such Notes, of the following conditions:

          3A. CERTAIN DOCUMENTS. Such Purchaser shall have received the
following, each dated the date of the applicable Closing Day:

          (i) The Note(s) to be purchased by such Purchaser.

          (ii) Certified copies of the resolutions of the Board of Directors of
     the Company authorizing the execution and delivery of this Agreement and
     the issuance of the Notes, and of all documents evidencing other necessary
     corporate action and governmental approvals, if any, with respect to this
     Agreement and the Accepted Notes (provided, that for any Closing Day
     occurring after the Series A Closing, the Company may certify that there
     has been no change to any applicable authorization or approval since the
     date on which it was most recently delivered to such Purchaser under this
     paragraph 3A(ii), as an alternative to the further delivery thereof).

          (iii) A certificate of the Secretary, an Assistant Secretary or an
     Associate Secretary of the Company certifying the names and true signatures
     of the officers of the Company authorized to sign this Agreement and the
     Notes and the other documents to be delivered hereunder (provided, that for
     any Closing Day occurring after the Series A Closing, the Secretary, an
     Assistant Secretary or an Associate Secretary of the Company may certify
     that there has been no change to the officers of the Company authorized to
     sign Accepted Notes and other documents to be delivered therewith since the
     date on which a certificate setting forth the names and true signatures of
     such officers, as described above, was most recently delivered to such
     Purchaser under this paragraph 3A(iii), as an alternative to the further
     delivery thereof).

          (iv) Certified copies of the Certificate of Incorporation and By-laws
     of the Company (provided, that for any Closing Day occurring after the
     Series A Closing, the Company may certify that there has been no change to
     any applicable constitutive

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     document since the date on which it was most recently delivered to such
     Purchaser under this paragraph 3A(iv), as an alternative to the further
     delivery thereof).

          (v) Favorable opinions of (a) Snell & Wilmer, L.L.P. and (b) Morgan,
     Lewis & Bockius LLP, special counsel to the Company (or such other counsel
     designated by the Company and acceptable to the Purchaser(s)) satisfactory
     to such Purchaser and substantially in the forms provided on the Closing
     Day with respect to the Series A Notes and as to such other matters as such
     Purchaser may reasonably request. The Company hereby directs each such
     counsel to deliver such opinion, agrees that the issuance and sale of any
     Accepted Notes will constitute a reconfirmation of such direction, and
     understands and agrees that each Purchaser receiving such an opinion will
     and is hereby authorized to rely on such opinion.

          (vi) A good standing certificate for the Company from the Arizona
     Corporation Commission dated a recent date and such other evidence of the
     status of the Company as such Purchaser may reasonably request.

          (vii) Solely in connection with the Series A Closing, certified copies
     of Requests for Information or Copies (Form UCC-11) or equivalent reports
     listing all effective financing statements which name the Company (under
     its present name and previous names) as debtor and which are filed in the
     office of the Secretary of State of Arizona, together with copies of such
     financing statements.

          (viii) Additional documents or certificates with respect to legal
     matters or corporate or other proceedings related to the transactions
     contemplated hereby as may be reasonably requested by such Purchaser at
     least five days in advance of the Closing Day.

          (ix) Written instructions of the Company in the form of Exhibit D
     attached hereto.

          3B. OPINION OF PURCHASER'S SPECIAL COUNSEL. Such Purchaser shall have
received from Baker Botts, L.L.P., who is acting as special counsel for it in
connection with this transaction, a favorable opinion satisfactory to such
Purchaser as to such matters incident to the matters herein contemplated as it
may reasonably request.

          3C. REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Except as disclosed in
the Officer's Certificate referenced herein, the representations and warranties
contained in paragraph 8 shall be true on and as of such Closing Day, except to
the extent of changes caused by the transactions herein contemplated; there
shall exist on such Closing Day no Event of Default or Default; and the Company
shall have delivered to such Purchaser an Officer's Certificate, dated such
Closing Day, to both such effects.

          3D. PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and payment
for the Notes to be purchased by such Purchaser on the terms and conditions
herein provided (including the use of the proceeds of such Notes by the Company)
shall not violate any applicable law or governmental regulation (including,
without limitation, Section 5 of the Securities Act or Regulation T, U or X of
the Board of Governors of the Federal Reserve System) and shall not subject such
Purchaser to any tax, penalty, liability or other onerous

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condition under or pursuant to any applicable law or governmental regulation,
and such Purchaser shall have received such certificates or other evidence as it
may reasonably request to establish compliance with this condition.

          3E. LEGAL MATTERS. Counsel for such Purchaser, including any special
counsel for the Purchasers retained in connection with the purchase and sale of
such Accepted Notes, shall be satisfied as to all legal matters relating to such
purchase and sale, and such Purchaser shall have received from such counsel
favorable opinions as to such legal matters as it may reasonably request.

          3F. PAYMENT OF FEES. The Company shall have paid to the Purchasers and
Prudential any fees due them pursuant to or in connection with this Agreement,
including any Issuance Fee due pursuant to paragraph 2I(1) and any Delayed
Delivery Fee due pursuant to paragraph 2I(2). In addition, and without limiting
the provisions of paragraph 11B, special counsel to the Purchasers shall have
received its reasonable fees, charges and disbursements to the extent reflected
in a statement of such special counsel rendered to the Company at least one
Business Day prior to such Closing Day.

          3G. PROCEEDINGS. All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in substance and form to such Purchaser,
and it shall have received all such counterpart originals or certified or other
copies of such documents as it may reasonably request.

          3H. PRIVATE PLACEMENT NUMBERS. Private Placement numbers issued by
Standard & Poor's CUSIP Service Bureau (in cooperation with the Securities
Valuation Office of the National Association of Insurance Commissioners) shall
have been obtained by Prudential for the Notes.

          4. PREPAYMENTS. The Notes shall be subject to prepayment with respect
to any required prepayments set forth in such Notes as provided in paragraph 4A
and with respect to the optional prepayments permitted by paragraph 4B.

          4A. REQUIRED PREPAYMENTS. The Notes of each Series shall be subject to
required prepayments, if any, set forth in the Notes of such Series.

          4B. OPTIONAL PREPAYMENT WITH YIELD-MAINTENANCE AMOUNT. The Notes of
each Series shall be subject to prepayment, in whole at any time or from time to
time in part (in integral multiples of $1,000,000 and in a minimum amount of
$1,000,000), at the option of the Company, at 100% of the principal amount so
prepaid plus interest thereon to the prepayment date and the Yield-Maintenance
Amount, if any, with respect to each such Note. Any partial prepayment of a
Series of Notes pursuant to this paragraph 4B shall be applied in satisfaction
of required payments of principal of the Notes in such Series in inverse order
of their scheduled due dates.

          4C. NOTICE OF OPTIONAL PREPAYMENT. The Company shall give the holder
of each Note to be prepaid pursuant to paragraph 4B irrevocable written notice
of such prepayment not less than 10 Business Days prior to the prepayment date,
specifying such prepayment date, specifying the aggregate principal amount of
the Notes to be prepaid on such date, identifying

                                        8

<PAGE>

each Note held by such holder, and the principal amount of each such Note, to be
prepaid on such date and stating that such prepayment is to be made pursuant to
paragraph 4B. Notice of prepayment having been given as aforesaid, the principal
amount of the Notes specified in such notice, together with interest thereon to
the prepayment date and together with the Yield-Maintenance Amount, if any,
herein provided, shall become due and payable on such prepayment date. The
Company shall, on or before the day on which it gives written notice of any
prepayment pursuant to paragraph 4B, give telephonic notice of the principal
amount of the Notes to be prepaid and the prepayment date to each Significant
Holder which shall have designated a recipient for such notices in the Purchaser
Schedule attached hereto or by notice in writing to the Company.

          4D. APPLICATION OF PREPAYMENTS. Upon any partial prepayment of the
Notes of any Series pursuant to paragraph 4A or 4B, the amount so prepaid shall
be allocated to all outstanding Notes of such Series (including, for the purpose
of this paragraph 4D only, all Notes prepaid or otherwise retired or purchased
or otherwise acquired by the Company or any of its Subsidiaries or Affiliates
other than by prepayment pursuant to paragraph 4A or 4B) in proportion to the
respective outstanding principal amounts thereof.

          4E. RETIREMENT OF NOTES. The Company shall not, and shall not permit
any of its Subsidiaries or Affiliates to, prepay or otherwise retire in whole or
in part prior to their stated final maturity (other than by prepayment pursuant
to paragraph 4A or 4B or upon acceleration of such final maturity pursuant to
paragraph 7A), or purchase or otherwise acquire, directly or indirectly, Notes
of any Series held by any holder unless the Company or such Subsidiary or
Affiliate shall have offered to prepay or otherwise retire or purchase or
otherwise acquire, as the case may be, the same proportion of the aggregate
principal amount of Notes of such Series held by each other holder of Notes of
such Series at the time outstanding upon the same terms and conditions. Any
Notes so prepaid or otherwise retired or purchased or otherwise acquired by the
Company or any of its Subsidiaries or Affiliates shall not be deemed to be
outstanding for any purpose under this Agreement, except as provided in
paragraph 4D.

          5. AFFIRMATIVE COVENANTS. During the Issuance Period, from and after
the Business Day immediately preceding the Series A Closing, and so long
thereafter as any Note is outstanding and unpaid, the Company covenants as
follows:

          5A. FINANCIAL STATEMENTS; NOTICE OF DEFAULTS. The Company will deliver
to each Significant Holder in duplicate:

          (i) as soon as practicable and in any event within 60 days after the
     end of each quarterly period (other than the last quarterly period) in each
     fiscal year, statements of income and cash flows of the Company and its
     Consolidated Subsidiaries for the period from the beginning of the current
     fiscal year to the end of such quarterly period, and a balance sheet of the
     Company and its Consolidated Subsidiaries as at the end of such quarterly
     period, setting forth in the case of statements of income and cash flows in
     comparative form figures for the corresponding period in the preceding
     fiscal year, and accompanied by a certificate of an authorized financial
     officer of the Company, which certificate shall state that said financial
     statements fairly present in all material respects the financial position
     and results of operation of the Company and its Consolidated

                                        9

<PAGE>

     Subsidiaries in accordance with GAAP, except as disclosed therein and
     subject to changes resulting from year-end audit adjustments; provided,
     however, that delivery pursuant to clause (iii) below of copies of the
     Quarterly Report on Form l0-Q of the Company for such quarterly period
     filed with the SEC shall be deemed to satisfy the requirements of this
     clause (i) with respect to consolidated financial statements so long as
     such Report on Form 10-Q includes the financial statements required by Form
     10-Q;

          (ii) as soon as practicable and in any event within 120 days after the
     end of each fiscal year, statements of income and cash flows of the Company
     and its Consolidated Subsidiaries for such year, and a balance sheet of the
     Company and its Consolidated Subsidiaries as at the end of such year,
     setting forth in each case in comparative form corresponding figures from
     the preceding fiscal year, and accompanied by a report thereon of
     independent public accountants of recognized national standing selected by
     the Company, whose report shall state that said financial statements fairly
     present in all material respects the financial position and results of
     operations of the Company and its Consolidated Subsidiaries as at the end
     of, and for, such fiscal year in accordance with GAAP (except as disclosed
     therein); provided, however, that delivery pursuant to clause (iii) below
     of copies of the Annual Report on Form 10-K of the Company for such fiscal
     year filed with the SEC shall be deemed to satisfy the requirements of this
     clause (ii) with respect to consolidated financial statements and the
     auditor's report so long as such Annual Report on Form 10-K includes the
     financial statements required by Form 10-K;

          (iii) promptly after transmission thereof, copies of all such
     financial statements, proxy statements, notices and reports as it shall
     send to its public stockholders and copies of all registration statements
     (other than the exhibits thereto and any registration statements on Form
     S-8 or its equivalent) and all reports on Form 10-K, 10-Q and 8-K (or their
     equivalents) which it files with the SEC;

          (iv) if and when any ERISA Affiliate (a) gives or is required to give
     notice to the PBGC of any "reportable event" (as defined in Section 4043 of
     ERISA) with respect to any Plan which might constitute grounds for a
     termination of such Plan under Title IV of ERISA, or knows that the plan
     administrator of any Plan has given or is required to give notice of any
     such reportable event, a copy of the notice of such reportable event given
     or required to be given to the PBGC; (b) receives notice of complete or
     partial withdrawal liability under Title IV of ERISA or notice that any
     Multiemployer Plan is in reorganization, is insolvent or has been
     terminated, a copy of such notice; (c) receives notice from the PBGC under
     Title IV of ERISA of an intent to terminate, impose liability (other than
     for premiums under Section 4007 of ERISA) in respect of, or appoint a
     trustee to administer any Plan, a copy of such notice; (d) applies for a
     waiver of the minimum funding standard under Section 412 of the Code, a
     copy of such application; (e) gives notice of intent to terminate any Plan
     under Section 4041(c) of ERISA, a copy of such notice and other information
     filed with the PBGC; (f) gives notice of withdrawal from any Plan pursuant
     to Section 4063 of ERISA, a copy of such notice; or (g) fails to make any
     payment or contribution to any Plan or Multiemployer Plan or in respect of
     any Benefit Arrangement or makes any amendment to any Plan or Benefit
     Arrangement which has resulted or is reasonably likely to result in the
     imposition of a Lien or the

                                       10

<PAGE>

     posting of a bond or other security under ERISA or the Code, a certificate
     of an Responsible Officer setting forth details as to such occurrence and
     action, if any, which the Company or applicable member of the ERISA
     Affiliate is required or proposes to take; and

          (v) with reasonable promptness, such other information respecting the
     condition or operations, financial or otherwise, of the Company or any of
     its Subsidiaries as such Significant Holder may reasonably request.

Together with each delivery of financial statements required by clauses (i) and
(ii) above, the Company will deliver to each Significant Holder an Officer's
Certificate demonstrating (with computations in reasonable detail) compliance by
the Company with the provisions of paragraph 6A and stating that there exists no
Event of Default or Default, or, if any Event of Default or Default exists,
specifying the nature thereof and what action the Company proposes to take with
respect thereto. Information required to be delivered pursuant to clauses (i),
(ii) and (iii) above shall be deemed to have been delivered on the date on which
the Company provides notice to each Significant Holder that such information has
been posted on the Company's website at www.pinnaclewest.com, at
sec.gov/edaux/searches.htm or at another website identified in such notice and
accessible by the Significant Holders without charge; provided that (a) such
notice may be included in any Officer's Certificate described in the foregoing
sentence and (b) the Company shall deliver paper copies of the information
referred to in clauses (i), (ii) or (iii) above to any Significant Holder which
requests such delivery.

          The Company also covenants that as soon as possible and in any event
within five Business Days after any Responsible Officer obtains knowledge of an
Event of Default or Default then continuing, it will deliver to each holder of
any Notes an Officer's Certificate specifying the nature thereof and what action
the Company proposes to take with respect thereto.

          5B. INFORMATION REQUIRED BY RULE 144A. The Company will, upon the
request of the holder of any Note, provide such holder, and any qualified
institutional buyer designated by such holder, such financial and other
information as such holder may reasonably determine to be necessary in order to
permit compliance with the information requirements of Rule 144A under the
Securities Act in connection with the resale of Notes, except at such times as
the Company is subject to and in compliance with the reporting requirements of
section 13 or 15(d) of the Exchange Act. For the purpose of this paragraph 5B,
the term "QUALIFIED INSTITUTIONAL BUYER" shall have the meaning specified in
Rule 144A under the Securities Act.

          5C. INSPECTION OF PROPERTY. The Company will permit any Person
designated by any Significant Holder in writing, at such Significant Holder's
expense if no Default or Event of Default exists and at the Company's expense if
a Default or Event of Default does exist, to visit and inspect any of the
properties of the Company and its Subsidiaries, to examine the corporate books
and financial records of the Company and its Subsidiaries and make copies
thereof or extracts therefrom and to discuss the affairs, finances and accounts
of any of such corporations with the principal officers of the Company and its
independent public accountants, all at such reasonable times and as often as
such Significant Holder may reasonably request; provided, however, that the
Company and its Subsidiaries reserve the right to restrict access to any of
their properties in accordance with reasonably adopted policies relating to
safety; and,

                                       11

<PAGE>

provided further, that such Significant Holder complies with reasonably adopted
security policies.

          5D. MAINTENANCE OF PROPERTY; INSURANCE.

          (i) The Company will keep, and will cause each Significant Subsidiary
     to keep, all property useful and necessary in its business in good working
     order and condition, ordinary wear and tear excepted, if the failure to do
     so is reasonably likely to have a material adverse effect on the financial
     condition or financial prospects of the Company and its Consolidated
     Subsidiaries, considered as a whole, it being understood that this covenant
     relates only to the working order and condition of such properties and
     shall not be construed as a covenant not to dispose of properties.

          (ii) The Company will maintain, and cause each Significant Subsidiary
     to maintain, insurance with responsible and reputable insurance companies
     or associations in such amounts and covering such risks as is usually
     carried by companies engaged in similar businesses and owning similar
     properties in the same general areas in which the Company or such
     Significant Subsidiary operates; provided, however, that the Company and
     APS may self-insure to the same extent as other companies engaged in
     similar businesses and owning similar properties in the same general areas
     in which the Company or such Significant Subsidiary operates.

          5E. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.

          (i) Subject to paragraph 6B hereof, the Company will preserve and
     maintain, and will cause APS to preserve and maintain, its corporate
     existence and all rights and privileges (other than, in the case of APS,
     "franchises" as described in Arizona Revised Statutes, Section 40-283 or
     any successor provision) reasonably necessary in the normal conduct of its
     business, if the failure to maintain such rights or privileges is
     reasonably likely to have a material adverse effect on the financial
     condition or financial prospects of the Company and its Consolidated
     Subsidiaries, considered as a whole, and will cause APS to use its
     commercially reasonable efforts to preserve and maintain such franchises
     reasonably necessary in the normal conduct of its business, except that (a)
     APS from time to time may make minor extensions of its lines, plants,
     services or systems prior to the time a related franchise, certificate of
     convenience and necessity, license or permit is procured, (b) from time to
     time communities served by APS may become incorporated and considerable
     time may elapse before such a franchise is procured, (c) certain such
     franchises may have expired prior to the renegotiation thereof, (d) certain
     minor defects and exceptions may exist which, individually and in the
     aggregate, are not material and (e) certain franchises, certificates,
     licenses and permits may not be specific as to their geographical scope.

          (ii) The Company will continue to conduct, directly or through its
     Subsidiaries, the same general type of business conducted by the Company
     and APS on the date hereof.

                                       12

<PAGE>

          5F. COMPLIANCE WITH LAWS. The Company will comply, and cause each of
its Significant Subsidiaries to comply, in all material respects with all
applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including, without limitation, environmental laws and
ERISA and the rules and regulations thereunder) except where (i) the necessity
of compliance therewith is contested in good faith by appropriate proceedings or
(ii) the noncompliance with which is not reasonably likely to have a material
adverse effect on the financial condition or financial prospects of the Company
and its Consolidated Subsidiaries, considered as a whole.

          5G. COVENANT TO SECURE NOTES EQUALLY. The Company will not create,
assume or suffer to exist any Lien on the capital stock of any Significant
Subsidiary owned by the Company unless the holders of Notes are also granted a
Lien thereon on a pari passu basis securing all of the Company's obligations
under the Notes.

          5H. OWNERSHIP OF APS. The Company will at all times continue to own
directly at least 80% of the outstanding capital stock of APS.

          5I. ADDITIONAL COVENANTS AND ADDITIONAL DEFAULTS. If, after the date
hereof, the Company enters into, assumes or otherwise becomes bound or obligated
under any agreement (including amendments of the Bank Agreement) evidencing,
securing, guaranteeing or otherwise relating to the Bank Obligations that
contains one or more Additional Covenants or Additional Defaults, the terms of
this Agreement shall, without any further action on the part of the Company or
any of the holders of the Notes, be deemed to be amended automatically to
include each Additional Covenant and each Additional Default contained in such
agreement. The Company further covenants to promptly execute and deliver at its
expense (including the reasonable fees and expenses of counsel for the holders
of the Notes) an amendment to this Agreement in form and substance satisfactory
to the Required Holder(s) evidencing the amendment of this Agreement to include
such Additional Covenants and Additional Defaults, provided that the execution
and delivery of such amendment shall not be a precondition to the effectiveness
of such amendment as provided for in this paragraph 5I, but shall merely be for
the convenience of the parties hereto.

          6. NEGATIVE COVENANTS. During the Issuance Period, from and after the
Business Day immediately preceding the Series A Closing, and so long thereafter
as any Note or other amount due hereunder is outstanding and unpaid, the Company
covenants as follows:

          6A. DEBT. Consolidated Debt will not exceed at any time an amount
equal to 65% of Consolidated Capitalization.

          6B. CONSOLIDATIONS; MERGERS AND SALES OF ASSETS. The Company will not,
nor will it permit any Significant Subsidiary to, merge or consolidate with or
into any other Person, except (i) any Significant Subsidiary may merge or
consolidate with the Company if the Company is the corporation surviving such
merger, (ii) any Significant Subsidiary may merge or consolidate with any other
Subsidiary, provided that the Company's aggregate direct and indirect ownership
interest in the survivor thereof shall not be less than the greater of the
Company's direct and indirect ownership interest in such Subsidiaries prior to
such merger, and (iii) the

                                       13

<PAGE>

Company or any Significant Subsidiary may merge or consolidate with any other
Person if (a) such Person was organized under the laws of the United States of
America or one of its States and (b) the Company or such Significant Subsidiary
is the corporation surviving such merger; provided that, in each case, after
giving effect thereto, no Default or Event of Default will be in existence. The
Company will not sell, lease, transfer, assign or otherwise dispose of all or
substantially all of its assets, or permit any of its Significant Subsidiaries
to sell, lease, transfer, assign or otherwise dispose of all or substantially
all of its assets, except for sales, leases, transfers, assignments, and other
dispositions of all or substantially all of the Company's or any such
Significant Subsidiary's assets to the Company or any other Subsidiary of the
Company, provided in each case that no Default or Event of Default shall have
occurred and be continuing after giving effect thereto and provided further that
(i) in no case will the merger of PWEC into the Company with the Company
surviving be governed or prohibited by this paragraph 6B, and (ii) this
paragraph 6B will not govern or prohibit pledges or the grant of security
interests, mortgages or other Liens on any assets.

          6C. TERRORISM SANCTION REGULATIONS. The Company will not and will not
permit any Subsidiary to (i) become a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Control or in Section 1 of the Anti-Terrorism Order, unless such
description or designation is then being contested in good faith by appropriate
proceedings, or (ii) knowingly engage in any dealings or transactions, except to
provide electricity to any APS customer, with any such Person.

          7. EVENTS OF DEFAULT.

          7A. ACCELERATION. If on or after the Series A Closing and so long
thereafter as any Note is outstanding and unpaid, any of the following events
shall occur and be continuing for any reason whatsoever (and whether such
occurrence shall be voluntary or involuntary or come about or be effected by
operation of law or otherwise):

          (i) the Company defaults in the payment of any principal of, or
     Yield-Maintenance Amount payable with respect to, any Note when the same
     shall become due, either by the terms thereof or otherwise as herein
     provided; or

          (ii) the Company defaults in the payment of any interest on any Note
     for more than three Business Days after the date due; or

          (iii) the Company or APS defaults in any payment of principal of or
     interest on any other Debt or any Derivative Obligation (in either case
     which is outstanding in a principal amount exceeding $25,000,000) and such
     default shall continue beyond any period of grace provided with respect
     thereto, or the Company or APS fails to perform or observe any other
     agreement, term or condition contained in any agreement under which any
     such Debt or Derivative Obligation is created and such failure shall
     continue after the applicable grace period, if any, specified in such
     agreement or instrument and the effect of such failure is to cause, or to
     permit the holder or holders of such Debt or Derivative Obligation (or a
     trustee on behalf of such holder or holders) to accelerate, or permit the
     acceleration of the maturity of, such Debt or Derivative Obligation; or

                                       14

<PAGE>

          (iv) any representation or warranty made by the Company herein or by
     the Company or any of its officers in any certificate furnished in
     connection with or pursuant to this Agreement shall be false in any
     material respect on the date as of which made; or

          (v) the Company fails to perform or observe any term, covenant or
     agreement contained in paragraph 5G, 5H or 6; or

          (vi) the Company fails to perform or observe any other term, covenant,
     agreement or condition contained herein (other than those covered by
     clauses (i) or (ii) above) and such failure shall not be remedied within 30
     days after notice thereof has been given to the Company by the Required
     Holders; or

          (vii) the Company or any Significant Subsidiary shall commence a
     voluntary case or other proceeding seeking liquidation, reorganization or
     other relief with respect to itself or its debts under any bankruptcy,
     insolvency or other similar law now or hereafter in effect or seeking the
     appointment of a trustee, receiver, liquidator, custodian or other similar
     official of it or any substantial part of its property, or shall consent to
     any such relief or to the appointment of or taking possession by any such
     official in an involuntary case or other proceeding commenced against it,
     or shall make a general assignment for the benefit of creditors, or shall
     fail generally to pay its debts as they become due, or shall take any
     corporate action to authorize any of the foregoing; or

          (viii) an involuntary case or other proceeding shall be commenced
     against the Company or any Significant Subsidiary seeking liquidation,
     reorganization or other relief with respect to it or its debts under any
     bankruptcy, insolvency or other similar law now or hereafter in effect or
     seeking the appointment of a trustee, receiver, liquidator, custodian or
     other similar official of it or any substantial part of its property, and
     such involuntary case or other proceeding shall remain undismissed or
     unstayed for a period of 60 days; or an order for relief shall be entered
     against the Company or any Significant Subsidiary under the federal
     bankruptcy laws as now or hereafter in effect; or

          (ix) a final judgment in an amount in excess of $25,000,000 (excluding
     any such judgments to the extent a solvent insurer has acknowledged
     liability therefor in writing) is rendered against the Company or APS and,
     within 45 days after entry thereof, such judgment is not discharged or
     execution thereof stayed pending appeal, or within 45 days after the
     expiration of any such stay, such judgment is not discharged; or

          (x) any ERISA Affiliate shall fail to pay when due an amount or
     amounts aggregating in excess of $25,000,000 which it shall have become
     liable to pay under Title IV of ERISA; or notice of intent to terminate a
     Material Plan shall be filed under Title IV of ERISA by any ERISA
     Affiliate, any plan administrator or any combination of the foregoing which
     could cause one or more ERISA Affiliates to incur a liability in excess of
     $25,000,000; or the PBGC shall institute proceedings under Title IV of
     ERISA to terminate, to impose liability (other than for premiums under
     Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed
     to administer any Material Plan which could cause one or more ERISA
     Affiliates to incur a liability in excess of $25,000,000 or a condition
     shall exist by reason of which the PBGC would be entitled to obtain a
     decree

                                       15

<PAGE>

     adjudicating that any Material Plan must be terminated which could cause
     one or more ERISA Affiliates to incur a liability in excess of $25,000,000;
     or there shall occur a complete or partial withdrawal from, or a default,
     within the meaning of Section 4219(c) (5) of ERISA, with respect to, one or
     more Multiemployer Plans which could cause one or more ERISA Affiliates to
     incur a current payment obligation in excess of $25,000,000; or

          (xi) any Change in Control shall occur;

then (a) if such event is an Event of Default specified in clause (i) or (ii) of
this paragraph 7A, any holder of any Note (other than the Company or any of its
Subsidiaries or Affiliates) may at its option, by notice in writing to the
Company, declare all of the Notes held by such holder to be, and all of the
Notes held by such holder shall thereupon be and become, immediately due and
payable at par together with interest accrued thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company, (b) if such event is an Event of Default specified in clause (vii) or
(viii) of this paragraph 7A with respect to the Company, all of the Notes at the
time outstanding shall automatically become immediately due and payable at par
together with interest accrued thereon and together with the Yield-Maintenance
Amount, if any, with respect to each Note, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Company, and (c) if
such event is any Event of Default other than as specified in preceding clause
(b), the Required Holder(s) of the Notes may at its or their option by notice in
writing to the Company, declare all of the Notes to be, and all of the Notes
shall thereupon be and become, immediately due and payable together with
interest accrued thereon and together with the Yield-Maintenance Amount, if any,
with respect to each Note, without presentment, demand, protest or notice of any
kind, all of which are hereby waived by the Company.

          The Company acknowledges, and the parties hereto agree, that each
holder of a Note has the right to maintain its investment in the Notes free from
repayment by the Company (except as herein specifically provided for) and that
the provision for payment of the Yield-Maintenance Amount by the Company in the
event that the Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of such right
under such circumstances.

          7B. RESCISSION OF ACCELERATION. At any time after any or all of the
Notes shall have been declared immediately due and payable pursuant to paragraph
7A, the Required Holder(s) may, by notice in writing to the Company, rescind and
annul such declaration and its consequences if (i) the Company shall have paid
all overdue interest on the Notes, the principal of and Yield-Maintenance
Amount, if any, payable with respect to any Notes which have become due
otherwise than by reason of such declaration, and interest on such overdue
interest and overdue principal and Yield Maintenance Amount at the rate
specified in the Notes, (ii) the Company shall not have paid any amounts which
have become due solely by reason of such declaration, (iii) all Events of
Default and Defaults, other than non-payment of amounts which have become due
solely by reason of such declaration, shall have been cured or waived pursuant
to paragraph 11C, and (iv) no judgment or decree shall have been entered for the
payment of any amounts due pursuant to the Notes or this Agreement. No such
rescission or annulment shall

                                       16

<PAGE>

extend to or affect any subsequent Event of Default or Default or impair any
right arising therefrom.

          7C. NOTICE OF ACCELERATION OR RESCISSION. Whenever any Note shall be
declared immediately due and payable pursuant to paragraph 7A or any such
declaration shall be rescinded and annulled pursuant to paragraph 7B, the
Company shall forthwith give written notice thereof to the holder of each Note
at the time outstanding.

          7D. OTHER REMEDIES. If any Event of Default or Default shall occur and
be continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by suit
in equity or by action at law, or both, whether for specific performance of any
covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the holder of any Note is intended to be exclusive of any other
remedy, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy conferred herein or now or hereafter existing at
law or in equity or by statute or otherwise.

          8. REPRESENTATIONS, COVENANTS AND WARRANTIES. Except as disclosed in
the Officer's Certificate referred to in paragraph 3C, as of each Closing Day
hereunder, the Company represents, covenants and warrants as follows (all
references to "SUBSIDIARY" and "SUBSIDIARIES" in this paragraph 8 shall be
deemed omitted if the Company has no Subsidiaries at the time the
representations herein are made or repeated):

          8A. ORGANIZATION. The Company is a corporation duly organized and
validly existing in good standing under the laws of the State of Arizona and APS
is a corporation duly organized and existing in good standing under the laws of
the State of Arizona. Each of the Company and APS has the corporate power to own
its respective property and to carry on its respective business as now being
conducted. The execution, delivery and performance by the Company of this
Agreement and the Notes are within the Company's corporate powers and have been
duly authorized by all necessary corporate action.

          8B. FINANCIAL STATEMENTS. The Company has furnished Prudential and
each Purchaser with the following financial statements, identified by a
principal financial officer of the Company or posted on the Company's website on
the Internet at www.pinnaclewest.com or on sec.gov/edaux/searches.htm: (i) a
balance sheet of the Company and its Consolidated Subsidiaries as at December
31, 2004 and the related statements of income and cash flows of the Company and
its Consolidated Subsidiaries for the fiscal year then ended, all reported on by
Deloitte & Touche LLP; and (ii) a balance sheet of the Company and its
Consolidated Subsidiaries as at September 30, 2005 and the related statements of
income and cash flows of the Company and its Consolidated Subsidiaries for the
nine months then ended. Such financial statements (including any related
schedules and/or notes) or the financial statements most recently provided
pursuant to Section 5A(i) and (ii) of this Agreement as of the date this
representation is made or repeated, fairly present in all material respects the
financial position and results of operations of the Company and its Consolidated
Subsidiaries as at the end of, and for, the applicable fiscal year or fiscal
quarter, as the case may be, in accordance with GAAP, except as disclosed
therein and subject, as to interim statements, to changes resulting from audits

                                       17

<PAGE>

and year-end adjustments. Except as disclosed in the SEC Reports or by means of
a letter delivered to Prudential and each Purchaser prior to any Closing Day,
there has been no material adverse change in the financial condition or
financial prospects of the Company and its Consolidated Subsidiaries taken as a
whole since the end of the most recent fiscal quarter for which financial
statements have been furnished at the time of an Acceptance relating to the
Notes to be purchased.

          8C. ACTIONS PENDING. Except as disclosed in the SEC Reports or by
means of a letter delivered to the Purchasers prior to any Closing Day, there is
no action, suit or proceeding pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries, by or
before any court, arbitrator or administrative or governmental body in which
there is a reasonable possibility of an adverse decision which is reasonably
likely to have a material adverse effect on the financial condition or financial
prospects of the Company and its Consolidated Subsidiaries taken as a whole.
There is no action, suit or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries which
purports to affect the validity or enforceability of this Agreement or any Note.

          8D. OUTSTANDING INDEBTEDNESS. Neither the Company nor any of its
Subsidiaries has outstanding any Indebtedness except as permitted by paragraph
6A. There exists no default under the provisions of any instrument evidencing
such Debt which is outstanding in a principal amount exceeding $25,000,000 or of
any agreement relating thereto.

          8E. TITLE TO PROPERTIES. The Company and APS have good and marketable
title in fee simple to their respective properties and assets, including the
properties and assets reflected in the most recent audited balance sheet
referred to in paragraph 8B, except any such assets held pursuant to any
arrangement accounted for as a capital lease or by any entity consolidated into
such balance sheet as a variable interest entity, subject to (i) assets disposed
of in the ordinary course of business since December 31, 2004; (ii) any defects
in or encumbrances on title of the respective lessors or grantors of easements
or rights-of-way pursuant to which APS has installed transmission and
distribution lines; and (iii) other liens, encumbrances, or defects, none of
which, individually or in the aggregate, materially interfere with the business
or operations of the Company and its Subsidiaries taken as a whole. The
representation in the foregoing sentence is subject to the following
qualifications: (a) APS is the owner of the rights conferred upon it by the
leases from the Navajo Tribe relating to the sites on which the Navajo Plant and
the Four Corners Plant are situated and no representation is made with respect
to the enforceability of such leases against the Navajo Tribe; and (b) certain
defects in the leases of the Company and APS may exist which, together with the
qualification referred to in clause (a), individually and in the aggregate, are
not materially adverse to the financial condition or financial prospects of the
Company and its Consolidated Subsidiaries taken as a whole. There are no
outstanding shares or other securities convertible into or exchangeable for any
shares of common stock of APS which are not held by the Company, nor any
outstanding agreements, rights or options to acquire, subscribe for or purchase
from APS any shares of its common stock or securities convertible into or
exchangeable for shares of its common stock (other than agreements with or
rights or options held by the Company). All leases necessary for the conduct of
the respective businesses of the Company and APS are valid and subsisting and
are in full force and effect, except to the extent qualified in this paragraph
8E and except to the extent that

                                       18

<PAGE>

the failure of any such lease to be valid and subsisting and in full force and
effect would not have a material adverse impact on the financial condition or
financial prospects of the Company and its Consolidated Subsidiaries, taken as a
whole.

          8F. TAXES. The Company and APS have filed all United States Federal
income tax returns and all other tax returns which are required to be filed by
them and have paid all taxes due pursuant to such returns or pursuant to any
assessment received by the Company or APS, except to the extent that (i) such
taxes are being contested in good faith and by appropriate proceedings and that
appropriate reserves for the payment thereof have been maintained by the Company
and APS in accordance with GAAP or (ii) the failure to make such filings or such
payments is not reasonably likely to have a material adverse effect on the
financial condition or financial prospects of the Company and its Consolidated
Subsidiaries taken as a whole. The charges, accruals and reserves on the books
of the Company and APS in respect of taxes or other governmental charges are, in
the opinion of the Company, adequate.

          8G. CONFLICTING AGREEMENTS AND OTHER MATTERS. Neither the execution
nor delivery of this Agreement or the Notes, nor the offering, issuance and sale
of the Notes, nor fulfillment of nor compliance with the terms and provisions
hereof and of the Notes will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or (except as provided for or permitted herein) result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Significant Subsidiaries pursuant to, the charter or by-laws of the
Company or any of its Significant Subsidiaries, any award of any arbitrator or
any agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company or any
of its Significant Subsidiaries is subject. Neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained in,
any instrument evidencing Indebtedness of the Company or such Subsidiary, any
agreement relating thereto or any other contract or agreement (including its
charter) which limits the amount of, or otherwise imposes restrictions on the
incurring of, Debt of the Company of the type to be evidenced by the Notes
except as set forth in the agreements listed in Schedule 8G attached hereto.

          8H. OFFERING OF NOTES. Neither the Company nor any agent acting on its
behalf has, directly or indirectly, offered the Notes for sale to, or solicited
any offers to buy the Notes from, or otherwise approached or negotiated with
respect thereto with, any Person other than institutional investors, and neither
the Company nor any agent acting on its behalf has taken or will take any action
which would subject the issuance or sale of the Notes to the provisions of
Section 5 of the Securities Act or to the provisions of any securities or Blue
Sky law of any applicable jurisdiction.

          8I. USE OF PROCEEDS. The proceeds of the Series A Notes will be used
for general corporate purposes (which purposes will be for some lawful object
within the corporate purposes of the Company, compatible with the public
interest, and reasonably necessary or appropriate for such purposes), including
the repayment at maturity of the $300,000,000 aggregate principal amount of
6.40% Notes due April 1, 2006. None of the proceeds of the sale of any Notes
will be used, directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying any "MARGIN STOCK" as defined
in Regulation U (12 CFR Part 221) of the Board of Governors of the Federal
Reserve System ("margin stock") or for the

                                       19

<PAGE>

purpose of maintaining, reducing or retiring any Indebtedness which was
originally incurred to purchase or carry any stock that is then currently a
margin stock or for any other purpose which might constitute the purchase of
such Notes a "purpose credit" within the meaning of such Regulation U or
Regulation T of the Board of Governors of the Federal Reserve System, unless the
Company shall have delivered to the Purchaser which is purchasing such Notes, on
the Closing Day for such Notes, an opinion of counsel satisfactory to such
Purchaser stating that the purchase of such Notes does not constitute a
violation of such Regulation U or Regulation T. Neither the Company nor any
agent acting on its behalf has taken or will take any action which might cause
this Agreement or the Notes to violate Regulation T, Regulation U or any other
regulation of the Board of Governors of the Federal Reserve System or to violate
the Exchange Act, in each case as in effect now or as the same may hereafter be
in effect.

          8J. ERISA. No accumulated funding deficiency (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, exists with
respect to any Plan (other than a Multiemployer Plan). No liability to the PBGC
has been or is expected by the Company or any ERISA Affiliate to be incurred
with respect to any Plan (other than a Multiemployer Plan) by the Company, any
Subsidiary or any ERISA Affiliate which is or would be materially adverse to the
financial condition or financial prospects of the Company and its Consolidated
Subsidiaries taken as a whole. Neither the Company, any Subsidiary nor any ERISA
Affiliate has incurred or presently expects to incur any withdrawal liability
under Title IV of ERISA with respect to any Multiemployer Plan which is or would
be materially adverse to the financial condition or financial prospects of the
Company and its Consolidated Subsidiaries taken as a whole. The execution and
delivery of this Agreement and the issuance and sale of the Notes will be exempt
from or will not involve any transaction which is subject to the prohibitions of
section 406 of ERISA and will not involve any transaction in connection with
which a penalty could be imposed under section 502(i) of ERISA or a tax could be
imposed pursuant to section 4975 of the Code. The representation by the Company
in the next preceding sentence is made in reliance upon and subject to the
accuracy of the representation of each Purchaser in paragraph 9B as to the
source of funds to be used by it to purchase any Notes.

          8K. GOVERNMENTAL CONSENT. Neither the nature of the Company or of any
Subsidiary, nor any of their respective businesses or properties, nor any
relationship between the Company or any Subsidiary and any other Person, nor any
circumstance in connection with the offering, issuance, sale or delivery of the
Notes is such as to require any authorization, consent, approval, exemption or
any action by or notice to or filing with any court or administrative or
governmental or regulatory body (other than routine filings after the Closing
Day for any Notes with the Securities and Exchange Commission and/or state Blue
Sky authorities) in connection with the execution and delivery of this
Agreement, the offering, issuance, sale or delivery of the Notes or fulfillment
of or compliance with the terms and provisions hereof or of the Notes.

          8L. COMPLIANCE WITH ENVIRONMENTAL AND OTHER LAWS. Except as described
in the SEC Reports or by means of a letter delivered to the Purchasers prior to
any Closing Day, the Company and its Significant Subsidiaries and all of their
respective properties and facilities comply in all respects with all federal,
state, local and regional statutes, laws, ordinances and judicial or
administrative orders, judgments, rulings and regulations, including those
relating to protection of the environment except, in any such case, where (i)
the necessity of compliance is being contested in good faith by appropriate
proceedings or (ii) failure to comply is not

                                       20

<PAGE>

reasonably likely to result in a material adverse effect on the financial
condition or financial prospects of the Company and its Consolidated
Subsidiaries taken as a whole.

          8M. FOREIGN ASSETS CONTROL REGULATIONS, ETC. (i) Neither the sale of
the Notes by the Company hereunder nor its use of the proceeds thereof will
violate the Trading with the Enemy Act, as amended, or any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle
B, Chapter V, as amended) or any enabling legislation or executive order
relating thereto.

          (i) Neither the Company nor any Subsidiary (a) is a Person described
     or designated in the Specially Designated Nationals and Blocked Persons
     List of the Office of Foreign Assets Control or in Section 1 of the Anti
     Terrorism Order or (b) knowingly engages in any dealings or transactions
     with any such Person, except to provide electricity to any APS customer.
     The Company and its Subsidiaries are in compliance, in all material
     respects, with the USA Patriot Act.

          (ii) No part of the proceeds from the sale of the Notes hereunder will
     be used, directly or indirectly, for any payments to any governmental
     official or employee, political party, official of a political party,
     candidate for political office, or anyone else acting in an official
     capacity, in order to obtain, retain or direct business or obtain any
     improper advantage, in violation of the United States Foreign Corrupt
     Practices Act of 1977, as amended, assuming in all cases that such Act
     applies to the Company.

          8N. PERMITS AND OTHER OPERATING RIGHTS. Except as described in the SEC
Reports or by means of a letter delivered to the Purchasers prior to any Closing
Day, each of the Company and APS has all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted, if
the failure to hold any such governmental licenses, authorizations, consents and
approvals is reasonably likely to have a material adverse effect on the
financial condition or financial prospects of the Company and its Consolidated
Subsidiaries, taken as a whole.

          8O. UTILITY COMPANY STATUS. The Company is a "holding company" as such
term is defined in the Public Utility Holding Company Act of 2005 ("PUHCA
2005"). Pursuant to PUHCA 2005, the Company is subject to the limited
jurisdiction of the Federal Energy Regulatory Commission ("FERC"), and any State
commission with jurisdiction to regulate a public utility company in the
Company's holding company system, with respect to access to books and records of
the Company and its subsidiaries and affiliates. The Company is a "public
utility", as such term is defined in the Federal Power Act, as amended ("FPA")
and subject to FERC regulation under the FPA. The Company has obtained blanket
authority from FERC under Section 204 of the FPA to issue securities and assume
liabilities, and such authorization remains in full force and effect.

          8P. INVESTMENT COMPANY STATUS. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.

                                       21

<PAGE>

          8Q. DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement furnished to any Purchaser by or on behalf of the
Company in connection herewith (including without limitation the Company's SEC
Reports) contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein and
therein not misleading. There is no fact peculiar to the Company or any of its
Subsidiaries which materially adversely affects or in the future may (so far as
the Company can now foresee) materially adversely affect the financial condition
or financial prospects of the Company and its Consolidated Subsidiaries taken as
a whole and which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to each Purchaser by or on
behalf of the Company prior to the date hereof or any Closing Day (including
without limitation the Company's SEC Reports) in connection with the
transactions contemplated hereby.

          8R. RULE 144A. The Notes are not of the same class as securities of
the Company, if any, listed on a national securities exchange, registered under
Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer
quotation system.

          8S. HOSTILE TENDER OFFERS. None of the proceeds of the sale of any
Notes will be used to finance a Hostile Tender Offer.

          9. REPRESENTATIONS OF THE PURCHASERS.

          Each Purchaser represents as follows:

          9A. NATURE OF PURCHASE. Such Purchaser is not acquiring the Notes
purchased by it hereunder with a view to or for sale in connection with any
distribution thereof within the meaning of the Securities Act, provided that the
disposition of such Purchaser's property shall at all times be and remain within
its control.

          9B. SOURCE OF FUNDS. At least one of the following statements is an
accurate representation as to each source of funds (the "SOURCE") to be used by
such Purchaser to pay the purchase price of the Notes to be purchased by such
Purchaser hereunder:

          (i) the Source is an "insurance company general account" (as the term
     is defined in the United States Department of Labor's Prohibited
     Transaction Exemption ("PTE") 95-60) in respect of which the reserves and
     liabilities (as defined by the annual statement for life insurance
     companies approved by the National Association of Insurance Commissioners
     (the "NAIC ANNUAL STATEMENT")) for the general account contract(s) held by
     or on behalf of any employee benefit plan together with the amount of the
     reserves and liabilities for the general account contract(s) held by or on
     behalf of any other employee benefit plans maintained by the same employer
     (or affiliate thereof as defined in PTE 95-60) or by the same employee
     organization in the general account do not exceed 10% of the total reserves
     and liabilities of the general account (exclusive of separate account
     liabilities) plus surplus as set forth in the NAIC Annual Statement filed
     with such Purchaser's state of domicile; or

          (ii) the Source is a separate account that is maintained solely in
     connection with such Purchaser's fixed contractual obligations under which
     the amounts payable, or

                                       22

<PAGE>

     credited, to any employee benefit plan (or its related trust) that has any
     interest in such separate account (or to any participant or beneficiary of
     such plan (including any annuitant)) are not affected in any manner by the
     investment performance of the separate account; or

          (iii) the Source is either (a) an insurance company pooled separate
     account, within the meaning of PTE 90-1 or (b) a bank collective investment
     fund, within the meaning of the PTE 91-38 and, except as disclosed by such
     Purchaser to the Company in writing pursuant to this clause (iii), no
     employee benefit plan or group of plans maintained by the same employer or
     employee organization beneficially owns more than 10% of all assets
     allocated to such pooled separate account or collective investment fund; or

          (iv) the Source constitutes assets of an "investment fund" (within the
     meaning of Part V of PTE 84-14 (the "QPAM EXEMPTION")) managed by a
     "qualified professional asset manager" or "QPAM" (within the meaning of
     Part V of the QPAM Exemption), no employee benefit plan's assets that are
     included in such investment fund, when combined with the assets of all
     other employee benefit plans established or maintained by the same employer
     or by an affiliate (within the meaning of Section V(c)(1) of the QPAM
     Exemption) of such employer or by the same employee organization and
     managed by such QPAM, exceed 20% of the total client assets managed by such
     QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are
     satisfied, neither the QPAM nor a person controlling or controlled by the
     QPAM (applying the definition of "control" in Section V(e) of the QPAM
     Exemption) owns a 5% or more interest in the Company and (a) the identity
     of such QPAM and (b) the names of all employee benefit plans whose assets
     are included in such investment fund have been disclosed to the Company in
     writing pursuant to this clause (iv); or

          (v) the Source constitutes assets of a "plan(s)" (within the meaning
     of Section IV of PTE 96-23 (the "INHAM EXEMPTION")) managed by an "in-house
     asset manager" or "INHAM" (within the meaning of Part IV of the INHAM
     exemption), the conditions of Part I(a), (g) and (h) of the INHAM Exemption
     are satisfied, neither the INHAM nor a person controlling or controlled by
     the INHAM (applying the definition of "control" in Section IV(h) of the
     INHAM Exemption) owns a 5% or more interest in the Company and (a) the
     identity of such INHAM and (b) the name(s) of the employee benefit plan(s)
     whose assets constitute the Source have been disclosed to the Company in
     writing pursuant to this clause (v); or

          (vi) the Source is a governmental plan; or

          (vii) the Source is one or more employee benefit plans, or a separate
     account or trust fund comprised of one or more employee benefit plans, each
     of which has been identified to the Company in writing pursuant to this
     clause (vii) prior to the Acceptance Day for such Notes; or

          (viii) the Source does not include assets of any employee benefit
     plan, other than a plan exempt from the coverage of ERISA.

                                       23

<PAGE>

As used in this paragraph 9B, the terms "employee benefit plan," "governmental
plan," and "separate account" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.

          9C. ACCREDITED INVESTOR. Each Purchaser is an "accredited investor"
(as such term is defined under Regulation D promulgated under the Securities
Act, or any successor law, rule or regulation).

          10. DEFINITIONS; ACCOUNTING MATTERS. For the purpose of this
Agreement, the terms defined in paragraphs 10A and 10B (or within the text of
any other paragraph) shall have the respective meanings specified therein and
all accounting matters shall be subject to determination as provided in
paragraph 10C.

          10A. YIELD-MAINTENANCE TERMS.

          "CALLED PRINCIPAL" shall mean, with respect to any Note, the principal
of such Note that is to be prepaid pursuant to paragraph 4B or is declared to be
immediately due and payable pursuant to paragraph 7A, as the context requires.

          "DESIGNATED SPREAD" shall mean 0.50% in the case of each Series A Note
and 0% in the case of each Note of any other Series unless the Confirmation of
Acceptance with respect to the Notes of such Series specifies a different
Designated Spread in which case it shall mean, with respect to each Note of such
Series, the Designated Spread so specified.

          "DISCOUNTED VALUE" shall mean, with respect to the Called Principal of
any Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due dates
to the Settlement Date with respect to such Called Principal, in accordance with
accepted financial practice and at a discount factor (as converted to reflect
the periodic basis on which interest on such Note is payable, if payable other
than on a semi-annual basis) equal to the Reinvestment Yield with respect to
such Called Principal.

          "REINVESTMENT YIELD" shall mean, with respect to the Called Principal
of any Note, the Designated Spread over the yield to maturity implied by (i) the
yields reported as of 10:00 a.m. (New York City local time) on the Business Day
next preceding the Settlement Date with respect to such Called Principal for
actively traded U.S. Treasury securities having a maturity equal to the
Remaining Average Life of such Called Principal as of such Settlement Date on
the Treasury Yield Monitor page of Standard & Poor's MMS - Treasury Market
Insight (or, if Standard & Poor's shall cease to report such yields in MMS -
Treasury Market Insight or shall cease to be Prudential Capital Group's
customary source of information for calculating yield-maintenance amounts on
privately placed notes, then such source as is then Prudential Capital Group's
customary source of such information), or if such yields shall not be reported
as of such time or the yields reported as of such time shall not be
ascertainable, (ii) the Treasury Constant Maturity Series yields reported, for
the latest day for which such yields shall have been so reported as of the
Business Day next preceding the Settlement Date with respect to such Called
Principal, in Federal Reserve Statistical Release H.15(519) (or any comparable
successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the

                                       24

<PAGE>

Remaining Average Life of such Called Principal as of such Settlement Date. Such
implied yield shall be determined, if necessary, by (a) converting U.S. Treasury
bill quotations to bond equivalent yields in accordance with accepted financial
practice and (b) interpolating linearly between yields reported for various
maturities. The Reinvestment Yield shall be rounded to that number of decimal
places as appears in the coupon of the applicable Note.

          "REMAINING AVERAGE LIFE" shall mean, with respect to the Called
Principal of any Note, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) each Remaining Scheduled Payment
of such Called Principal (but not of interest thereon) by (b) the number of
years (calculated to the nearest one-twelfth year) which will elapse between the
Settlement Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.

          "REMAINING SCHEDULED PAYMENTS" shall mean, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due on or after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to its
scheduled due date.

          "SETTLEMENT DATE" shall mean, with respect to the Called Principal of
any Note, the date on which such Called Principal is to be prepaid pursuant to
paragraph 4B or is declared to be immediately due and payable pursuant to
paragraph 7A, as the context requires.

          "YIELD-MAINTENANCE AMOUNT" shall mean, with respect to any Note, an
amount equal to the excess, if any, of the Discounted Value of the Called
Principal of such Note over the sum of (i) such Called Principal plus (ii)
interest accrued thereon as of (including interest due on) the Settlement Date
with respect to such Called Principal. The Yield-Maintenance Amount shall in no
event be less than zero.

          10B. OTHER TERMS.

          "ACCEPTANCE" shall have the meaning specified in paragraph 2F.

          "ACCEPTANCE DAY" shall have the meaning specified in paragraph 2F.

          "ACCEPTANCE WINDOW" shall have the meaning specified in paragraph 2F.

          "ACCEPTED NOTE" shall have the meaning specified in paragraph 2F.

          "ADDITIONAL COVENANT" shall mean any affirmative or negative covenant
or similar restriction applicable to the Company or any Subsidiary (regardless
of whether such provision is labeled or otherwise characterized as a covenant)
the subject matter of which either (i) is similar to that of any covenant in
paragraph 5 or 6 of this Agreement, or related definitions in paragraph 10 of
this Agreement, but contains one or more percentages, amounts or formulas that
is more restrictive than those set forth herein or more beneficial to the holder
or holders of the Bank Obligations created or evidenced by the document in which
such covenant or similar restriction is contained (and such covenant or similar
restriction shall be deemed an Additional Covenant only to the extent that is
more restrictive or more beneficial) or (ii) is different from

                                       25

<PAGE>

the subject matter of any covenants in paragraph 5 or 6 of this Agreement, or
related definitions in paragraph 10 of this Agreement.

          "ADDITIONAL DEFAULT" shall mean any provision contained in any
document or instrument creating or evidencing Bank Obligations which permits the
holder or holders of any of the Bank Obligations to accelerate (with the passage
of time or giving of notice or both) the maturity thereof or otherwise requires
the Company or any Subsidiary to purchase such Bank Obligations prior to the
stated maturity thereof and which either (i) is similar to any Default or Event
of Default contained in paragraph 7 of this Agreement, or related definitions in
paragraph 10 of this Agreement, but contains one or more percentages, amounts or
formulas that is more restrictive or has a shorter grace period than those set
forth herein or is more beneficial to the holders of such other Bank Obligations
(and such provision shall be deemed an Additional Default only to the extent
that it is more restrictive, has a shorter grace period or is more beneficial)
or (ii) is different from the subject matter of any Default or Event of Default
contained in paragraph 7 of this Agreement, or related definitions in paragraph
10 of this Agreement.

          "AFFILIATE" shall mean any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company,
except a Subsidiary. A Person shall be deemed to control a corporation if such
Person possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether through
the ownership of voting securities, by contract or otherwise.

          "ANTI-TERRORISM ORDER" shall mean Executive Order No. 13224 of
September 24, 2001, Blocking Property and Prohibiting Transactions with Persons
Who Commit, Threaten to Commit or Support Terrorism, 66 U.S. Fed. Reg. 49,079
(2001), as amended.

          "APS" shall mean Arizona Public Service Company, an Arizona
corporation.

          "AUTHORIZED OFFICER" shall mean (i) in the case of the Company, its
chief executive officer, its chief financial officer, its chief operating
officer, president, any vice president, treasurer or controller of the Company
designated as an "Authorized Officer" of the Company for the purpose of this
Agreement in a certificate provided for in paragraph 3A(iii) or in an Officer's
Certificate executed by any one of such officers and delivered to Prudential
from time to time, and (ii) in the case of Prudential, any officer of Prudential
designated as its "Authorized Officer" in the Purchaser Schedule or any officer
of Prudential designated as its "Authorized Officer" for the purpose of this
Agreement in a certificate executed by one of its Authorized Officers. Any
action taken under this Agreement on behalf of the Company by any individual who
on or after the date of this Agreement shall have been an Authorized Officer of
the Company and whom Prudential in good faith believes to be an Authorized
Officer of the Company at the time of such action shall be binding on the
Company even though such individual shall have ceased to be an Authorized
Officer of the Company, and any action taken under this Agreement on behalf of
Prudential by any individual who on or after the date of this Agreement shall
have been an Authorized Officer of Prudential and whom the Company in good faith
believes to be an Authorized Officer of Prudential at the time of such action
shall be binding on Prudential even though such individual shall have ceased to
be an Authorized Officer of Prudential.

                                       26

<PAGE>

          "AVAILABLE FACILITY AMOUNT" shall have the meaning specified in
paragraph 2A.

          "BANK AGREEMENT" shall mean that certain Amended and Restated Credit
Agreement dated as of December 9, 2005 among the Company, the lenders party
thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other
agents party thereto, as amended, restated, supplemented, modified, replaced or
refinanced from time to time.

          "BANK OBLIGATIONS" means the "Obligations," as such term is defined in
the Bank Agreement on the date hereof.

          "BENEFIT ARRANGEMENT" shall mean at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
ERISA Affiliate.

          "BUSINESS DAY" shall mean any day other than (i) a Saturday or a
Sunday, (ii) a day on which commercial banks in New York City or Phoenix,
Arizona are required or authorized to be closed and (iii) for purposes of
paragraph 2C hereof only, a day on which Prudential is not open for business.

          "CANCELLATION DATE" shall have the meaning specified in paragraph
2I(3).

          "CANCELLATION FEE" shall have the meaning specified in paragraph
2I(3).

          "CAPITAL LEASE OBLIGATION" shall mean any rental obligation which,
under GAAP, is required to be capitalized on the books of the Company or any
Subsidiary, taken at the amount thereof accounted for as indebtedness (net of
interest expenses) in accordance with such principles.

          "CHANGE IN CONTROL" shall mean (i) the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the SEC under the Exchange Act) of thirty percent (30%)
or more of the aggregate ordinary voting power represented by the issued and
outstanding capital stock of the Company; or (ii) the majority of the board of
directors of the Company fails to consist of Continuing Directors (other than
due to death or disability).

          "CLOSING DAY" shall mean, with respect to the Series A Notes, the
Series A Closing and, with respect to any Accepted Note, the Business Day
specified for the closing of the purchase and sale of such Accepted Note in the
Request for Purchase of such Accepted Note, provided that (i) if the Company and
the Purchasers which are obligated to purchase such Note agree in writing on an
earlier Business Day for such closing, the "CLOSING DAY" for such Accepted Note
shall be such earlier Business Day, and (ii) if the closing of the purchase and
sale of such Accepted Note is rescheduled pursuant to paragraph 2H, the Closing
Day for such Accepted Note, for all purposes of this Agreement except references
to "original Closing Day" in paragraph 2I(2), shall mean the Rescheduled Closing
Day with respect to such Accepted Note.

          "CODE" shall mean the Internal Revenue Code of 1986, as amended.

                                       27

<PAGE>

          "CONFIRMATION OF ACCEPTANCE" shall have the meaning specified in
paragraph 2F.

          "CONSOLIDATED CAPITALIZATION" means the sum of (i) Consolidated Debt
and (ii) Consolidated Net Worth.

          "CONSOLIDATED DEBT" means at any date the Debt of the Company and its
Consolidated Subsidiaries determined on a consolidated basis as of such date.

          "CONSOLIDATED NET WORTH" means the sum of (i) the par value (or value
stated on the books of the Company) of all classes of capital stock of the
Company and its Subsidiaries, excluding the Company's capital stock owned by the
Company and/or its Subsidiaries, plus (or minus in the case of a surplus
deficit) (ii) the amount of the consolidated surplus, whether capital or earned,
of the Company, determined in accordance with GAAP as of the end of the most
recent calendar month (excluding (x) cumulative charges of up to $300 million to
consolidated surplus resulting from, or in anticipation of, discontinuation of
FASB 71, accounting for all or part of the business and (y) the effect on the
Company's accumulated other comprehensive income/loss of the ongoing application
of FASB 133).

          "CONSOLIDATED SUBSIDIARY" shall mean at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Company in its consolidated financial statements if such statements were
prepared as of such date.

          "CONTINUING DIRECTOR" shall mean, with respect to any Person as of any
date of determination, any member of the board of directors of such Person who
(i) was a member of such board of directors on the date of this Agreement, or
(ii) was nominated for election or elected to such board of directors with the
approval of a majority of the Continuing Directors who were members of such
board at the time of such nomination or election.

          "DEBT" shall mean as to any Person at any date (without duplication):
(a) indebtedness created, issued, incurred or assumed by such Person for
borrowed money or evidenced by bonds, debentures, notes or similar instruments;
(b) all obligations of such Person to pay the deferred purchase price of
property or services, excluding, however, trade accounts payable (other than for
borrowed money) arising in, and accrued expenses incurred in, the ordinary
course of business of such Person so long as such trade accounts payable are
paid within 180 days of the date incurred; (c) all Debt secured by a Lien on any
asset of such Person, to the extent such Debt has been assumed by, or is a
recourse obligation of, such Person; (d) all Guarantees by such Person; (e) all
Capital Lease Obligations of such Person; and (f) the amount of all
reimbursement obligations of such Person (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptances, surety or other bonds and
similar instruments in support of Debt.

          "DEFAULT RATE" shall mean, for any Note at any time upon the
occurrence of an Event of Default and until such Event of Default has been cured
or waived in writing, a rate of interest per annum from time to time equal to
the lesser of (i) the maximum rate permitted by applicable law and (ii) the
greater of (a) 2% over the coupon rate for such Note in effect

                                       28

<PAGE>

immediately prior to such Event of Default and (b) 2.0% over the rate of
interest publicly announced by The Bank of New York from time to time in New
York City as its Prime Rate.

          "DELAYED DELIVERY FEE" shall have the meaning specified in paragraph
2I(2).

          "DERIVATIVE OBLIGATIONS" of any Person shall mean all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
For the purposes of paragraph 7A(iii) hereof, the amount of any Derivative
Obligation shall be the amount of the net termination liability of the Company
or APS thereunder.

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

          "ERISA AFFILIATE" shall mean any corporation which is a member of the
same controlled group of corporations as the Company within the meaning of
section 414(b) of the Code, or any trade or business which is under common
control with the Company within the meaning of section 414(c) of the Code.

          "EVENT OF DEFAULT" shall mean any of the events specified in paragraph
7A, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "DEFAULT" shall mean an event which but
for the lapse of time or the giving of notice, or both, would constitute an
Event of Default.

          "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.

          "FACILITY" shall have the meaning specified in paragraph 2A.

          "GAAP" shall have the meaning set forth in paragraph 10C.

          "GUARANTEE" shall mean, as to any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person or in any manner providing for the payment of any Debt of any other
Person or otherwise protecting the holder of such Debt against loss (whether by
virtue of partnership arrangements, agreements to keep well, to purchase assets,
goods, securities or services, or to take-or-pay or otherwise), provided that
the term "Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.

          "HEDGE TREASURY NOTE(S)" shall mean, with respect to any Accepted
Note, the United States Treasury Note or Notes whose duration (as determined by
Prudential) most closely matches the duration of such Accepted Note.

                                       29

<PAGE>

          "HOSTILE TENDER OFFER" shall mean, with respect to the use of proceeds
of any Note, any offer to purchase, or any purchase of, shares of capital stock
of any corporation or equity interests in any other entity, or securities
convertible into or representing the beneficial ownership of, or rights to
acquire, any such shares or equity interests, if such shares, equity interests,
securities or rights are of a class which is publicly traded on any securities
exchange or in any over-the-counter market, other than purchases of such shares,
equity interests, securities or rights representing less than 5% of the equity
interests or beneficial ownership of such corporation or other entity for
portfolio investment purposes, and such offer or purchase has not been duly
approved by the board of directors of such corporation or the equivalent
governing body of such other entity prior to the date on which the Company makes
the Request for Purchase of such Note.

          "INCLUDING" shall mean, unless the context clearly requires otherwise,
"including without limitation".

          "INDEBTEDNESS" shall mean as to any Person at any date (without
duplication) indebtedness created, issued, incurred or assumed by such Person
for borrowed money or evidenced by bonds, debentures, notes or similar
instruments.

          "INHAM EXEMPTION" shall have the meaning set forth in paragraph 9B.

          "INSTITUTIONAL INVESTOR" shall mean (i) any original purchaser of a
Note, (ii) any holder of a Note holding more than 10% of the aggregate principal
amount of the Notes then outstanding, and (iii) any bank, trust company, savings
and loan association or other financial institution, any pension plan, any
registered investment company, any insurance company, any broker or dealer, or
any other similar financial institution or entity, regardless of legal form.

          "ISSUANCE FEE" shall have the meaning specified in paragraph 2I(1).

          "ISSUANCE PERIOD" shall have the meaning specified in paragraph 2B.

          "LIEN" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind, or any other type
of preferential arrangement that has the practical effect of creating a security
interest in respect of such asset. For purposes of this Agreement, the Company
or any Subsidiary shall be deemed to own subject to a Lien any asset which it
has acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.

          "MATERIAL PLAN" shall mean at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $25,000,000.

          "MULTIEMPLOYER PLAN" shall mean any Plan which is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).

          "NAIC ANNUAL STATEMENT" shall have the meaning set forth in paragraph
9B.

          "NOTES" shall have the meaning specified in paragraph 1.

                                       30

<PAGE>

          "OFFICER'S CERTIFICATE" shall mean a certificate signed in the name of
the Company by an Authorized Officer of the Company.

          "PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.

          "PERSON" shall mean and include an individual, a partnership, a joint
venture, a limited liability company, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

          "PLAN" shall mean any employee pension benefit plan (as such term is
defined in section 3 of ERISA) which is or has been established or maintained,
or to which contributions are or have been made, by the Company or any ERISA
Affiliate.

          "PRUDENTIAL" shall mean Prudential Investment Management, Inc.

          "PRUDENTIAL AFFILIATE" shall mean (i) any corporation or other entity
controlling, controlled by, or under common control with, Prudential either
directly or through subsidiaries and (ii) any managed account or investment fund
which is managed by Prudential or a Prudential Affiliate described in clause (i)
of this definition. For purposes of this definition, the terms "control",
"controlling" and "controlled" shall mean the ownership, directly or through
subsidiaries, of a majority of a corporation's or other entity's Voting Stock or
equivalent voting securities or interests.

          "PURCHASERS" shall mean The Prudential Insurance Company of America,
Pruco Life Insurance Company, American Skandia Life Assurance Corporation,
Prudential Retirement Insurance and Annuity Company, RGA Reinsurance Company,
Union Security Insurance Company and American Security Insurance Company with
respect to the Series A Notes and, with respect to any other Accepted Notes,
Prudential and/or the Prudential Affiliate(s), which are purchasing such
Accepted Notes.

          "PWEC" shall mean Pinnacle West Energy Corporation, an Arizona
corporation, and its successors.

          "QPAM EXEMPTION" shall have the meaning set forth in paragraph 9B.

          "REQUEST FOR PURCHASE" shall have the meaning specified in paragraph
2D.

          "REQUIRED HOLDER(S)" shall mean the holder or holders of at least
66-2/3% of the aggregate principal amount of the Notes outstanding at such time.

          "RESCHEDULED CLOSING DAY" shall have the meaning specified in
paragraph 2H(3).

          "RESPONSIBLE OFFICER" shall mean the chief executive officer, chief
operating officer, chief financial officer, chief accounting officer, controller
or treasurer of the Company or any other officer of the Company involved
principally in its financial administration or its controllership function.

                                       31

<PAGE>

          "SEC" shall mean the Securities and Exchange Commission (or any
governmental body or agency succeeding to the function of the Securities and
Exchange Commission.)

          "SEC REPORTS" shall mean (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 2004; the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 2005, June 30, 2005 and September 30,
2005; the Company's Current Reports on Form 8-K filed January 28, March 1, March
29, April 13, April 26, May 2, May 19, May 25, June 17, June 22, July 25, July
27, August 16, August 18, August 30, September 22, October 13, October 18,
October 26, October 27, November 4, December 6, December 15, and December 22,
2005 and January 5, January 9, January 10, January 26, February 1, February 3,
and February 24, 2006, and (ii) as to any Accepted Notes (other than the Series
A Notes), any future filings made by the Company with the SEC under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the Acceptance Day with
respect to such Accepted Notes.

          "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

          "SERIES" shall have the meaning specified in paragraph 1.

          "SERIES A CLOSING" shall have the meaning specified in paragraph
2H(1).

          "SERIES A NOTES" shall have the meaning specified in paragraph 2H(1).

          "SIGNIFICANT HOLDER" shall mean (i) Prudential, so long as Prudential
or any Prudential Affiliate shall hold (or be committed under this Agreement to
purchase) any Note, or (ii) any other holder of at least 5% of the aggregate
principal amount of the Notes from time to time outstanding.

          "SIGNIFICANT SUBSIDIARY" shall mean means APS and each other
Subsidiary of the Company (other than SunCor Development Company and any of its
Subsidiaries) whose consolidated assets exceed 10% of the consolidated assets of
the Company and its Consolidated Subsidiaries.

          "SUBSIDIARY" shall mean, as to any Person, any corporation or other
entity of which securities or other ownership interests having ordinary voting
power to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person;
unless otherwise specified, "Subsidiary" means a Subsidiary of the Company.

          "TRANSFEREE" shall mean any direct or indirect transferee of all or
any part of any Note purchased by any Purchaser under this Agreement.

          "UNFUNDED LIABILITIES" shall mean, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess

                                       32

<PAGE>

represents a potential liability of an ERISA Affiliate to the PBGC or any other
Person under Title IV of ERISA.

          "USA PATRIOT ACT" shall mean United States Public Law 107-56, Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism (USA PATRIOT Act) Act of 2001, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time in
effect.

          "VOTING STOCK" shall mean, with respect to any corporation, any shares
of stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of directors of such corporation
(irrespective of whether at the time stock of any other class or classes shall
have or might have voting power by reason of the happening of any contingency).

          10C. ACCOUNTING PRINCIPLES, TERMS AND DETERMINATIONS. All references
in this Agreement to "GAAP" shall be deemed to refer to generally accepted
accounting principles in effect in the United States at the time of application
thereof. Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all determinations with respect to accounting matters
hereunder shall be made, and all unaudited financial statements and certificates
and reports as to financial matters required to be furnished hereunder shall be
prepared, in accordance with GAAP applied on a basis consistent (except for
changes concurred in by the Company's independent public accountants) with the
most recent audited financial statements delivered pursuant to clause (ii) of
paragraph 5A or, if no such statements have been so delivered, the most recent
audited financial statements referred to in clause (i) of paragraph 8B.

          11. MISCELLANEOUS.

          11A. NOTE PAYMENTS. The Company agrees that, so long as any Purchaser
shall hold any Note, it will make payments of principal of, interest on, and any
Yield-Maintenance Amount payable with respect to, such Note, which comply with
the terms of this Agreement, by wire transfer of immediately available funds for
credit (not later than 11:00 a.m., New York City local time, on the date due) to
the account or accounts of such Purchaser, if any, as are specified in the
Purchaser Schedule attached hereto or to the applicable Confirmation of
Acceptance, or, in the case of any Purchaser not named in such Purchaser
Schedule or any Purchaser wishing to change the account specified for it in the
Purchaser Schedule, such account or accounts in the United States as such
Purchaser may from time to time designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of payment.
Each Purchaser agrees that, before disposing of any Note, it will make a
notation thereon (or on a schedule attached thereto) of all principal payments
previously made thereon and of the date to which interest thereon has been paid.
The Company agrees to afford the benefits of this paragraph 11A to any
Transferee which shall have made the same agreement as the Purchasers have made
in this paragraph 11A. No holder shall be required to present or surrender any
Note or make any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, the applicable holder shall surrender such Note
for cancellation, reasonably promptly after any such request, to the Company at
its principal executive office.

                                       33

<PAGE>

          11B. EXPENSES. The Company agrees, whether or not the transactions
contemplated hereby shall be consummated, to pay, and save Prudential, each
Purchaser and any Transferee harmless against liability for the payment of, all
reasonable out-of-pocket expenses arising in connection with such transactions,
consisting of the following:

          (i) (A) all stamp and documentary taxes and similar charges and (B)
     costs of obtaining a private placement number from S&P for the Notes, in
     each case as a result of the execution and delivery of this Agreement or
     the issuance of the Notes;

          (ii) reasonable document production and duplication charges and the
     fees and reasonable expenses of any special counsel engaged by Prudential
     or such Purchaser or such Transferee in connection with (A) the execution
     and delivery of this Agreement and the transactions contemplated hereby and
     each issuance of Notes hereunder and (B) any subsequent proposed waiver,
     amendment or modification of, or proposed consent under, this Agreement,
     whether or not such proposed action shall be effected or granted;

          (iii) the costs and expenses, including attorneys' and financial
     advisory fees, incurred by Prudential or such Purchaser or such Transferee
     in enforcing (or determining whether or how to enforce) any rights under
     this Agreement or the Notes or in responding to any subpoena or other legal
     process or informal investigative demand issued in connection with this
     Agreement or the transactions contemplated hereby or by reason of
     Prudential or such Purchaser's or such Transferee's having acquired any
     Note, including without limitation costs and expenses incurred in any
     workout, restructuring or renegotiation proceeding or bankruptcy case; and

          (iv) any judgment, liability, claim, order, decree, cost, fee,
     expense, action or obligation incurred in connection with any
     investigative, administrative or judicial proceeding brought or threatened
     relating to or resulting from the consummation of the transactions
     contemplated hereby, including the use of the proceeds of the Notes by the
     Company except to the extent resulting from the gross negligence or willful
     misconduct of the payee or any of its affiliates or agents as determined by
     a court of competent jurisdiction.

          The Company will promptly pay or reimburse each Purchaser or holder of
a Note (upon demand, in accordance with each such Purchaser's or holder's
written instructions) for all fees and costs paid or payable by such Purchaser
or holder to the Securities Valuation Office of the National Association of
Insurance Commissioners ("SVO") in connection with the initial filing of this
Agreement and all related documents and financial information, and all
subsequent annual and interim filings of documents and financial information
related to this Agreement, with the SVO or any successor organization acceding
to the authority thereof.

          The obligations of the Company under this paragraph 11B shall survive
the transfer of any Note or portion thereof or interest therein by any Purchaser
or Transferee and the payment of any Note.

          11C. CONSENT TO AMENDMENTS. This Agreement may be amended, and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be

                                       34

<PAGE>

performed by it, if the Company shall obtain the written consent to such
amendment, action or omission to act, of the Required Holder(s) except that, (i)
with the written consent of the holders of all Notes of a particular Series, and
if an Event of Default shall have occurred and be continuing, of the holders of
all Notes of all Series, at the time outstanding (and not without such written
consents), the Notes of such Series may be amended or the provisions thereof
waived to change the maturity thereof, to change or affect the principal
thereof, or to change or affect the time of payment of, or decrease the rate of,
interest on or any Yield-Maintenance Amount payable with respect to the Notes of
such Series, (ii) without the written consent of the holder or holders of all
Notes at the time outstanding, no amendment to or waiver of the provisions of
this Agreement shall change or affect the provisions of paragraph 7A or this
paragraph 11C insofar as such provisions relate to proportions of the principal
amount of the Notes of any Series, or the rights of any individual holder of
Notes, required with respect to any declaration of Notes to be due and payable
or with respect to any consent, amendment, waiver or declaration, (iii) with the
written consent of Prudential (and not without the written consent of
Prudential) the provisions of paragraph 2 may be amended or waived (except
insofar as any such amendment or waiver would affect any rights or obligations
with respect to the purchase and sale of Notes which shall have become Accepted
Notes prior to such amendment or waiver), and (iv) with the written consent of
all of the Purchasers which shall have become obligated to purchase Accepted
Notes of any Series (and not without the written consent of all such
Purchasers), any of the provisions of paragraphs 2 and 3 may be amended or
waived insofar as such amendment or waiver would affect only rights or
obligations with respect to the purchase and sale of the Accepted Notes of such
Series or the terms and provisions of such Accepted Notes. Each holder of any
Note at the time or thereafter outstanding shall be bound by any consent
authorized by this paragraph 11C, whether or not such Note shall have been
marked to indicate such consent, but any Notes issued thereafter may bear a
notation referring to any such consent. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights hereunder or
under any Note shall operate as a waiver of any rights of any holder of such
Note. As used herein and in the Notes, the term "THIS AGREEMENT" and references
thereto shall mean this Agreement as it may from time to time be amended or
supplemented.

          11D. FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST NOTES.
The Notes are issuable as registered notes without coupons in denominations of
at least $2,500,000, except as may be necessary to reflect any principal amount
not evenly divisible by $2,500,000. The Company shall keep at its principal
office a register in which the Company shall provide for the registration of
Notes and of transfers of Notes. Upon surrender for registration of transfer of
any Note at the principal office of the Company, the Company shall, at its
expense, execute and deliver one or more new Notes of like tenor and of a like
aggregate principal amount, registered in the name of such transferee or
transferees. At the option of the holder of any Note, such Note may be exchanged
for other Notes of like tenor and of any authorized denominations, of a like
aggregate principal amount, upon surrender of the Note to be exchanged at the
principal office of the Company. Whenever any Notes are so surrendered for
exchange, the Company shall, at its expense, execute and deliver the Notes which
the holder making the exchange is entitled to receive. Each installment of
principal payable on each installment date upon each new Note issued upon any
such transfer or exchange shall be in the same proportion to the unpaid
principal amount of such new Note as the installment of principal payable on
such date on the Note surrendered for registration of transfer or exchange bore
to the unpaid principal amount of such Note. No reference need be made in any
such new Note to any installment or installments of

                                       35

<PAGE>

principal previously due and paid upon the Note surrendered for registration of
transfer or exchange. Every Note surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer duly executed, by the holder of such Note or such holder's attorney
duly authorized in writing. Any Note or Notes issued in exchange for any Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or in the case of any such mutilation upon surrender and cancellation
of such Note, the Company will make and deliver a new Note, of like tenor, in
lieu of the lost, stolen, destroyed or mutilated Note. Any sale of Notes by a
holder will be made in accordance with applicable securities laws. No holder of
a Note will sell or otherwise transfer any Note to any Person described or
designated in the Specially Designated Nationals and Blocked Persons List of the
Office of Foreign Assets Control or in Section 1 of the Anti-Terrorism Order.

          11E. PERSONS DEEMED OWNERS; PARTICIPATIONS. Prior to due presentment
for registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of and interest on, and any Yield-Maintenance
Amount payable with respect to, such Note and for all other purposes whatsoever,
whether or not such Note shall be overdue, and the Company shall not be affected
by notice to the contrary. Subject to the preceding sentence, the holder of any
Note may from time to time grant participations in all or any part of such Note
to any Person on such terms and conditions as may be determined by such holder
in its sole and absolute discretion, provided that, the Company shall continue
to deal solely and directly with such holder, such holder's rights and
obligations hereunder shall remain unchanged, and such holder shall retain the
sole right to approve any amendment, modification or waiver of any provision .

          11F. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All
representations and warranties contained herein or made in writing by or on
behalf of the Company in connection herewith shall survive the execution and
delivery of this Agreement and the Notes, the transfer by any Purchaser of any
Note or portion thereof or interest therein and the payment of any Note, and may
be relied upon by any Transferee, regardless of any investigation made at any
time by or on behalf of any Purchaser or any Transferee. Subject to the
preceding sentence, this Agreement, the Notes and each Confirmation of
Acceptance embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to such subject matter.

          11G. SUCCESSORS AND ASSIGNS. All covenants and other agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of the parties
hereto (including, without limitation, any Transferee) whether so expressed or
not.

          11H. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is prohibited by
any one of such covenants, the fact that it would be permitted by an exception
to, or otherwise be in compliance

                                       36

<PAGE>

within the limitations of, another covenant shall not avoid the occurrence of a
Default or Event of Default if such action is taken or such condition exists.

          11I. NOTICES. All written communications provided for hereunder (other
than communications provided for under paragraph 2) shall be sent by first class
mail or nationwide overnight delivery service (with charges prepaid) and (i) if
to any Purchaser, addressed as specified for such communications in the
Purchaser Schedule attached hereto or the Purchaser Schedule attached to the
applicable Confirmation of Acceptance (in the case of any Notes issued after the
date hereof) or at such other address as any such Purchaser shall have specified
to the Company in writing, (ii) if to any other holder of any Note, addressed to
it at such address as it shall have specified in writing to the Company, or, if
any such holder shall not have so specified an address, then addressed to such
holder in care of the last holder of such Note which shall have so specified an
address to the Company and (iii) if to the Company, addressed to it at 400 North
5th Street, 19th Floor, Phoenix, Arizona 85004, Attention: Treasurer, provided,
however, that any such communication may also, at the option of the Person
sending such communication, be delivered by any other means at the applicable
address specified above, addressed to the attention of the person designated to
receive such notice as provided in this paragraph 11I. Any communication
pursuant to paragraph 2 shall be made by the method specified for such
communication in paragraph 2, and shall be effective to create any rights or
obligations under this Agreement only if, in the case of a telephone
communication, an Authorized Officer of the party conveying the information and
of the party receiving the information are parties to the telephone call, and in
the case of a telecopier communication, the communication is signed by an
Authorized Officer of the party conveying the information, addressed to the
attention of an Authorized Officer of the party receiving the information, and
in fact received at the telecopier terminal the number of which is listed for
the party receiving the communication in the Purchaser Schedule or at such other
telecopier terminal as the party receiving the information shall have specified
in writing to the party sending such information.

          11J. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or
the Notes to the contrary notwithstanding, any payment of principal of or
interest on, or Yield-Maintenance Amount payable with respect to, any Note that
is due on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day; provided that if the
maturity date of any series of the Notes is a date other than a Business Day,
then and in such event payment shall be made on the next succeeding Business
Day, but shall include the additional days elapsed in the computation of
interest payable on such next succeeding Business Day.

          11K. SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.

          11L. DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.

                                       37

<PAGE>

          11M. SATISFACTION REQUIREMENT. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory to Prudential, any Purchaser, to any holder of Notes
or to the Required Holder(s), the determination of such satisfaction shall be
made by Prudential, such Purchaser, such holder or the Required Holder(s), as
the case may be, in the sole and exclusive judgment (exercised in good faith) of
the Person or Persons making such determination.

          11N. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK.

          11O. SEVERALTY OF OBLIGATIONS. The sales of Notes to the Purchasers
are to be several sales, and the obligations of Prudential and the Purchasers
under this Agreement are several obligations. No failure by Prudential or any
Purchaser to perform its obligations under this Agreement shall relieve any
other Purchaser or the Company of any of its obligations hereunder, and neither
Prudential nor any Purchaser nor the Company shall be responsible for the
obligations of, or any action taken or omitted by, any other such Person
hereunder.

          11P. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

          11Q. BINDING AGREEMENT. When this Agreement is executed and delivered
by the Company and Prudential, it shall become a binding agreement between the
Company and Prudential. This Agreement shall also inure to the benefit of each
Purchaser which shall have executed and delivered a Confirmation of Acceptance,
and each such Purchaser shall be bound by this Agreement to the extent provided
in such Confirmation of Acceptance.

          11R. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION.

          (i) THE COMPANY, PRUDENTIAL AND EACH HOLDER OF NOTES HEREBY KNOWINGLY,
     VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY
     JURY IN ANY LITIGATION OF ANY CLAIM WHICH IS BASED HEREON, OR ARISES OUT
     OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR THE OTHER
     NOTE DOCUMENTS, OR ANY TRANSACTIONS RELATING HERETO OR THERETO, OR ANY
     COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN),
     OR ACTIONS OF THE COMPANY, PRUDENTIAL OR THE HOLDERS OF THE NOTES RELATING
     HERETO OR THERETO. THE COMPANY ACKNOWLEDGES THAT THIS PROVISION IS A
     MATERIAL INDUCEMENT FOR PRUDENTIAL AND EACH PURCHASER TO BECOME A PARTY TO
     THIS AGREEMENT AND TO PURCHASE NOTES HEREUNDER.

          (ii) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT,
     THE NOTES, THE OTHER NOTE DOCUMENTS OR ANY TRANSACTIONS RELATING HERETO OR
     THERETO, OR ANY COURSE OF

                                       38

<PAGE>

     CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
     ACTIONS OF THE COMPANY, PRUDENTIAL OR THE HOLDERS OF NOTES RELATING HERETO
     OR THERETO MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR THE
     UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND THE
     COMPANY HEREBY ACCEPTS FOR ITSELF, THE NONEXCLUSIVE JURISDICTION OF THE
     AFORESAID COURTS. THE COMPANY, PRUDENTIAL AND EACH HOLDER OF NOTES HEREBY
     IRREVOCABLY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW ANY OBJECTIONS,
     INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
     BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
     HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
     JURISDICTIONS.

          11S. CONFIDENTIAL INFORMATION. For the purposes of this paragraph 11S,
"CONFIDENTIAL INFORMATION" means information delivered to you by or on behalf of
the Company or any Subsidiary in connection with the transactions contemplated
by or otherwise pursuant to this Agreement that is proprietary in nature and
that was clearly marked or labeled or otherwise adequately identified when
received by you as being confidential information of the Company or such
Subsidiary or was obtained pursuant to paragraphs 5A(v) or 5C hereof, provided
that such term does not include information that (i) was publicly known, (ii)
subsequently becomes publicly known through no act or omission by you or any
person acting on your behalf, (iii) otherwise becomes known to you on a
nonconfidential basis from a source other than the Company or any Subsidiary
(provided that the source of such information was not known by the recipient
after inquiry to be bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other person with respect to such information) or (iv) constitutes financial
statements delivered to you under paragraph 5A that are otherwise publicly
available. You will maintain the confidentiality of such Confidential
Information in accordance with procedures adopted by you in good faith to
protect confidential information of third parties delivered to you, provided
that you may deliver or disclose Confidential Information to (a) your directors,
officers, employees and attorneys (to the extent such disclosure reasonably
relates to the administration of the investment represented by your Notes), (b)
your agents, affiliates, financial advisors and other professional advisors who
agree to hold confidential the Confidential Information substantially in
accordance with the terms of this paragraph 11S, (c) any other holder of any
Note, (d) any Institutional Investor to which you sell or offer to sell such
Note or any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this paragraph 11S), (e) any Person from which you offer to
purchase any security of the Company (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this paragraph 11S), (f) any federal or state regulatory authority having
jurisdiction over you, (g) the National Association of Insurance Commissioners
or any similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio or (h) any other
Person to which such delivery or disclosure may be necessary or appropriate (1)
to effect compliance with any law, rule, regulation or order applicable to you,
(2) in response to any subpoena or other legal process, (3) in connection with
any litigation to which you are a party or (4) if an Event of Default has
occurred and is continuing, to the extent you may reasonably determine such

                                       39

<PAGE>

delivery and disclosure to be necessary or appropriate in the enforcement or for
the protection of the rights and remedies under your Notes and this Agreement.
Each holder of a Note, by its acceptance of a Note, will be deemed to have
agreed to be bound by and to be entitled to the benefits of this paragraph 11S
as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Note of information
required to be delivered to such holder under this Agreement or requested by
such holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Company embodying
the provisions of this paragraph 11S.

              (Remainder of the Page Blank: Signature Page Follows)

                                       40

<PAGE>
\
          If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
Company, whereupon this letter shall become a binding agreement between the
Company and you.

                                        Very truly yours,

                                        PINNACLE WEST CAPITAL
                                        CORPORATION

                                        By:  /s/ Barbara M. Gomez
                                            ------------------------------------
                                        Name: Barbara M. Gomez
                                        Title: Vice President and Treasurer

                                        The foregoing Agreement is hereby
                                        accepted as of the date first above
                                        written.

                                        PRUDENTIAL INVESTMENT
                                        MANAGEMENT, INC.

                                        By:  /s/ Ric E. Abel
                                            ------------------------------------
                                             Ric E. Abel
                                             Vice President

                                        THE PRUDENTIAL INSURANCE COMPANY
                                        OF AMERICA

                                        By:  /s/ Ric E. Abel
                                            ------------------------------------
                                             Ric E. Abel
                                             Vice President

                                        PRUCO LIFE INSURANCE COMPANY

                                        By:  /s/ Ric E. Abel
                                            ------------------------------------
                                             Ric E. Abel
                                             Vice President

                    SIGNATURE PAGE TO MASTER SHELF AGREEMENT

<PAGE>

                                        AMERICAN SKANDIA LIFE ASSURANCE
                                        CORPORATION

                                        By: Prudential Investment Management,
                                            Inc., as investment manager

                                        By: /s/ Ric E. Abel
                                            ------------------------------------
                                            Ric E. Abel
                                            Vice President

                                        PRUDENTIAL RETIREMENT INSURANCE
                                        AND ANNUITY COMPANY

                                        By: Prudential Investment Management,
                                            Inc., as investment manager

                                        By: /s/ Ric E. Abel
                                            ------------------------------------
                                            Ric E. Abel
                                            Vice President

                                        RGA REINSURANCE COMPANY

                                        By: Prudential Private Placement
                                            Investors, L.P. (as Investment
                                            Advisor)

                                        By: Prudential Private Placement
                                            Investors, Inc. (as its General
                                            Partner)

                                        By: /s/ Ric E. Abel
                                            ------------------------------------
                                            Ric E. Abel
                                            Vice President

                                        2

<PAGE>

                                        UNION SECURITY INSURANCE COMPANY

                                        By: Prudential Private Placement
                                            Investors, L.P. (as Investment
                                            Advisor)

                                        By: Prudential Private Placement
                                            Investors, Inc. (as its General
                                            Partner)

                                        By: /s/ Ric E. Abel
                                            ------------------------------------
                                            Ric E. Abel
                                            Vice President

                                        AMERICAN SECURITY INSURANCE
                                        COMPANY

                                        By: Prudential Private Placement
                                            Investors, L.P. (as Investment
                                            Advisor)

                                        By: Prudential Private Placement
                                            Investors, Inc. (as its General
                                            Partner)

                                        By: /s/ Ric E. Abel
                                            ------------------------------------
                                            Ric E. Abel
                                            Vice President

                                       3

<PAGE>

                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>
                                                                                   AGGREGATE PRINCIPAL
                                                                                     AMOUNT OF NOTES           NOTE
                                                                                     TO BE PURCHASED     DENOMINATION(S)
                                                                                   -------------------   ---------------
<S>                                                                                <C>                   <C>
     THE PRUDENTIAL INSURANCE COMPANY OF AMERICA                                       $105,200,000        $78,100,000
                                                                                                           $22,100,000
                                                                                                           $ 5,000,000

(1)  All payments on account of Notes held by such purchaser shall be
     made by wire transfer of immediately available funds for credit to:

     JPMorgan Chase Bank, N.A.
     New York, NY
     ABA No.: 021-000-021
     Account Name: Prudential Private Placement Servicing Account
     Account No.: 304617040

     Each such wire transfer shall set forth the name of the Company, a
     reference to "5.91% Senior Notes, Series A, due 2011, Security No.
     INV05539, PPN _____" and the due date and application (as among principal,
     interest and Yield-Maintenance Amount) of the payment being made.

(2)  Address for all notices relating to payments:

     The Prudential Insurance Company of America
     c/o Investment Operations Group
     Gateway Center Two, 10th Floor
     100 Mulberry Street
     Newark, NJ 07102-4077

     Attention: Manager, Billings and Collections

(3)  Address for all other communications and notices:

     The Prudential Insurance Company of America
     c/o Prudential Capital Group
     2200 Ross Avenue, Suite 4200E
     Dallas, TX 75201

     Attention: Managing Director

(4)  Recipient of telephonic prepayment notices:

     Manager, Trade Management Group

     Telephone: (973) 367-3141
     Facsimile: (888) 889-3832
</TABLE>

                                      PS-1

<PAGE>

<TABLE>
<S>                                                                                <C>                   <C>
(5)  Address for Delivery of Notes:

     Send physical security by nationwide overnight delivery service to:

     Prudential Capital Group
     2200 Ross Avenue, Suite 4200E
     Dallas, TX 75201

     Attention: William H. Bulmer
     Telephone: (214) 720-6204

(6)  Tax Identification No.: 22-1211670

(7)  Authorized Officers:

     Randall M. Kob
     Ric E. Abel
     Gwendolyn Foster
     Andy Williams
</TABLE>

                                      PS-2

<PAGE>

                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>
                                                                                   AGGREGATE PRINCIPAL
                                                                                     AMOUNT OF NOTES           NOTE
                                                                                     TO BE PURCHASED     DENOMINATION(S)
                                                                                   -------------------   ---------------
<S>                                                                                <C>                   <C>
     PRUCO LIFE INSURANCE COMPANY                                                      $10,000,000         $10,000,000

(1)  All payments on account of Notes held by such purchaser shall be made by
     wire transfer of immediately available funds for credit to:

     JPMorgan Chase Bank, N.A.
     New York, NY
     ABA No.: 021-000-021
     Account Name: Prudential Private Placement Servicing Account
     Account No.: 304617040

     Each such wire transfer shall set forth the name of the Company, a
     reference to "5.91% Senior Notes, Series A, due 2011, Security No.
     INV05539, PPN _____", and the due date and application (as among principal,
     interest and Yield-Maintenance Amount) of the payment being made.

(2)  Address for all notices relating to payments:

     Pruco Life Insurance Company
     c/o The Prudential Insurance Company of America
     c/o Investment Operations Group
     Gateway Center Two, 10th Floor
     100 Mulberry Street
     Newark, NJ 07102-4077

     Attention: Manager, Billings and Collections

(3)  Address for all other communications and notices:

     Pruco Life Insurance Company
     c/o Prudential Capital Group
     2200 Ross Avenue, Suite 4200E
     Dallas, TX 75201

     Attention: Managing Director

(4)  Recipient of telephonic prepayment notices:

     Manager, Trade Management Group

     Telephone: (973) 367-3141
     Facsimile: (888) 889-3832
</TABLE>

                                      PS-3

<PAGE>

<TABLE>
<S>                                                                                <C>                   <C>
(5)  Address for Delivery of Notes:

     Send physical security by nationwide overnight delivery service to:

     Prudential Capital Group
     2200 Ross Avenue, Suite 4200E
     Dallas, TX 75201

     Attention: William H. Bulmer
     Telephone: (214) 720-6204

(6)  Tax Identification No.: 22-1944557

(7)  Authorized Officers:

     Randall M. Kob
     Ric E. Abel
     Gwendolyn Foster
     Andy Williams
</TABLE>

                                      PS-4

<PAGE>

                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>
                                                                             AGGREGATE
                                                                             PRINCIPAL
                                                                          AMOUNT OF NOTES         NOTE
                                                                          TO BE PURCHASED   DENOMINATION(S)
                                                                          ---------------   ---------------
<S>                                                                       <C>               <C>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION                                  $1,900,000        $1,900,000

(1) All payments on account of Notes held by such purchaser shall be
    made by wire transfer of immediately available funds for credit to:

    JPMorgan Chase Bank, N.A.
    New York, NY
    ABA No.: 021-000-021
    Account Name: Prudential Private Placement Servicing Account
    Account No.: 304617040

    Each such wire transfer shall set forth the name of the Company, a
    reference to "5.91% Senior Notes, Series A, due 2011, Security No.
    INV05539, PPN _____" and the due date and application (as among
    principal, interest and Yield-Maintenance Amount) of the payment
    being made.

(2) Address for all notices relating to payments:

    The Prudential Insurance Company of America
    c/o Investment Operations Group
    Gateway Center Two, 10th Floor
    100 Mulberry Street
    Newark, NJ 07102-4077

    Attention: Manager, Billings and Collections

(3) Address for all other communications and notices:

    The Prudential Insurance Company of America
    c/o Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

    Attention: Managing Director

(4) Recipient of telephonic prepayment notices:

    Manager, Trade Management Group

    Telephone: (973) 367-3141
    Facsimile: (888) 889-3832
</TABLE>

                                      PS-5

<PAGE>

<TABLE>
<S>                                                                       <C>               <C>
(5) Address for Delivery of Notes:

    Send physical security by nationwide overnight delivery service to:

    Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

    Attention: William H. Bulmer
    Telephone: (214) 720-6204

(6) Tax Identification No.: 06-1241288
</TABLE>

                                      PS-6

<PAGE>

                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>
                                                                             AGGREGATE
                                                                             PRINCIPAL
                                                                          AMOUNT OF NOTES         NOTE
                                                                          TO BE PURCHASED   DENOMINATION(S)
                                                                          ---------------   ---------------
<S>                                                                       <C>               <C>
    PRUDENTIAL RETIREMENT INSURANCE AND ANNUITY COMPANY                     $40,000,000       $40,000,000

(1) All payments on account of Notes held by such purchaser shall be
    made by wire transfer of immediately available funds for credit to:

    JPMorgan Chase Bank, N.A.
    New York, NY
    ABA No.: 021-000-021
    Account Name: Prudential Private Placement Servicing Account
    Account No.: 304617040

    Each such wire transfer shall set forth the name of the Company, a
    reference to "5.91% Senior Notes, Series A, due 2011, Security No.
    INV05539, PPN _____" and the due date and application (as among
    principal, interest and Yield-Maintenance Amount) of the payment
    being made.

(2) Address for all notices relating to payments:

    Prudential Retirement Insurance and Annuity Company
    c/o Prudential Investment Management, Inc.
    Private Placement Trade Management
    PRIAC Administration
    Gateway Center Four, 7th Floor
    100 Mulberry Street
    Newark, NJ 07102

    Telephone: (973) 802-8107
    Facsimile: (888) 889-3832

(3) Address for all other communications and notices:

    Prudential Retirement Insurance and Annuity Company
    c/o Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

    Attention: Managing Director
</TABLE>

                                      PS-7

<PAGE>

<TABLE>
<S>                                                                       <C>               <C>
(4) Address for Delivery of Notes:

    Send physical security by nationwide overnight delivery service to:

    Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

    Attention: William H. Bulmer
    Telephone: (214) 720-6204

(5) Tax Identification No.: 06-1050034
</TABLE>

                                      PS-8

<PAGE>

                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>
                                                                             AGGREGATE
                                                                             PRINCIPAL
                                                                          AMOUNT OF NOTES         NOTE
                                                                          TO BE PURCHASED   DENOMINATION(S)
                                                                          ---------------   ---------------
<S>                                                                       <C>               <C>
    RGA REINSURANCE COMPANY                                                  $7,500,000        $7,500,000

    Notes/Certificates to be registered in the name of:
    HARE & CO.

(1) All payments on account of Notes held by such purchaser shall be
    made by wire transfer of immediately available funds for credit to:

    The Bank of New York
    ABA No.: 021-000-018
    BNF Account No. IOC566
    Credit to: Hare & Co

    Each such wire transfer shall set forth the name of the Company, a
    reference to "5.91% Senior Notes, Series A, due 2011, PPN ____"
    and the due date and application (as among principal, interest and
    Yield-Maintenance Amount) of the payment being made.

(2) All notices of payments and written confirmations of such wire
    transfers:

    RGA Reinsurance Company
    Attn: Banking Dept.
    1370 Timberlake Manor Parkway
    Chesterfield, MO 63017-6039

(3) Address for all other communications and notices:

    Prudential Private Placement Investors, L.P.
    c/o Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

    Attention: Managing Director
</TABLE>

                                      PS-9

<PAGE>

<TABLE>
<S>                                                                       <C>               <C>
(4) Address for Delivery of Notes:

    (a) Send physical security by nationwide overnight delivery service
        to:

        The Bank of New York
        Securities Department
        One Wall Street
        3rd Floor - "A"
        New York, NY 10286

        Attention: Lucille Del Terzo
        Telephone: (718) 315-3543
        Facsimile: (718) 623-7572 or (718) 623-7575
        E-mail: ldelterzo@bankofny.com

        Please include in the cover letter accompanying the
        Notes a reference to the Purchaser (RGA Private
        Placement Prudential Financial Account No. 128863).

    (b) Send copy by nationwide overnight delivery service to:

        Prudential Capital Group
        Gateway Center 4
        100 Mulberry, 7th Floor
        Newark, NJ 07102

        Attention: Trade Management, Manager
        Telephone: (973) 367-3141

(5) Tax Identification No.: 43-1235868
</TABLE>

                                     PS-10

<PAGE>

                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>
                                                                             AGGREGATE
                                                                             PRINCIPAL
                                                                          AMOUNT OF NOTES         NOTE
                                                                          TO BE PURCHASED   DENOMINATION(S)
                                                                          ---------------   ---------------
<S>                                                                       <C>               <C>
    UNION SECURITY INSURANCE COMPANY                                         $6,400,000        $6,400,000

(1) All payments on account of Notes held by such purchaser shall be
    made by wire transfer of immediately available funds for credit to:

    M&I Marshall & Ilsley Bank
    Milwaukee, WI
    ABA No.: 075000051
    DDA Account No.: 27006
    Account Name: General Trust Fund
    For further credit to Account No.: 89-0035-76-9
    Account Name:  Union Security Prudential Private Placements

    Each such wire transfer shall set forth the name of the Company, a
    reference to "5.91% Senior Notes, Series A, due 2011, PPN ____" and
    the due date and application (as among principal, interest and
    Yield-Maintenance Amount) of the payment being made.

(2) All notices of payments and written confirmations of such wire
    transfers:

    Marshall & Ilsley Trust Company
    Asset Booking Department
    11270 West Park Place, Suite 400
    Milwaukee, WI 53224

    Attention: Linda Harris-Murphy

    Telephone: (414) 815-3635
    Facsimile: (414) 815-3589

    AND

    Fortis, Inc.
    One Chase Manhattan Plaza
    New York, NY 10005

    Attention: Kevin P. Mahoney
               AVP, Investment Accounting & Treasury Operations

    Telephone: (212) 859-7184
    Facsimile: (212) 859-7043
</TABLE>

                                     PS-11

<PAGE>

<TABLE>
<S>                                                                       <C>               <C>
(3) Address for all other communications and notices:

    Prudential Private Placement Investors, L.P.
    c/o Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

    Attention: Managing Director

(4) Address for Delivery of Notes:

    (a) Send physical security by nationwide overnight delivery service
        to:

        Marshall & Ilsley Trust Company
        Asset Booking Department
        11270 West Park Place, Suite 400
        Milwaukee, WI 53224

        Attention:  Linda Harris-Murphy
        Phone: (414) 815-3635
        Facsimile: (414) 815-3589

        Please include in the cover letter accompanying the
        Notes a reference to the Purchaser's account number
        (Union Security - Prudential Private Placements;
        Account Number: 89 0035 76 9)

    (b) Send copy by nationwide overnight delivery service to:

        Prudential Capital Group
        Gateway Center 4
        100 Mulberry, 7th Floor
        Newark, NJ 07102

        Attention: Trade Management, Manager
        Telephone: (973) 367-3141

(5) Tax Identification No.: 81-0170040
</TABLE>

                                     PS-12

<PAGE>

                               PURCHASER SCHEDULE

<TABLE>
<CAPTION>
                                                                             AGGREGATE
                                                                             PRINCIPAL
                                                                          AMOUNT OF NOTES         NOTE
                                                                          TO BE PURCHASED   DENOMINATION(S)
                                                                          ---------------   ---------------
<S>                                                                       <C>               <C>
    AMERICAN SECURITY INSURANCE COMPANY                                      $4,000,000        $4,000,000

(1) All payments on account of Notes held by such purchaser shall be
    made by wire transfer of immediately available funds for credit to:

    M&I Marshall & Ilsley Bank
    Milwaukee, WI
    ABA No.: 075000051
    DDA Account No.: 27006
    Account Name: General Trust Fund
    For further credit to Account No.: 89-0035-89-2
    Account Name: American Security Insurance Company Prudential

                               Private Placements

    Each such wire transfer shall set forth the name of the Company, a
    reference to "5.91% Senior Notes, Series A, due 2011, PPN ____"
    and the due date and application (as among principal, interest and
    Yield-Maintenance Amount) of the payment being made.

(2) All notices of payments and written confirmations of such wire
    transfers:

    Marshall & Ilsley Trust Company
    Asset Booking Department
    11270 West Park Place, Suite 400
    Milwaukee, WI 53224

    Attention: Linda Harris-Murphy

    Telephone: (414) 815-3635
    Facsimile: (414) 815-3589

    AND

    Fortis, Inc.
    One Chase Manhattan Plaza
    New York, NY 10005

    Attention: Kevin P. Mahoney
               AVP, Investment Accounting & Treasury Operations

    Telephone: (212) 859-7184
    Facsimile: (212) 859-7043
</TABLE>

                                     PS-13

<PAGE>

<TABLE>
<S>                                                                       <C>               <C>
(3) Address for all other communications and notices:

    Prudential Private Placement Investors, L.P.
    c/o Prudential Capital Group
    2200 Ross Avenue, Suite 4200E
    Dallas, TX 75201

    Attention: Managing Director

(4) Address for Delivery Notes:

    (a) Send physical security by nationwide overnight delivery service
        to:

        Marshall & Ilsley Trust Company
        Asset Booking Department
        11270 West Park Place, Suite 400
        Milwaukee, WI 53224

        Attention:  Linda Harris-Murphy
        Phone: (414) 815-3635
        Facsimile: (414) 815-3589

        Please include in the cover letter accompanying the Notes a
        reference to the Purchaser's account number (American Security
        Insurance Company Prudential
        Private Placements; Account Number: 89 0035 89-2).

    (b) Send copy by nationwide overnight delivery service to:

        Prudential Capital Group
        Gateway Center 4
        100 Mulberry, 7th Floor
        Newark, NJ 07102

        Attention: Trade Management, Manager
        Telephone: (973) 367-3141

(5) Tax Identification No.: 58-1529575
</TABLE>

                                     PS-14

<PAGE>

                                                                     SCHEDULE 8G

                       LIST OF AGREEMENTS RESTRICTING DEBT

-    Amended and Restated Credit Agreement dated as of December 9, 2005 among
     Pinnacle West Capital Corporation, the Lenders party thereto, JPMorgan
     Chase Bank, N.A. as Administrative Agent, and the other agents party
     thereto.

<PAGE>

                                                                     EXHIBIT A-1

                                 [FORM OF NOTE]

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT.

                        PINNACLE WEST CAPITAL CORPORATION

                           % SENIOR NOTE, SERIES , DUE

No. R-
ORIGINAL PRINCIPAL AMOUNT:
ORIGINAL ISSUE DATE:
INTEREST RATE:
INTEREST PAYMENT DATES:
FINAL MATURITY DATE:
PRINCIPAL INSTALLMENT DATES AND AMOUNTS:

          FOR VALUE RECEIVED, the undersigned, Pinnacle West Capital Corporation
(herein called the "COMPANY"), a corporation organized and existing under the
laws of the State of Arizona, hereby promises to pay to ______________, or
registered assigns, the principal sum of ________________ DOLLARS [on the Final
Maturity Date specified above] [, payable in installments on the Principal
Installment Dates and in the amounts specified above, and on the Final Maturity
Date specified above in an amount equal to the unpaid balance of the principal
hereof,] with interest (computed on the basis of a 360-day year--30-day month)
(a) on the unpaid balance hereof from the date hereof at the Interest Rate per
annum specified above, payable on each Interest Payment Date specified above and
on the Final Maturity Date specified above, commencing with the Interest Payment
Date next succeeding the date hereof, until the principal hereof shall have
become due and payable, and (b) on the occurrence and during the continuance of
an Event of Default, at the Default Rate with respect to any outstanding
principal hereof, any overdue payment of interest and any overdue payment of any
Yield-Maintenance Amount, payable quarterly as aforesaid (or, at the option of
the registered holder hereof, on demand).

          Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of JPMorgan
Chase Bank, N.A., in New York City or at such other place as the holder hereof
shall designate to the Company in writing, in lawful money of the United States
of America.

          This Note is one of a series of Senior Notes (herein called the
"NOTES") issued pursuant to an Uncommitted Master Shelf Agreement, dated as of
February 28, 2006 (herein called the "AGREEMENT"), between the Company,
Prudential Investment Management, Inc. and the Purchasers named therein and is
entitled to the benefits thereof. As provided in the Agreement, this Note is
subject to optional prepayment, in whole or from time to time in part on the
terms specified in the Agreement. Capitalized terms used and not otherwise
defined herein have the meanings specified in the Agreement.

                                      A-1-1

<PAGE>

          This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.

          In case an Event of Default, as defined in the Agreement, shall occur
and be continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner and with the effect provided in the
Agreement.

          THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.

                                        PINNACLE WEST CAPITAL CORPORATION

                                        By:
                                            ------------------------------------
                                            [TITLE]

                                      A-1-2

<PAGE>

                                                                     EXHIBIT A-2

                             [FORM OF SERIES A NOTE]

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT.

                        PINNACLE WEST CAPITAL CORPORATION

               5.91% SENIOR NOTE, SERIES A, DUE FEBRUARY 28, 2011

No. R-A-__                   PPN: _________
ORIGINAL PRINCIPAL AMOUNT:   $_____________
ORIGINAL ISSUE DATE:         February 28, 2006
INTEREST RATE:               5.91%
INTEREST PAYMENT DATES:      March 31, June 30, September 30 and
                             December 31 of each year,
                             commencing on March 31, 2006
FINAL MATURITY DATE:         February 28, 2011

          FOR VALUE RECEIVED, the undersigned, Pinnacle West Capital Corporation
(herein called the "COMPANY"), a corporation organized and existing under the
laws of the State of Arizona, hereby promises to pay to
_______________________________, or registered assigns, the principal sum of
_______________________ AND NO/100'S DOLLARS ($________) on the Final Maturity
Date specified above with interest (computed on the basis of a 360-day
year--30-day month) (a) on the unpaid balance hereof from the date hereof at the
Interest Rate per annum specified above, payable on each Interest Payment Date
specified above and on the Final Maturity Date specified above, commencing with
the Interest Payment Date next succeeding the date hereof, until the principal
hereof shall have become due and payable, and (b) on the occurrence and during
the continuance of an Event of Default, at the Default Rate with respect to any
outstanding principal hereof, any overdue payment of interest and any overdue
payment of any Yield-Maintenance Amount, payable quarterly as aforesaid (or, at
the option of the registered holder hereof, on demand).

          Payments of principal of, interest on and any Yield-Maintenance Amount
payable with respect to this Note are to be made at the main office of JPMorgan
Chase Bank, N.A., in New York City or at such other place as the holder hereof
shall designate to the Company in writing, in lawful money of the United States
of America.

          This Note is one of a series of Senior Notes (herein called the
"NOTES") issued pursuant to an Uncommitted Master Shelf Agreement, dated as of
February 28, 2006 (herein called the "AGREEMENT"), between the Company,
Prudential Investment Management, Inc. and the Purchasers named therein and is
entitled to the benefits thereof. As provided in the Agreement, this Note is
subject to optional prepayment, in whole or from time to time in part on the
terms specified in the Agreement. Capitalized terms used and not otherwise
defined herein have the meanings specified in the Agreement.

                                     A-2-1

<PAGE>

          This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.

          In case an Event of Default, as defined in the Agreement, shall occur
and be continuing, the principal of this Note may be declared or otherwise
become due and payable in the manner and with the effect provided in the
Agreement.

          THIS NOTE IS INTENDED TO BE PERFORMED IN THE STATE OF NEW YORK AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAW OF SUCH STATE.

                                        PINNACLE WEST CAPITAL CORPORATION

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                     A-2-2

<PAGE>

                                                                       EXHIBIT B

                      [TO BE PLACED ON COMPANY LETTERHEAD]

                         [FORM OF REQUEST FOR PURCHASE]

                        PINNACLE WEST CAPITAL CORPORATION

          Reference is made to the Master Shelf Agreement (the "AGREEMENT"),
dated as of February 28, 2006, between Pinnacle West Capital Corporation (the
"COMPANY"), Prudential Investment Management, Inc. and the Purchasers named
therein. All terms used herein that are defined in the Agreement have the
respective meanings specified in the Agreement.

          Pursuant to paragraph 2D of the Agreement, the Company hereby makes
the following Request for Purchase:

          1.   Aggregate principal amount of
               the Notes covered hereby
               (the "Notes")                             $____________

          2.   Individual specifications of the Notes:

<TABLE>
<CAPTION>
                                 Principal
Principal   Final Maturity   Installment Dates   Designated
  Amount         Date           and Amounts        Spread
---------   --------------   -----------------   ----------
<S>         <C>              <C>                 <C>

</TABLE>

          3.   Use of proceeds of the Notes:

          4.   Proposed day for the closing of the purchase and sale of the
               Notes:

          5.   The purchase price of the Notes is to be transferred to:

<TABLE>
<CAPTION>
                                               Name and Telephone No. of Bank
Name and Address of Bank   Number of Account               Officer
------------------------   -----------------   ------------------------------
<S>                        <C>                 <C>

</TABLE>

          6.   The Company certifies (a) that the representations and warranties
               contained in paragraph 8 of the Agreement are true on and as of
               the date of this Request for Purchase except to the extent of
               changes caused by the transactions contemplated in the Agreement
               and (b) that there exists on the date of this Request for
               Purchase no Event of Default or Default.

                                      B-1

<PAGE>

Dated:
       ------------------

                                        PINNACLE WEST CAPITAL CORPORATION

                                        By:
                                            ------------------------------------
                                            Authorized Officer

                                      B-2

<PAGE>

                                                                       EXHIBIT C

                      [FORM OF CONFIRMATION OF ACCEPTANCE]

                        PINNACLE WEST CAPITAL CORPORATION

          Reference is made to the Master Shelf Agreement (the "Agreement"),
dated as of February 28, 2006, between Pinnacle West Capital Corporation (the
"Company"), Prudential Investment Management, Inc. and the Purchasers named
therein. All terms used herein that are defined in the Agreement have the
respective meanings specified in the Agreement.

          Each of the undersigned institutions which is named below as a
Purchaser of any Accepted Notes hereby confirms the representations as to such
Accepted Notes set forth in paragraph 9 of the Agreement, and agrees to be bound
by the provisions of paragraphs 2F and 2H of the Agreement relating to the
purchase and sale of such Accepted Notes.

          Pursuant to paragraph 2F of the Agreement, an Acceptance with respect
to the following Accepted Notes is hereby confirmed:

I.   Aggregate principal amount $
     (A)  (a) Name of Purchaser:
          (b) Principal amount:
          (c) Final maturity date:
          (d) Principal installment dates and amounts:
          (e) Interest rate:
          (f) Payment and notice instructions: As set forth on attached
              Purchaser Schedule
          (g) Designated spread:

     (B)  (a) Name of Purchaser:
          (b) Principal amount:
          (c) Final maturity date:
          (d) Principal installment dates and amounts:
          (e) Interest rate:
          (f) Payment and notice instructions: As set forth on attached
              Purchaser Schedule
          (g) Designated spread:

     [(C),(D) ....: same information as to any other Purchaser

II.  Closing Day:

III. Issuance Fee:

Dated:
       ------------------

                                      C-1

<PAGE>

                                        PINNACLE WEST CAPITAL CORPORATION

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

                                        PRUDENTIAL INVESTMENT MANAGEMENT, INC.

                                        By:
                                            ------------------------------------
                                            Vice President

[Signature block for each named Purchaser other than Prudential]

                                      C-2

<PAGE>

                                                                       EXHIBIT D

               [FORM OF WRITTEN FUNDING INSTRUCTIONS]

                             [Company's Letterhead]

[NAMES AND ADDRESSES OF PURCHASERS]

               Re: FUNDS DELIVERY INSTRUCTION

Ladies and Gentlemen:

          As contemplated by paragraph 2 of the Uncommitted Master Shelf
Agreement, dated as of February 28, 2006, among you, Prudential Investment
Management, Inc. and the Purchasers named therein, the undersigned hereby
instructs you to deliver, on the date of closing, the proceeds of the Notes in
the manner required by paragraph 2 to the undersigned's account identified
below:

          Account Name: ______________________________________

          Account No.: _______________________________________

          Bank: ______________________________________________

          Bank City & State: _________________________________

          Bank ABA No.: ______________________________________

          Reference: _________________________________________

          This instruction has been executed and delivered by an authorized
representative of the undersigned.

                                        Very truly yours,

                                        PINNACLE WEST CAPITAL CORPORATION

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------<PAGE>
                                                                  Exhibit 10.97

                                                                  EXECUTION COPY

                      AMENDED AND RESTATED CREDIT AGREEMENT

                          DATED AS OF DECEMBER 9, 2005

                                      AMONG

                       PINNACLE WEST CAPITAL CORPORATION,

                  THE LENDERS FROM TIME TO TIME PARTIES HERETO,

                            JPMORGAN CHASE BANK, N.A.
                     (FORMERLY KNOWN AS JPMORGAN CHASE BANK)
                             AS ADMINISTRATIVE AGENT

                         UNION BANK OF CALIFORNIA, N.A.,
                              AS SYNDICATION AGENT

                                       AND

                CITIBANK, N.A., KEYBANK NATIONAL ASSOCIATION AND
                          MIZUHO CORPORATE BANK, LTD.,
                           AS CO-DOCUMENTATION AGENTS

                         J.P. MORGAN SECURITIES INC. AND
                         UNION BANK OF CALIFORNIA, N.A.
                    AS CO-LEAD ARRANGERS AND CO-BOOK RUNNERS

<PAGE>

                               TABLE OF CONTENTS
<TABLE>
<S>                                                                           <C>
ARTICLE I DEFINITIONS......................................................    1
   1.1.     Definitions....................................................    1
   1.2.     Plural Forms...................................................   11

ARTICLE II THE CREDITS.....................................................   12
   2.1.     Commitment.....................................................   12
   2.2.     Required Payments; Termination.................................   12
   2.3.     Ratable Loans..................................................   12
   2.4.     Types of Advances..............................................   12
   2.5.     Commitment Fee; Utilization Margin; LC Fee; Reductions in
            Aggregate Commitment...........................................   12
   2.6.     Minimum Amount of Each Advance.................................   13
   2.7.     Optional Principal Payments....................................   14
   2.8.     Method of Selecting Types and Interest Periods for New
            Advances..............................                            14
   2.9.     Conversion and Continuation of Outstanding Advances............   14
   2.10.    Changes in Interest Rate, etc..................................   15
   2.11.    Rates Applicable After Default.................................   15
   2.12.    Method of Payment..............................................   16
   2.13.    Noteless Agreement; Evidence of Indebtedness...................   16
   2.14.    Telephonic Notices.............................................   16
   2.15.    Interest Payment Dates; Interest and Fee Basis; Regulation D
            Compensation...................................................   17
   2.16.    Notification of Advances, Interest Rates, Prepayments and
            Commitment Reductions..........................................   18
   2.17.    Lending Installations..........................................   18
   2.18.    Non-Receipt of Funds by the Agent..............................   18
   2.19.    Replacement of Lender..........................................   18
   2.20.    Letters of Credit..............................................   19
   2.21.    Expansion Option...............................................   24
   2.22.    Extension of Facility Termination Date.........................   25

ARTICLE III YIELD PROTECTION; TAXES........................................   27
   3.1.     Yield Protection...............................................   27
   3.2.     Changes in Capital Adequacy Regulations........................   28
   3.3.     Availability of Types of Advances..............................   29
   3.4.     Funding Indemnification........................................   29
   3.5.     Taxes..........................................................   29
   3.6.     Lender Statements; Survival of Indemnity.......................   31
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                           <C>
ARTICLE IV CONDITIONS PRECEDENT............................................   32
   4.1.     Effectiveness of Agreement.....................................   32
   4.2.     Each Credit Extension..........................................   33

ARTICLE V REPRESENTATIONS AND WARRANTIES...................................   34
   5.1.     Existence and Standing.........................................   34
   5.2.     Corporate and Governmental Authorization; No Contravention.....   34
   5.3.     Binding Effect.................................................   34
   5.4.     Financial Information..........................................   34
   5.5.     Litigation.....................................................   35
   5.6.     Compliance with ERISA..........................................   35
   5.7.     Environmental Matters..........................................   35
   5.8.     Taxes..........................................................   35
   5.9.     Material Subsidiaries..........................................   36
   5.10.    Not an Investment Company......................................   36
   5.11.    Public Utility Holding Company Act, Etc........................   36

ARTICLE VI COVENANTS.......................................................   36
   6.1.     Information....................................................   36
   6.2.     Maintenance of Property; Insurance.............................   38
   6.3.     Conduct of Business and Maintenance of Existence...............   39
   6.4.     Compliance with Laws...........................................   39
   6.5.     Pari Passu.....................................................   39
   6.6.     Ownership of APS...............................................   40
   6.7.     Consolidations, Mergers and Sales of Assets....................   40
   6.8.     Use of Proceeds................................................   40
   6.9.     Indebtedness...................................................   40
   6.10.    Inspection of Property, Books and Records......................   41

ARTICLE VII DEFAULTS.......................................................   41

ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES................   42
   8.1.     Acceleration...................................................   43
   8.2.     Amendments.....................................................   43
   8.3.     Preservation of Rights.........................................   44

ARTICLE IX GENERAL PROVISIONS..............................................   44
   9.1.     Survival of Representations....................................   44
   9.2.     Governmental Regulation........................................   44
   9.3.     Headings.......................................................   44
</TABLE>

                                      iii

<PAGE>

<TABLE>
<S>                                                                           <C>
   9.4.     Entire Agreement...............................................   44
   9.5.     Several Obligations; Benefits of this Agreement................   44
   9.6.     Expenses; Indemnification......................................   45
   9.7.     Numbers of Documents...........................................   46
   9.8.     Accounting Terms and Determinations............................   46
   9.9.     Severability of Provisions.....................................   46
   9.10.    Nonliability of Lenders........................................   46
   9.11.    Confidentiality................................................   46
   9.12.    Nonreliance....................................................   47
   9.13.    Disclosure.....................................................   47
   9.14.    USA Patriot Act Notification...................................   47
   9.15.    Relations Among Lenders........................................   47

ARTICLE X THE AGENT........................................................   48
   10.1.    Appointment; Nature of Relationship............................   48
   10.2.    Powers.........................................................   48
   10.3.    General Immunity...............................................   48
   10.4.    No Responsibility for Loans, Recitals, etc.....................   48
   10.5.    Action on Instructions of Lenders..............................   49
   10.6.    Employment of Agents and Counsel...............................   49
   10.7.    Reliance on Documents; Counsel.................................   49
   10.8.    Agent's Reimbursement and Indemnification......................   49
   10.9.    Notice of Default..............................................   50
   10.10.   Rights as a Lender.............................................   50
   10.11.   Lender Credit Decision.........................................   50
   10.12.   Successor Agent................................................   51
   10.13.   Agent and Arranger Fees........................................   51
   10.14.   Delegation to Affiliates.......................................   51
   10.15.   Co-Agents, Managing Agent, Documentation Agent, Syndication
            Agent, etc.....................................................   51

ARTICLE XI SETOFF; RATABLE PAYMENTS........................................   52
   11.1.    Setoff.........................................................   52
   11.2.    Ratable Payments...............................................   52

ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..............   52
   12.1.    Successors and Assigns.........................................   52
   12.2.    Participations.................................................   53
   12.3.    Assignments....................................................   54
   12.4.    Dissemination of Information...................................   55
</TABLE>

                                       iv

<PAGE>

<TABLE>
<S>                                                                           <C>
   12.5.    Tax Treatment..................................................   55

ARTICLE XIII NOTICES.......................................................   55

ARTICLE XIV COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC
   EXECUTION...............................................................   56
   14.1.    Counterparts; Effectiveness....................................   56
   14.2.    Electronic Execution of Assignments............................   57

ARTICLE XV  CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL...   57
   15.1.    CHOICE OF LAW..................................................   57
   15.2.    CONSENT TO JURISDICTION........................................   57
   15.3.    WAIVER OF JURY TRIAL...........................................   58
</TABLE>

                                       v

<PAGE>

                             SCHEDULES AND EXHIBITS

PRICING SCHEDULE
COMMITMENT SCHEDULE

SCHEDULE 2.20 EXISTING LETTERS OF CREDIT

EXHIBIT A   ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT B   NOTE
EXHIBIT C   FORM OF INCREASING LENDER SUPPLEMENT
EXHIBIT D   FORM OF AUGMENTING LENDER SUPPLEMENT

                                       vi

<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

     This Agreement, dated as of December 9, 2005, is among Pinnacle West
Capital Corporation, as Borrower, the Lenders, JPMorgan Chase Bank, N.A., as
Agent, and the other agents party hereto. The parties hereto (i) agree to amend
and restate the Existing Credit Agreement pursuant hereto, and in connection
therewith, each Departing Lender has agreed to execute and deliver a Departing
Lender Signature Page pursuant to which such Departing Lender shall cease to be
a party to the Existing Credit Agreement, and (ii) further agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

     1.1. Definitions. As used in this Agreement:

     "Advance" means a borrowing hereunder consisting of the aggregate amount of
several Loans, (i) made by the Lenders on the same Borrowing Date, or (ii)
converted or continued by the Lenders on the same date of conversion or
continuation, consisting, in either case, of the aggregate amount of the several
Loans of the same Type and, in the case of Eurodollar Loans, for the same
Interest Period.

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

     "Agent" means JPMCB in its capacity as contractual representative of the
Lenders pursuant to Article X, and not in its individual capacity as a Lender,
and any successor Agent appointed pursuant to Article X.

     "Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders, as reduced from time to time pursuant to the terms hereof.

     "Aggregate Outstanding Credit Exposure" means, at any time, the aggregate
of the Outstanding Credit Exposure of all the Lenders.

     "Agreement" means this amended and restated credit agreement, as it may be
amended, restated, supplemented or modified and in effect from time to time.

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

     "Applicable Commitment Fee Rate" means, at any time, the percentage rate
per annum as set forth in the Pricing Schedule.

                                        1

<PAGE>

     "Applicable Margin" means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.

     "Applicable Percentage" means, with respect to any Lender, the percentage
of the total Commitments represented by such Lender's Commitment. If the
Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect, giving effect to
any assignments.

     "Applicable Utilization Margin" means, at any time, the percentage rate per
annum at which utilization margins are accruing on the Aggregate Outstanding
Credit Exposure at such time as set forth in the Pricing Schedule.

     "Approved Fund" means any Fund that is administered or managed by (i) a
Lender, (ii) an Affiliate of a Lender or (iii) an entity or an Affiliate of an
entity that administers or manages a Lender.

     "APS" means the Arizona Public Service Company, an Arizona corporation, and
its successors.

     "Arrangers" means, collectively, J.P. Morgan Securities Inc., and its
successors, and Union Bank of California, N.A., and its successors, in their
capacity as Co-Lead Arrangers and Co-Book Runners.

     "Article" means an article of this Agreement unless another document is
specifically referenced.

     "Assuming Lender" has the meaning assigned to such term in Section 2.22.3.

     "Augmenting Lender" has the meaning assigned to such term in Section 2.21.

     "Authorized Officer" means the Chairman of the Board, Chief Executive
Officer, Chief Financial Officer, President, Treasurer, Controller, Chief
Operating Officer, any Vice President or any Assistant Treasurer of the
Borrower.

     "Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA
Group.

     "Borrower" means Pinnacle West Capital Corporation, an Arizona corporation,
and its permitted successors and assigns (including, without limitation, a
debtor in possession on its behalf).

     "Borrower's 2004 Form 10-K" means the Borrower's annual report on Form 10-K
for the fiscal year ended December 31, 2004, as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.

                                        2

<PAGE>

     "Borrower's Latest Form 10-Q" means the Borrower's quarterly report on Form
10-Q for the quarter ended September 30, 2005, as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.

     "Borrower's SEC Reports" means the Borrower's 2004 Form 10-K; the
Borrower's quarterly reports on Form 10-Q for the quarters ended March 31, 2005,
June 30, 2005 and September 30, 2005; and the Borrower's current reports on Form
8-K as filed with the Securities and Exchange Commission on January 28, March 1,
March 29, April 13, April 26, May 2, May 19, May 25, June 17, June 22, July 25,
July 27, August 16, August 18, August 30, September 22, October 13, October 18,
October 26, October 27, November 4, and December 6, 2005.

     "Borrowing Date" means a date on which an Advance is made hereunder.

     "Borrowing Notice" is defined in Section 2.8.

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

     "Capital Lease Obligations" means as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on the balance
sheet of such Person under generally accepted accounting principles and, for the
purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with generally accepted
accounting principles.

     "Change in Control" means (i) the acquisition by any Person, or two or more
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of thirty percent (30%) or more of the aggregate ordinary voting
power represented by the issued and outstanding capital stock of the Borrower;
or (ii) the majority of the board of directors of the Borrower fails to consist
of Continuing Directors (other than due to death or disability).

     "Closing Date" means October 19, 2004, the original effective date of the
Existing Credit Agreement.

     "Commitment" means, for each Lender, the obligation of such Lender to make
Loans to, and participate in Letters of Credit issued upon the application of,
the Borrower in an aggregate amount not exceeding the amount set forth opposite
its name on the Commitment Schedule, as it may be modified as a result of any
increase pursuant to Section 2.21, assignment that has become effective pursuant
to Section 2.21, 2.22 or 12.3.3 or as otherwise modified from time to time
pursuant to the terms hereof.

                                        3

<PAGE>

     "Commitment Schedule" means the Schedule identifying each Lender's
Commitment attached hereto and identified as such, which Schedule may be
modified from time to time after the Effective Date by the Agent (and the
parties hereto hereby authorize the Agent to make such modifications) to reflect
any assignment that has become effective pursuant to Section 12.3.3 or as
otherwise modified from time to time pursuant to the terms hereof.

     "Confidential Information" means information that the Borrower furnishes to
any party hereto designated as confidential in writing or that any such party
obtains pursuant to its rights under Section 6.1.9 or 6.10, but does not include
any such information that (a) is or becomes generally available to the public
other than as a result of a breach by any party hereto of its obligations
hereunder, (b) was available to such party on a nonconfidential basis prior to
its disclosure to such party by the Borrower or any of its Affiliates or (c) is
or becomes available to such party from a source other than the Borrower or any
of its Affiliates that is not, to the knowledge of such party after inquiry,
acting in violation of a confidentiality agreement with the Borrower or any
other Person.

     "Consenting Lender" has the meaning assigned to such term in Section
2.22.2.

     "Consolidated Capitalization" means the sum of (i) Consolidated Debt and
(ii) Consolidated Net Worth.

     "Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries determined on a consolidated basis as of such date.

     "Consolidated Net Worth" means the sum of (i) the par value (or value
stated on the books of the Borrower) of all classes of capital stock of the
Borrower and its Subsidiaries, excluding the Borrower's capital stock owned by
the Borrower and/or its Subsidiaries, plus (or minus in the case of a surplus
deficit) (ii) the amount of the consolidated surplus, whether capital or earned,
of the Borrower, determined in accordance with generally accepted accounting
principles as of the end of the most recent calendar month (excluding (x)
cumulative charges of up to $300 million to consolidated surplus resulting from,
or in anticipation of, discontinuation of FASB 71, accounting for all or part of
the business and (y) the effect on the Borrower's accumulated other
comprehensive income/loss of the ongoing application of FASB 133).

     "Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements if such statements were prepared as of such
date.

     "Continuing Director" means, with respect to any Person as of any date of
determination, any member of the board of directors of such Person who (i) was a
member of such board of directors on the date of this Agreement, or (ii) was
nominated for election or elected to such board of directors with the approval
of a majority of the Continuing Directors who were members of such board at the
time of such nomination or election.

     "Conversion/Continuation Notice" is defined in Section 2.9.

     "Credit Extension" means the making of an Advance or the issuance of a
Letter of Credit hereunder.

                                        4

<PAGE>

     "Credit Extension Date" means the Borrowing Date for an Advance or the
issuance date for a Letter of Credit.

     "Debt" means as to any Person at any date (without duplication): (i)
indebtedness created, issued, incurred or assumed by such Person for borrowed
money or evidenced by bonds, debentures, notes or similar instruments; (ii) all
obligations of such Person to pay the deferred purchase price of property or
services, excluding, however, trade accounts payable (other than for borrowed
money) arising in, and accrued expenses incurred in, the ordinary course of
business of such Person so long as such trade accounts payable are paid within
180 days of the date incurred; (iii) all Debt secured by a lien on any asset of
such Person, to the extent such Debt has been assumed by, or is a recourse
obligation of, such Person; (iv) all Guarantees by such Person; (v) all Capital
Lease Obligations of such Person; and (vi) the amount of all reimbursement
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, bankers' acceptances, surety or other bonds and similar
instruments in support of Debt.

     "Default" means an event described in Article VII.

     "Departing Lender" means each lender under the Existing Credit Agreement
that executes and delivers to the Agent a Departing Lender Signature Page.

     "Departing Lender Signature Page" means each signature page to this
Agreement in which it is indicated that the Departing Lender executing the same
shall cease to be a party to the Existing Credit Agreement on the Effective
Date.

     "Derivative Obligations" of any Person means all obligations of such Person
in respect of any rate swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of the foregoing
transactions) or any combination of the foregoing transactions.

     "Effective Date" means the date on which the conditions specified in
Section 4.1 are satisfied (or waived in accordance with Section 8.2).

     "Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment, the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.

     "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute and any rule or regulation issued thereunder.

                                       5

<PAGE>

     "ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary are treated as a single employer under Section 414 of the Internal
Revenue Code.

     "Eurodollar Advance" means an Advance which, except as otherwise provided
in Section 2.11, bears interest at the applicable Eurodollar Rate.

     "Eurodollar Loan" means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the applicable Eurodollar Rate.

     "Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the LIBO Rate applicable to such
Interest Period, plus (ii) the then Applicable Margin, changing as and when the
Applicable Margin changes.

     "Excluded Taxes" means, in the case of each Lender, each Issuing Bank or
applicable Lending Installation and the Agent, (A) taxes imposed on its overall
net income, and franchise taxes imposed on it, by (i) the United States, (ii)
any jurisdiction under the laws of which such Lender, such Issuing Bank or the
Agent is incorporated, organized or doing business or (iii) any jurisdiction in
which the Agent's, such Issuing Bank's or such Lender's principal executive
office or such Lender's or Issuing Bank's applicable Lending Installation is
located and (B) in the case of each Lender and Issuing Bank, any United States
withholding tax imposed with respect to any payment by the Borrower pursuant to
this Agreement, but only up to the rate (if any) at which United States
withholding tax would apply to such payments to such Lender or Issuing Bank, or
applicable Lending Installation, at the time such Lender or Issuing Bank, as
applicable, first becomes a party to this Agreement.

     "Exhibit" refers to an exhibit to this Agreement, unless another document
is specifically referenced.

     "Existing Credit Agreement" means that certain Credit Agreement, dated as
of the Closing Date, by and among the Borrower, the lenders parties thereto,
JPMorgan Chase Bank, N.A. (formerly known as JPMorgan Chase Bank), as
administrative agent, and the other agents party thereto, as the same has been
amended, restated, supplemented or otherwise modified from time to time prior to
the Effective Date.

     "Extension Date" has the meaning assigned to such term in Section 2.22.2.

     "Facility Termination Date" means December 9, 2010, subject to extension
pursuant to Section 2.22, or any earlier date on which the Aggregate Commitment
is reduced to zero or otherwise terminated pursuant to the terms hereof.

     "Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if

                                        6

<PAGE>

necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.

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

     "Floating Rate Advance" means an Advance which, except as otherwise
provided in Section 2.11, bears interest at the Floating Rate.

     "Floating Rate Loan" means a Loan which, except as otherwise provided in
Section 2.11, bears interest at the Floating Rate.

     "Fund" means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.

     "Guarantee" means as to any Person, any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person or in any manner providing for the payment of any Debt of any other
Person or otherwise protecting the holder of such Debt against loss (whether by
virtue of partnership arrangements, agreements to keep well, to purchase assets,
goods, securities or services, or to take-or-pay or otherwise), provided that
the term "Guarantee" shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.

     "Hazardous Substances" means (i) any toxic, radioactive, caustic or
otherwise hazardous substance, as defined by any applicable Environmental Law;
(ii) petroleum, its derivatives, by-products and other hydrocarbons; or (iii)
any substance having any constituent elements displaying any of the foregoing
characteristics, as defined by any applicable Environmental Law.

     "Increasing Lender" has the meaning assigned to such term in Section 2.21.

     "Interest Period" means, with respect to a Eurodollar Advance, a period of
one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on the day
which corresponds numerically to such date one, two, three or six months
thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.

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

     "Issuing Bank" means JPMCB or any other Lender (with such Lender's consent)
satisfactory to the Agent and the Borrower in its capacity as issuer of Letters
of Credit hereunder.

                                        7

<PAGE>

     "JPMCB" means JPMorgan Chase Bank, N.A., in its individual capacity, and
its successors.

     "LC Disbursement" means a payment made by an Issuing Bank pursuant to a
Letter of Credit.

     "LC Exposure" means, at any time, the sum of (i) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (ii) the aggregate
unpaid amount of all Reimbursement Obligations at such time. The LC Exposure of
any Lender at any time shall be its Applicable Percentage of the total LC
Exposure at such time.

     "LC Fee" is defined in Section 2.5.3.

     "Lenders" means the lending institutions listed on the signature pages of
this Agreement and their respective permitted successors and assigns.

     "Lending Installation" means, with respect to a Lender, an Issuing Bank or
the Agent, the office, branch, subsidiary or affiliate of such Lender, Issuing
Bank or the Agent listed on the administrative information sheets provided to
the Agent in connection herewith or on the signature pages hereof or on a
Schedule or otherwise selected by such Lender, Issuing Bank or the Agent
pursuant to Section 2.17.

     "Letter of Credit" means any letter of credit issued pursuant to this
Agreement, including, without limitation, each Letter of Credit deemed issued by
JPMCB, as Issuing Bank, hereunder pursuant to Section 2.20.1(ii).

     "Letter of Credit Application" is defined in Section 2.20.1(i).

     "Letter of Credit Collateral Account" is defined in Section 2.20.10.

     "LIBO Rate" means, with respect to any Eurodollar Advance for any Interest
Period, the rate appearing on Page 3750 of the Dow Jones Market Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Agent from
time to time for purposes of providing quotations of interest rates applicable
to dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the "LIBO Rate" with respect to such Eurodollar Advance for
such Interest Period shall be the rate at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.

     "Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset

                                        8

<PAGE>

which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.

     "Loan" means, with respect to a Lender, such Lender's loan made pursuant to
Article II (or any conversion or continuation thereof).

     "Loan Documents" means this Agreement and any Notes issued pursuant to
Section 2.13.

     "Material Debt" means Debt (other than the Credit Extensions) of the
Borrower and/or one or more of its Material Subsidiaries in an aggregate
principal amount exceeding $25,000,000.

     "Material Derivative Obligations" means Derivative Obligations of the
Borrower and/or one or more of its Material Subsidiaries with an aggregate
mark-to-market termination amount exceeding $25,000,000.

     "Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $25,000,000.

     "Material Subsidiary" means APS and each other Subsidiary of the Borrower
(other than SunCor Development Company and any of its Subsidiaries) whose
consolidated assets exceed 10% of the consolidated assets of the Borrower and
its Consolidated Subsidiaries.

     "Modify" and "Modification" are defined in Section 2.20.1(i).

     "Moody's" means Moody's Investors Service, Inc., and any successor thereto.

     "Multiemployer Plan" means, at any time, an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.

     "Non-U.S. Lender" is defined in Section 3.5(iv).

     "Note" is defined in Section 2.13.

     "Obligations" means all unpaid principal of and accrued and unpaid interest
on the Loans, all Reimbursement Obligations, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the Borrower to
the Lenders or to any Lender, any Issuing Bank, the Agent or any indemnified
party arising under the Loan Documents.

     "Other Taxes" is defined in Section 3.5(ii).

     "Outstanding Credit Exposure" means, as to any Lender at any time, the sum
of (i) the aggregate principal amount of its Loans outstanding at such time,
plus (ii) an amount equal to its Applicable Percentage of the LC Exposure at
such time.

                                        9

<PAGE>

     "Participants" is defined in Section 12.2.1.

     "Payment Date" means the last day of each of March, June, September and
December and the Facility Termination Date.

     "PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

     "Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

     "Plan" means, at any time, an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.

     "Pricing Schedule" means the Schedule attached hereto identified as such.

     "Prime Rate" means the rate of interest per annum publicly announced from
time to time by JPMCB as its prime rate in effect at its principal office in New
York City; each change in the Prime Rate shall be effective from and including
the date such change is publicly announced as being effective.

     "Purchasers" is defined in Section 12.3.1.

     "PWEC" means Pinnacle West Energy Corporation, an Arizona corporation, and
its successors.

     "Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks, non-banks and non-broker lenders for the purpose
of purchasing or carrying margin stocks applicable to member banks of the
Federal Reserve System.

     "Reimbursement Obligations" means, at any time, the aggregate of all LC
Disbursements and all other obligations of the Borrower then outstanding under
Section 2.20 to reimburse the applicable Issuing Bank for amounts paid by such
Issuing Bank in respect of any one or more drawings under Letters of Credit
issued by it, unless such obligation has become a Loan pursuant to the terms of
this Agreement.

     "Required Lenders" means Lenders in the aggregate having more than 50% of
the Aggregate Commitment at such time or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding more than 50% of the Aggregate
Outstanding Credit Exposure at such time.

                                       10

<PAGE>

     "S&P" means Standard and Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc., and any successor thereto.

     "Schedule" refers to a specific schedule to this Agreement, unless another
document is specifically referenced.

         "Section" means a numbered section of this Agreement, unless another
document is specifically referenced.

         "Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.

     "Syndication Agent" means Union Bank of California, N.A. and its successors
and assigns.

     "Taxes" means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and any and all liabilities with respect to
the foregoing, but excluding Excluded Taxes and Other Taxes.

     "Transferee" is defined in Section 12.4.

     "Type" means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance and with respect to any Loan, its nature as a
Floating Rate Loan or a Eurodollar Loan.

     "Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.

     "Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.

     1.2. Plural Forms. The foregoing definitions shall be equally applicable to
both the singular and plural forms of the defined terms.

                                       11

<PAGE>

                                   ARTICLE II

                                   THE CREDITS

     2.1. Commitment. From and including the date of this Agreement and prior to
the Facility Termination Date, each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to (i) make Loans to the Borrower and
(ii) participate in Letters of Credit issued upon the request of the Borrower,
provided that, after giving effect to the making of each such Loan and the
issuance of each such Letter of Credit, such Lender's Outstanding Credit
Exposure shall not exceed its Commitment. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow at any time prior to the
Facility Termination Date. The Commitments to extend credit hereunder shall
expire on the Facility Termination Date. The Issuing Banks will issue Letters of
Credit hereunder on the terms and conditions set forth in Section 2.20.

     2.2. Required Payments; Termination. The Outstanding Credit Exposure of
each Lender and all other unpaid Obligations of the Borrower to such Lender
(other than contingent indemnity obligations and other expense reimbursement
obligations not then due and payable) shall be payable on the Facility
Termination Date applicable to such Lender. In addition, in the event and on the
occasion that the Aggregate Outstanding Credit Exposure as of any Extension Date
exceeds the aggregate Commitments of all Consenting Lenders and Assuming Lenders
with respect to such Extension Date, the Borrower shall prepay the Advances on
such Extension Date in an aggregate amount equal to such excess, together with
accrued interest thereon and any amounts otherwise due pursuant to Section 3.4
in respect thereof.

     2.3. Ratable Loans. Each Advance hereunder shall consist of Loans made from
the several Lenders ratably in proportion to their Applicable Percentages.

     2.4. Types of Advances. The Advances may be Floating Rate Advances or
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.8 and 2.9.

     2.5. Commitment Fee; Utilization Margin; LC Fee; Reductions in Aggregate
Commitment.

          2.5.1 The Borrower agrees to pay to the Agent for the account of each
     Lender a commitment fee at a per annum rate equal to the Applicable
     Commitment Fee Rate on the average daily unused amount of such Lender's
     Commitment from the date hereof to but excluding the date on which such
     Commitment terminates, payable in arrears on each Payment Date hereafter.
     For purposes of computing commitment fees, the Commitment of a Lender shall
     be deemed to be used to the extent of the Outstanding Credit Exposure of
     such Lender.

          2.5.2 For each day from and after the date hereof to but not including
     the Facility Termination Date on which the Aggregate Outstanding Credit
     Exposure exceeds fifty percent (50%) of the Aggregate Commitment, the
     interest rate otherwise applicable to the Advances and the LC Fee,
     respectively, shall be increased by an amount equal to a

                                       12

<PAGE>

     utilization margin at a rate per annum equal to the Applicable Utilization
     Margin in effect from time to time, payable from the date hereof until the
     date on which this Agreement is terminated in full and the Aggregate
     Outstanding Credit Exposure has been paid in full pursuant to Section 2.2.
     Such utilization margin shall be payable in arrears on each Payment Date
     hereafter and on the date on which this Agreement is terminated in full and
     the Aggregate Outstanding Credit Exposure hereunder has been paid in full
     pursuant to Section 2.2.

          2.5.3 The Borrower agrees to pay (i) to the Agent for the account of
     each Lender a participation fee with respect to its participations in
     Letters of Credit (the "LC Fee"), which shall accrue at the same Applicable
     Margin used to determine the interest rate applicable to Eurodollar Loans
     on the average daily amount of such Lender's LC Exposure (excluding any
     portion thereof attributable to unreimbursed LC Disbursements) during the
     period from and including the Effective Date to but excluding the later of
     the date on which such Lender's Commitment terminates and the date on which
     such Lender ceases to have any LC Exposure, and (ii) to each Issuing Bank a
     fronting fee, which shall accrue at a per annum rate agreed upon between
     the Borrower and the applicable Issuing Bank on the average daily amount of
     the LC Exposure (excluding any portion thereof attributable to unreimbursed
     LC Disbursements) related to Letters of Credit issued by it during the
     period from and including the Effective Date to but excluding the later of
     the date of termination of the Commitments and the date on which there
     ceases to be any LC Exposure, as well as such Issuing Bank's standard fees
     with respect to the issuance or Modification of any Letter of Credit issued
     by it or processing of drawings thereunder. Participation fees and fronting
     fees accrued through and including the last day of March, June, September
     and December of each year shall be payable on or before the third Business
     Day following such last day, commencing on the first such date to occur
     after the Effective Date; provided that all such accrued and unpaid fees
     shall be payable on the date on which the Commitments terminate and any
     such fees accruing after the date on which the Commitments terminate shall
     be payable either on demand, if such termination is due to a Default
     arising under Section 7.1, 7.6 or 7.7, or otherwise within 3 days after
     demand. Any other fees payable to the Issuing Banks pursuant to this
     Section 2.5.3 shall be payable within 10 days after demand. All
     participation fees and fronting fees shall be computed on the basis of a
     year of 360 days and shall be payable for the actual number of days elapsed
     (including the first day but excluding the last day).

          2.5.4 The Borrower may permanently reduce the Aggregate Commitment in
     whole, or in part ratably among the Lenders in integral multiples of
     $1,000,000, upon at least three Business Days' prior written notice to the
     Agent, which notice shall specify the amount of any such reduction,
     provided, however, that the amount of the Aggregate Commitment may not be
     reduced below the Aggregate Outstanding Credit Exposure. All accrued
     commitment fees and utilization margin shall be payable on the effective
     date of any termination of the obligations of the Lenders to make Credit
     Extensions hereunder and on the final date upon which the Aggregate
     Outstanding Credit Exposure is repaid hereunder.

     2.6. Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof), and,

                                       13

<PAGE>

except as provided in Section 2.20.5, each Floating Rate Advance shall be in the
minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof), provided, however, that any Floating Rate Advance may be in the amount
of the unused Aggregate Commitment.

     2.7. Optional Principal Payments. The Borrower may from time to time pay,
without penalty or premium, all outstanding Floating Rate Advances, or, in a
minimum aggregate amount of $1,000,000 or any integral multiple of $1,000,000 in
excess thereof, any portion of the outstanding Floating Rate Advances upon one
Business Day's prior notice to the Agent. The Borrower may from time to time
pay, subject to the payment of any funding indemnification amounts required by
Section 3.4 but without penalty or premium, all outstanding Eurodollar Advances,
or, in a minimum aggregate amount of $5,000,000 or any integral multiple of
$1,000,000 in excess thereof, any portion of the outstanding Eurodollar Advances
upon three Business Days' prior notice to the Agent.

     2.8. Method of Selecting Types and Interest Periods for New Advances. The
Borrower shall select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto from time to time. The Borrower
shall give the Agent irrevocable notice (a "Borrowing Notice") not later than
1:30 p.m. (New York time) on the Borrowing Date of each Floating Rate Advance
and three Business Days before the Borrowing Date for each Eurodollar Advance,
specifying:

     (i)  the Borrowing Date, which shall be a Business Day, of such Advance,

     (ii) the aggregate amount of such Advance,

     (iii) the Type of Advance selected, and

     (iv) in the case of each Eurodollar Advance, the Interest Period applicable
          thereto.

The Agent will promptly send each Borrowing Notice to the Lenders. Not later
than 3:30 p.m. (New York time) on each Borrowing Date, each Lender shall make
available its Loan or Loans in funds immediately available in New York to the
Agent at its address specified pursuant to Article XIII. The Agent will make the
funds so received from the Lenders available to the Borrower at the Agent's
aforesaid address or as otherwise provided in such Borrowing Notice.

     2.9. Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such Floating
Rate Advances are converted into Eurodollar Advances pursuant to this Section
2.9 or are repaid in accordance with Section 2.7. Each Eurodollar Advance shall
continue as a Eurodollar Advance until the end of the then applicable Interest
Period therefor, at which time such Eurodollar Advance shall be automatically
converted into a Floating Rate Advance unless (x) such Eurodollar Advance is or
was repaid in accordance with Section 2.7 or (y) the Borrower shall have given
the Agent a Conversion/Continuation Notice (as defined below) requesting that,
at the end of such Interest Period, such Eurodollar Advance continue as a
Eurodollar Advance for the same or another Interest Period. Subject to the terms
of Section 2.6, the Borrower may elect from time to time to convert all or any
part of a Floating Rate Advance into a Eurodollar Advance. The Borrower shall
give the Agent irrevocable notice (a "Conversion/Continuation Notice") of each
conversion of a Floating Rate Advance into a Eurodollar Advance or continuation
of a Eurodollar Advance

                                       14

<PAGE>

not later than 11:00 a.m. (New York time) at least three Business Days prior to
the date of the requested conversion or continuation, specifying:

     (i)  the requested date, which shall be a Business Day, of such conversion
          or continuation,

     (ii) the aggregate amount and Type of the Advance which is to be converted
          or continued, and

     (iii) in connection with the conversion or continuation of an Advance as a
          Eurodollar Advance, (a) the amount of such Advance which is to be
          converted or continued and (b) the duration of the Interest Period
          applicable thereto.

     2.10. Changes in Interest Rate, etc. Each Floating Rate Advance shall bear
interest on the outstanding principal amount thereof, for each day from and
including the date such Advance is made or is automatically converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9, to but
excluding the date it is paid or is converted into a Eurodollar Advance pursuant
to Section 2.9 hereof, at a rate per annum equal to the Floating Rate for such
day. Changes in the rate of interest on that portion of any Advance maintained
as a Floating Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined by the Agent as applicable to
such Eurodollar Advance based upon the Borrower's selections under Sections 2.8
and 2.9 and otherwise in accordance with the terms hereof. No Interest Period
may end after the Facility Termination Date. The Borrower shall select Interest
Periods so that it is not necessary to repay any portion of a Eurodollar Advance
prior to the last day of the applicable Interest Period in order to make a
mandatory repayment required pursuant to Section 2.2.

     2.11. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.8, 2.9 or 2.10, during the continuance of a
Default or Unmatured Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that no
Advance may be made as, converted into or continued as a Eurodollar Advance.
During the continuance of a Default under Section 7.1, 7.6 (relating to the
Borrower) or 7.7 (relating to the Borrower) and without any election or action
on the part of the Agent or any Lender, (i) each Eurodollar Advance shall bear
interest for the remainder of the applicable Interest Period at the rate
otherwise applicable to such Interest Period plus 2% per annum, (ii) each
Floating Rate Advance shall bear interest at a rate per annum equal to the
Floating Rate in effect from time to time plus 2% per annum and (iii) the LC Fee
shall be increased to a rate per annum equal to the Applicable Margin used to
determine the interest applicable to Eurodollar Loans in effect from time to
time plus 2% per annum, provided that the Required Lenders may, at their option
revoke such increase notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates or the LC Fee.

                                       15

<PAGE>

     2.12. Method of Payment. All payments of the Obligations hereunder shall be
made, without setoff, deduction, or counterclaim, in immediately available funds
to the Agent at the Agent's address specified pursuant to Article XIII, or at
any other Lending Installation of the Agent specified in writing by the Agent to
the Borrower, by 1:00 p.m. (New York time) on the date when due and shall be
applied ratably by the Agent among the Lenders in accordance with amounts then
owing to such Lenders. Each payment delivered to the Agent for the account of
any Lender shall be delivered promptly by the Agent to such Lender in the same
type of funds that the Agent received at its address specified pursuant to
Article XIII or at any Lending Installation specified in a notice received by
the Agent from such Lender. Each reference to the Agent in this Section 2.12
shall also be deemed to refer, and shall apply equally, to the Issuing Banks, in
the case of payments required to be made by the Borrower to the Issuing Banks
pursuant to Section 2.20.5.

     2.13. Noteless Agreement; Evidence of Indebtedness. (i) Each Lender shall
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of the Borrower to such Lender resulting from each Credit
Extension made by such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.

     (ii) The Agent shall also maintain accounts in which it will record (a) the
          amount of each Loan made hereunder, the Type thereof and the Interest
          Period with respect thereto, (b) the amount of any principal or
          interest due and payable or to become due and payable from the
          Borrower to each Lender hereunder, (c) the original stated amount of
          each Letter of Credit and the amount of LC Exposure outstanding at any
          time and (d) the amount of any sum received by the Agent hereunder
          from the Borrower and each Lender's share thereof.

     (iii) The entries maintained in the accounts maintained pursuant to
          paragraphs (i) and (ii) above shall be prima facie evidence of the
          existence and amounts of the Obligations therein recorded; provided,
          however, that the failure of the Agent or any Lender to maintain such
          accounts or any error therein shall not in any manner affect the
          obligation of the Borrower to repay the Obligations in accordance with
          their terms.

     (iv) Any Lender may request that its Loans be evidenced by a promissory
          note in substantially the form of Exhibit B (a "Note"). In such event,
          the Borrower shall prepare, execute and deliver to such Lender such
          Note payable to the order of such Lender or its registered assigns.
          Thereafter, the Loans evidenced by such Note and interest thereon
          shall at all times (prior to any assignment pursuant to Section 12.3)
          be represented by one or more Notes payable to the order of the payee
          named therein, except to the extent that any such Lender subsequently
          returns any such Note for cancellation and requests that such Loans
          once again be evidenced as described in paragraphs (i) and (ii) above.

     2.14. Telephonic Notices. The Borrower hereby authorizes the Lenders and
the Agent to extend, convert or continue Advances, effect selections of Types of
Advances and to transfer funds based on telephonic notices made by any person or
persons the Agent or any Lender in

                                       16

<PAGE>

good faith believes to be acting on behalf of the Borrower, it being understood
that the foregoing authorization is specifically intended to allow Borrowing
Notices and Conversion/Continuation Notices to be given telephonically. The
Borrower agrees to deliver promptly to the Agent a written confirmation, if such
confirmation is requested by the Agent or any Lender, of each telephonic notice
signed by an Authorized Officer. If the written confirmation differs in any
material respect from the action taken by the Agent and the Lenders, the records
of the Agent and the Lenders shall govern absent manifest error.

     2.15. Interest Payment Dates; Interest and Fee Basis; Regulation D
Compensation.

          2.15.1 Interest accrued on each Floating Rate Advance shall be payable
     on each Payment Date, commencing with the first such date to occur after
     the date hereof, on any date on which the Floating Rate Advance is prepaid,
     whether due to acceleration or otherwise, and at maturity. Interest accrued
     on that portion of the outstanding principal amount of any Floating Rate
     Advance converted into a Eurodollar Advance on a day other than a Payment
     Date shall be payable on the date of conversion. Interest accrued on each
     Eurodollar Advance shall be payable on the last day of its applicable
     Interest Period, on any date on which the Eurodollar Advance is prepaid,
     whether by acceleration or otherwise, and at maturity. Interest accrued on
     each Eurodollar Advance having an Interest Period longer than three months
     shall also be payable on the last day of each three-month interval during
     such Interest Period. Interest on Eurodollar Advances and fees shall be
     calculated for actual days elapsed on the basis of a 360-day year. Interest
     on Floating Rate Advances shall be calculated for actual days elapsed on
     the basis of a 365-/366-day year. Interest shall be payable for the day an
     Advance is made but not for the day of any payment on the amount paid if
     payment is received prior to 1:00 p.m. (New York time) at the place of
     payment. If any payment of principal of or interest on an Advance, any fees
     or any other amounts payable to the Agent or any Lender hereunder shall
     become due on a day which is not a Business Day, such payment shall be made
     on the next succeeding Business Day and, in the case of a principal
     payment, such extension of time shall be included in computing interest,
     fees and commissions in connection with such payment.

          2.15.2 Each Lender may require the Borrower to pay, contemporaneously
     with each payment of interest on such Lender's Eurodollar Loans, additional
     interest on the such Lender's Eurodollar Loan at a rate per annum
     determined by such Lender up to but not exceeding the excess of (i) (A) the
     applicable LIBO Rate divided by (B) one minus the "Eurodollar Reserve
     Percentage" (as defined below) over (ii) the applicable LIBO Rate. Any
     Lender wishing to require payment of such additional interest (x) shall so
     notify the Borrower and the Agent, in which case such additional interest
     on such Lender's Eurodollar Loans shall be payable to such Lender at the
     place indicated in such notice with respect to each Interest Period
     commencing at least three Business Days after the giving of such notice and
     (y) shall notify the Borrower at least five Business Days prior to each
     date on which interest is payable on the Eurodollar Loans of the amount
     then due it under this Section 2.15.2. "Eurodollar Reserve Percentage"
     means for any day that percentage (expressed as a decimal) which is in
     effect on such day, as prescribed by the Board of Governors of the Federal
     Reserve System (or any successor) for determining the maximum reserve
     requirement for a member bank of the Federal Reserve

                                       17

<PAGE>

     System in New York City with deposits exceeding five billion dollars in
     respect of "Eurocurrency liabilities" (or in respect of any other category
     of liabilities which includes deposits by reference to which the interest
     rate on Eurodollar Advances is determined or any category of extensions of
     credit or other assets which includes loans by a non-United States office
     of any Lender to United States residents).

     2.16. Notification of Advances, Interest Rates, Prepayments and Commitment
Reductions. Promptly after receipt thereof, the Agent will notify each Lender of
the contents of each Aggregate Commitment reduction notice, Borrowing Notice,
Conversion/Continuation Notice, and repayment notice received by it hereunder.
The Agent will notify each Lender of the interest rate applicable to each
Eurodollar Advance promptly upon determination of such interest rate and will
give each Lender prompt notice of each change in the Alternate Base Rate.

     2.17. Lending Installations. Each Lender may book its Loans and its
participation in any LC Exposure and the Issuing Banks may book the Letters of
Credit issued by it at any Lending Installation selected by such Lender or
Issuing Bank, as the case may be, and may change its Lending Installation from
time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Loans, Letters of Credit, participations in LC Exposure and
any Notes issued hereunder shall be deemed held by each Lender or Issuing Bank,
as the case may be, for the benefit of any such Lending Installation. Each
Lender or Issuing Bank, as the case may be, may, by written notice to the Agent
and the Borrower in accordance with Article XIII, designate replacement or
additional Lending Installations through which Loans will be made by it or
Letters of Credit will be issued by it and for whose account Loan payments or
payments with respect to Letters of Credit are to be made.

     2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a Lender,
as the case may be, notifies the Agent prior to 1:00 p.m. (New York time) on the
date on which it is scheduled to make payment to the Agent of (i) in the case of
a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment
of principal, interest or fees to the Agent for the account of the Lenders, that
it does not intend to make such payment, the Agent may assume that such payment
has been made. The Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption. If such Lender or the Borrower, as the case may be, has not in fact
made such payment to the Agent, the recipient of such payment shall, on or
before the fifth Business Day after demand by the Agent, repay to the Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available by
the Agent until the date the Agent recovers such amount at a rate per annum
equal to (x) in the case of payment by a Lender, the Federal Funds Effective
Rate for such day for the first three days and, thereafter, the interest rate
applicable to the relevant Loan or (y) in the case of payment by the Borrower,
the interest rate applicable to the relevant Loan.

     2.19. Replacement of Lender. If the Borrower is required pursuant to
Section 3.1, 3.2 or 3.5 to make any additional payment to any Lender or if any
Lender's obligation to make or continue, or to convert Floating Rate Advances
into, Eurodollar Advances shall be suspended pursuant to Section 3.3 (any Lender
so affected an "Affected Lender"), the Borrower may elect to terminate or
replace the Commitment and Outstanding Credit Exposure of such Affected Lender,
provided that no Default shall have occurred and be continuing at the time of
such

                                       18

<PAGE>

termination or replacement, and provided further that, concurrently with such
termination or replacement, (i) if the Affected Lender is being replaced,
another bank or other entity which is reasonably satisfactory to the Borrower
and the Agent shall agree, as of such date, to purchase for cash (to the extent
of the principal amount of such Affected Lender's Loans and accrued interest and
fees and other reimbursable amounts then due and payable) and otherwise assume
the Outstanding Credit Exposure and other Obligations then due to the Affected
Lender pursuant to an assignment substantially in the form of Exhibit A and to
become a Lender for all purposes under this Agreement and to assume all
obligations of the Affected Lender to be terminated as of such date and to
comply with the requirements of Section 12.3 applicable to assignments, (ii) the
Borrower shall pay to such Affected Lender in same day funds on the day of such
replacement (A) all interest, fees and other amounts then accrued but unpaid to
such Affected Lender by the Borrower hereunder to and including the date of
termination, including without limitation payments due to such Affected Lender
under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any, equal to the payment
which would have been due to such Lender on the day of such replacement under
Section 3.4 had the Outstanding Credit Exposure of such Affected Lender been
prepaid on such date rather than sold to the replacement Lender, in each case to
the extent not paid by the purchasing Lender and (iii) if the Affected Lender is
being terminated, the Borrower shall pay to such Affected Lender all Obligations
then due and payable to such Affected Lender (including the amounts described in
the immediately preceding clauses (i) and (ii)) and (iv) concurrently with the
effectiveness of such release or termination, such Affected Lender shall be
released with respect to its Commitments and such Commitments shall be
terminated, and, in the case of replacement, Outstanding Credit Exposure
assigned by such Affected Lender, and shall cease to be a Lender hereunder but
shall continue to be entitled to the benefits of, and subject to, those
provisions of this Agreement and the other Loan Documents which survive payment
of the Obligations and termination of the applicable agreement.

     2.20. Letters of Credit.

          2.20.1 General; Existing Letters of Credit. (i) Subject to the terms
     and conditions set forth herein, the Borrower may request the issuance of
     Letters of Credit for its own account, in a form reasonably acceptable to
     the Agent and the applicable Issuing Bank, and to renew, extend, increase,
     decrease or otherwise modify each Letter of Credit ("Modify," and each such
     action a "Modification"), from time to time from and including the date of
     this Agreement and prior to the date that is five Business Days prior to
     the Facility Termination Date. In the event of any inconsistency between
     the terms and conditions of this Agreement and the terms and conditions of
     any form of letter of credit application or other agreement submitted by
     the Borrower to, or entered into by the Borrower with, the applicable
     Issuing Bank relating to any Letter of Credit (a "Letter of Credit
     Application"), the terms and conditions of this Agreement shall control.
     Without limitation of the immediately preceding sentence, no such Letter of
     Credit Application may impose any additional conditions on the issuance of
     a Letter of Credit nor obligations of the Borrower to the Issuing Bank or
     any Lender, other than as expressly stated in this Agreement.

     (ii) Schedule 2.20 contains a schedule of certain letters of credit issued
          for the account of the Borrower prior to the Effective Date. Subject
          to the satisfaction of the conditions contained in Sections 4.1 and
          4.2, from and after the Effective Date

                                       19

<PAGE>

          such letters of credit shall be deemed to be Letters of Credit issued
          pursuant to this Section 2.20.

          2.20.2 Notice of Issuance, Amendment, Renewal, Extension; Certain
     Conditions. To request the issuance of a Letter of Credit (or the
     Modification of an outstanding Letter of Credit), the Borrower shall hand
     deliver or telecopy (or transmit by electronic communication, if
     arrangements for doing so have been approved by the applicable Issuing
     Bank) to the applicable Issuing Bank and the Agent (reasonably in advance
     of the requested date of issuance or Modification) a notice requesting the
     issuance of a Letter of Credit, or identifying the Letter of Credit to be
     Modified, and specifying the date of issuance or Modification (which shall
     be a Business Day), the date on which such Letter of Credit is to expire
     (which shall comply with Section 2.20.3), the amount of such Letter of
     Credit, the name and address of the beneficiary thereof and such other
     information as shall be necessary to prepare or Modify such Letter of
     Credit. If requested by the applicable Issuing Bank, but subject to Section
     2.20.1(i) hereof, the Borrower also shall submit a Letter of Credit
     Application on such Issuing Bank's standard form in connection with any
     request for a Letter of Credit. A Letter of Credit shall be issued or
     Modified only if (A) after giving effect to such issuance or Modification
     (and upon such issuance or Modification the Borrower shall be deemed to
     represent and warrant that) (i) the LC Exposure shall not exceed
     $100,000,000, (ii) the LC Exposure with respect to Letters of Credit having
     an expiration date that is after any applicable and effective Extension
     Date shall not exceed the aggregate Commitments of all Consenting Lenders
     and Assuming Lenders with respect to such Extension Date and (iii) the
     Aggregate Outstanding Credit Exposure shall not exceed the Aggregate
     Commitment and (B) the Issuing Bank has not received written notice from
     the Agent, the Required Lenders or the Borrower, at least one Business Day
     prior to the requested date of issuance or Modification of the applicable
     Letter of Credit, that one or more applicable conditions contained in
     Section 4.2 shall not be satisfied.

          2.20.3 Expiration Date. Each Letter of Credit shall expire at or prior
     to the close of business on the earlier of (i) the date eighteen months
     after the date of the issuance or any renewal or extension of such Letter
     of Credit and (ii) the date that is five Business Days prior to the
     Facility Termination Date. A Letter of Credit may contain a provision
     pursuant to which it is deemed to be extended on an annual basis unless
     notice of termination is given by the Issuing Bank subject to clause (ii)
     in the immediately preceding sentence.

          2.20.4 Participations. On the Effective Date with respect to the
     Letters of Credit identified on Schedule 2.20, and for all other Letters of
     Credit by the issuance of such Letter of Credit, or a Modification to a
     Letter of Credit increasing the amount thereof, and without any further
     action on the part of the Issuing Bank issuing such Letter of Credit or the
     Lenders, such Issuing Bank hereby grants to each Lender, and each Lender
     hereby acquires from such Issuing Bank, a participation in such Letter of
     Credit equal to such Lender's Applicable Percentage of the aggregate amount
     available to be drawn under such Letter of Credit. In consideration and in
     furtherance of the foregoing, each Lender hereby absolutely and
     unconditionally agrees to pay to the Agent, for the account of the
     applicable Issuing Bank, such Lender's Applicable Percentage of each LC

                                       20

<PAGE>

     Disbursement made by the Issuing Bank and not reimbursed by the Borrower on
     the date due as provided in Section 2.20.5, or of any reimbursement payment
     required to be refunded to the Borrower for any reason. Each Lender
     acknowledges and agrees that its obligation to acquire participations
     pursuant to this Section 2.20.4 in respect of Letters of Credit is absolute
     and unconditional and shall not be affected by any circumstance whatsoever,
     including any amendment, renewal or extension of any Letter of Credit or
     the occurrence and continuance of a Default or Unmatured Default or
     reduction or termination of the Commitments, and that each such payment
     shall be made without any offset, abatement, withholding or reduction
     whatsoever.

          2.20.5 Reimbursement. If any Issuing Bank shall make any LC
     Disbursement in respect of a Letter of Credit, the Borrower shall reimburse
     such LC Disbursement by paying to the Agent an amount equal to such LC
     Disbursement not later than 2:30 p.m., New York City time, on the date that
     such LC Disbursement is made, if the Borrower shall have received notice of
     such LC Disbursement prior to 1:00 p.m., New York City time, on such date,
     or, if such notice has not been received by the Borrower prior to such time
     on such date, then not later than 2:30 p.m., New York City time, on (i) the
     Business Day that the Borrower receives such notice, if such notice is
     received prior to 1:00 p.m., New York City time, on the day of receipt, or
     (ii) the Business Day immediately following the day that the Borrower
     receives such notice, if such notice is not received prior to such time on
     the day of receipt; provided that, if such LC Disbursement is not less than
     $1,000,000, the Borrower may request in accordance with Section 2.8 that
     such payment be financed with a Floating Rate Advance in an equivalent
     amount and, to the extent so financed, the Borrower's obligation to make
     such payment shall be discharged and replaced by the resulting Floating
     Rate Advance. If the Borrower fails to make such payment when due, the
     Agent shall notify each Lender of the applicable LC Disbursement, the
     payment then due from the Borrower in respect thereof and such Lender's
     Applicable Percentage thereof. Promptly following receipt of such notice,
     each Lender shall pay to the Agent its Applicable Percentage of the payment
     then due from the Borrower, in the same manner as provided in Section 2.12
     with respect to Loans made by such Lender (and Section 2.12 shall apply,
     mutatis mutandis, to the payment obligations of the Lenders), and the Agent
     shall promptly pay to the applicable Issuing Bank the amounts so received
     by it from the Lenders. Promptly following receipt by the Agent of any
     payment from the Borrower pursuant to this paragraph, the Agent shall
     distribute such payment to the applicable Issuing Bank or, to the extent
     that Lenders have made payments pursuant to this paragraph to reimburse
     such Issuing Bank, then to such Lenders and the applicable Issuing Bank as
     their interests may appear. Any payment made by a Lender pursuant to this
     paragraph to reimburse any Issuing Bank for any LC Disbursement (other than
     the funding of Floating Rate Advances as contemplated above) shall not
     constitute a Loan and shall not relieve the Borrower of its obligation to
     reimburse such LC Disbursement.

          2.20.6 Obligations Absolute. The Borrower's obligation to reimburse LC
     Disbursements as provided in Section 2.20.5 shall be absolute,
     unconditional and irrevocable, and shall be performed strictly in
     accordance with the terms of this Agreement under any and all circumstances
     whatsoever and irrespective of (i) any lack of validity or enforceability
     of any Letter of Credit or this Agreement, or any term or

                                       21

<PAGE>

     provision therein, (ii) any draft or other document presented under a
     Letter of Credit proving to be forged, fraudulent or invalid in any respect
     or any statement therein being untrue or inaccurate in any respect, (iii)
     payment by any Issuing Bank under a Letter of Credit issued by it against
     presentation of a draft or other document that does not comply with the
     terms of such Letter of Credit, or (iv) any other event or circumstance
     whatsoever, whether or not similar to any of the foregoing, that might, but
     for the provisions of this Section, constitute a legal or equitable
     discharge of, or provide a right of setoff against, the Borrower's
     obligations hereunder. Neither the Agent, the Lenders nor any Issuing Bank,
     nor any of their Affiliates, shall have any liability or responsibility by
     reason of or in connection with the issuance or transfer of any Letter of
     Credit or any payment or failure to make any payment thereunder
     (irrespective of any of the circumstances referred to in the preceding
     sentence), or any error, omission, interruption, loss or delay in
     transmission or delivery of any draft, notice or other communication under
     or relating to any Letter of Credit (including any document required to
     make a drawing thereunder), any error in interpretation of technical terms
     or any consequence arising from causes beyond the control of the Issuing
     Bank issuing such Letter of Credit; provided that the foregoing shall not
     be construed to excuse such Issuing Bank from liability to the Borrower to
     the extent of any direct damages (as opposed to consequential damages,
     claims in respect of which are hereby waived by the Borrower to the extent
     permitted by applicable law) suffered by the Borrower that are caused by
     such Issuing Bank's failure to exercise care when determining whether
     drafts and other documents presented under a Letter of Credit issued by it
     comply with the terms thereof or such Issuing Bank's willful failure to
     make lawful payment under a Letter of Credit after the presentation to it
     of a draft and certificates strictly complying with the terms and
     conditions of the Letter of Credit. The parties hereto expressly agree
     that, in the absence of gross negligence or willful misconduct on the part
     of an Issuing Bank (as finally determined by a court of competent
     jurisdiction), such Issuing Bank shall be deemed to have exercised care in
     each such determination. In furtherance of the foregoing and without
     limiting the generality thereof, the parties agree that, with respect to
     documents presented which appear on their face to be in substantial
     compliance with the terms of a Letter of Credit, the applicable Issuing
     Bank may, in its sole discretion, either accept and make payment upon such
     documents without responsibility for further investigation, regardless of
     any notice or information to the contrary, or refuse to accept and make
     payment upon such documents if such documents are not in strict compliance
     with the terms of such Letter of Credit.

          2.20.7 Disbursement Procedures. Each Issuing Bank shall, promptly
     following its receipt thereof, examine all documents purporting to
     represent a demand for payment under a Letter of Credit issued by it. Each
     Issuing Bank shall promptly notify the Agent and the Borrower by telephone
     (confirmed by telecopy) of such demand for payment and whether such Issuing
     Bank has made or will make an LC Disbursement thereunder; provided that any
     failure to give or delay in giving such notice shall not relieve the
     Borrower of its obligation to reimburse such Issuing Bank and the Lenders
     with respect to any such LC Disbursement.

          2.20.8 Interim Interest. If any Issuing Bank shall make any LC
     Disbursement, then, unless the Borrower shall reimburse such LC
     Disbursement in full on the date such

                                       22

<PAGE>

     LC Disbursement is made, the unpaid amount thereof shall bear interest, for
     each day from and including the date such LC Disbursement is made to but
     excluding the date that the Borrower reimburses such LC Disbursement, at
     the rate per annum then applicable to Floating Rate Advances; provided
     that, if the Borrower fails to reimburse such LC Disbursement when due
     pursuant to Section 2.20.5, then Section 2.11 shall apply. Interest accrued
     pursuant to this Section 2.20.8 shall be for the account of the applicable
     Issuing Bank, except that interest accrued on and after the date of payment
     by any Lender pursuant to Section 2.20.5 to reimburse the applicable
     Issuing Bank shall be for the account of such Lender to the extent of such
     payment.

          2.20.9 Replacement of any Issuing Bank. An Issuing Bank may be
     replaced at any time by written agreement among the Borrower, the Agent,
     the replaced Issuing Bank and the successor Issuing Bank. The Agent shall
     notify the Lenders of any such replacement of an Issuing Bank. At the time
     any such replacement shall become effective, the Borrower shall pay all
     unpaid fees accrued for the account of the replaced Issuing Bank pursuant
     to Section 2.5.3. From and after the effective date of any such
     replacement, (i) the successor Issuing Bank shall have all the rights and
     obligations of the replaced Issuing Bank under this Agreement with respect
     to Letters of Credit to be issued by it thereafter and (ii) references
     herein to the term "Issuing Bank" shall be deemed to refer to such
     successor or to any previous Issuing Bank, or to such successor and all
     previous Issuing Banks, as the context shall require. After the replacement
     of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a
     party hereto and shall continue to have all the rights and obligations of
     an Issuing Bank under this Agreement with respect to Letters of Credit
     issued by it prior to such replacement, but shall not be required to issue
     additional Letters of Credit.

          2.20.10 Cash Collateralization. If any Default shall occur and be
     continuing, on the Business Day that the Borrower receives notice from the
     Agent or the Required Lenders (or, if the maturity of the Loans has been
     accelerated, Lenders with LC Exposure representing greater than 50% of the
     total LC Exposure) demanding the deposit of cash collateral pursuant to
     this Section 2.20.10, the Borrower shall deposit in an account with the
     Agent, in the name of the Agent and for the benefit of the Lenders (the
     "Letter of Credit Collateral Account"), an amount in cash which is free and
     clear of all rights and claims of third parties equal to the aggregate
     undrawn amount of all outstanding Letters of Credit as of such date plus
     any accrued and unpaid LC Fees thereon; provided that the obligation to
     deposit such cash collateral shall become effective immediately, and such
     deposit shall become immediately due and payable, without demand or other
     notice of any kind, upon the occurrence of any Default with respect to the
     Borrower described in Section 7.6 or 7.7. If at any time while any Default
     is continuing, the Agent determines that the amount on deposit in the
     Letter of Credit Collateral Account shall be less than the aggregate
     undrawn amount of all outstanding Letters of Credit as of such date plus
     any accrued and unpaid LC Fees thereon, the Agent may make demand on the
     Borrower to pay, and the Borrower will, forthwith upon such demand and
     without any further notice or act, pay to the Agent an amount equal to such
     deficiency, which funds shall be deposited in the Letter of Credit
     Collateral Account. All deposits maintained in the Letter of Credit
     Collateral Account shall be held by the Agent as collateral for the payment
     and performance of the Reimbursement Obligations of the Borrower with

                                       23

<PAGE>

     respect to such undrawn amounts and as otherwise expressly set forth in
     this Section 2.20.10. The Agent shall have exclusive dominion and control,
     including the exclusive right of withdrawal, over such Letter of Credit
     Collateral Account. Other than any interest earned on the investment of
     such deposits, which investments shall be made at the option and sole
     discretion of the Agent and at the Borrower's risk and expense, such
     deposits shall not bear interest. Interest or profits, if any, on such
     investments shall accumulate in such account. Moneys in such Letter of
     Credit Collateral Account shall be applied by the Agent to reimburse each
     Issuing Bank for LC Disbursements with respect to such undrawn amounts for
     which it has not otherwise been reimbursed and, to the extent not so
     applied, shall be held for the satisfaction of additional Reimbursement
     Obligations arising in respect of undrawn amounts of outstanding Letters of
     Credit or, if the maturity of the Loans has been accelerated (but subject
     to the consent of Lenders with LC Exposure representing greater than 50% of
     the total LC Exposure), be applied to satisfy other obligations of the
     Borrower under this Agreement. If the Borrower is required to provide an
     amount of cash collateral hereunder as a result of the occurrence of a
     Default, such amount (to the extent not applied as aforesaid) shall be
     returned to the Borrower within three Business Days after all Defaults have
     been cured or waived.

     2.21. Expansion Option. The Borrower may from time to time elect to
increase the Commitments in a minimum amount of $10,000,000 so long as, after
giving effect thereto, the aggregate amount of the Commitments does not exceed
$400,000,000. Upon the Borrower's request, such increase may be provided by one
or more Lenders (each Lender so agreeing to an increase in its Commitment, an
"Increasing Lender"), or by one or more new banks, financial institutions or
other entities (each such new bank, financial institution or other entity, an
"Augmenting Lender"), selected by the Arrangers, in consultation with the
Borrower, and willing to increase their existing Commitments, or extend
Commitments, as the case may be, provided that (i) each Augmenting Lender, shall
be subject to the approval of the Agent and the Issuing Banks and (ii) (x) in
the case of an Increasing Lender, the Borrower and such Increasing Lender
execute an agreement substantially in the form of Exhibit C hereto, and (y) in
the case of an Augmenting Lender, the Borrower and such Augmenting Lender
execute an agreement substantially in the form of Exhibit D hereto. Increases
and new Commitments created pursuant to this clause shall become effective on
the date agreed by the Borrower, the Agent and the relevant Increasing Lenders
or Augmenting Lenders and the Agent shall notify each Lender thereof.
Notwithstanding the foregoing, no increase in the Commitments (or in the
Commitment of any Lender), shall become effective under this paragraph unless,
(i) on the proposed date of the effectiveness of such increase, the conditions
set forth in Sections 4.2.1 and 4.2.2 shall be satisfied or waived by Lenders
holding more than 50% of the Commitments (inclusive of any increased or new
Commitments under this Section 2.21) and the Agent shall have received a
certificate to that effect dated such date and executed by an Authorized Officer
of the Borrower and (ii) the Agent shall have received documents consistent with
those delivered on the Effective Date as to the corporate power and authority of
the Borrower to borrow hereunder after giving effect to such increase. On the
effective date of any increase in the Commitments, (i) each relevant Increasing
Lender and Augmenting Lender shall make available to the Agent such amounts in
immediately available funds as the Agent shall determine, for the benefit of the
other Lenders, as being required in order to cause, after giving effect to such
increase and the use of such amounts to make payments to such other Lenders,
each Lender's portion of the outstanding Loans of all the Lenders to equal its
Applicable Percentage of such outstanding Loans, and (ii)

                                       24

<PAGE>

the Borrower shall be deemed to have repaid and reborrowed all outstanding Loans
as of the date of any increase in the Commitments (with such reborrowing to
consist of the Types of Loans, with related Interest Periods if applicable,
specified in a notice delivered by the Borrower in accordance with the
requirements of Section 2.8). The deemed payments made pursuant to clause (ii)
of the immediately preceding sentence shall be accompanied by payment of all
accrued interest on the amount prepaid and, in respect of each Eurocurrency
Loan, shall be subject to indemnification by the Borrower pursuant to the
provisions of Section 3.4 if the deemed payment occurs other than on the last
day of the related Interest Periods.

     2.22. Extension of Facility Termination Date.

          2.22.1 Extension Request. The Borrower may request, no more than twice
     during the term of this Agreement, a one-year extension of the Facility
     Termination Date by submitting a written request for an extension to the
     Agent (an "Extension Request") no earlier than 90 days but not later than
     60 days prior to any anniversary of the Effective Date (such anniversary
     being an "Anniversary Date"). Promptly upon receipt of an Extension
     Request, the Agent shall notify each Lender thereof and shall request each
     Lender to approve the Extension Request. Each Lender approving the
     Extension Request shall deliver its written consent no earlier than 30 days
     but no later than 20 days prior to such Anniversary Date (it being
     understood and agreed that such consent may be given or withheld in such
     Lender's sole and absolute discretion). If any Lender shall fail to notify
     the Agent in writing of its consent to any such request for extension of
     the Facility Termination Date by the 20th day prior to such Anniversary
     Date, such Lender shall be deemed to be a Non-Consenting Lender (as defined
     below) with respect to such request. The election of any Lender to agree to
     an Extension Request shall not obligate any other Lender to so agree. The
     Agent shall deliver to the Borrower written notification of the Lenders'
     decisions no later than 15 days prior to such Anniversary Date.

          2.22.2 Extension. If all of the Lenders consent in writing to any such
     request in accordance with Section 2.22.1, the Facility Termination Date in
     effect at such time shall, effective as at such next Anniversary Date (the
     "Extension Date"), be extended for one calendar year; provided that no such
     extension shall become effective under this sentence unless, (i) on the
     applicable Extension Date, the conditions set forth in Sections 4.2.1 and
     4.2.2 shall be satisfied or waived by Lenders holding more than 50% of the
     Commitments and the Agent shall have received a certificate to that effect
     dated such date and executed by an Authorized Officer of the Borrower and
     (ii) the Agent shall have received documents consistent with those
     delivered on the Effective Date as to the corporate power and authority of
     the Borrower to borrow hereunder after giving effect to such extension. If
     Lenders holding more than 50% of the Commitments, but less than all of the
     Lenders, consent in writing to any such request in accordance with Section
     2.22.1, unless the Borrower shall deliver written notice to the Agent
     terminating such requested extension not less than ten Business Days prior
     to the proposed Extension Date (it being understood and agreed that any
     Extension Request issued in connection with any such terminated extension
     shall constitute an Extension Request for purposes of determining the then
     remaining available number of Extension Requests under Section 2.22.1), the
     Facility Termination Date in effect at such time shall, effective as at the
     applicable Extension Date, be extended as to those Lenders that so
     consented (each a "Consenting

                                       25

<PAGE>

     Lender") but shall not be extended as to any other Lender (each a
     "Non-Consenting Lender"). To the extent that the Facility Termination Date
     is not extended as to any Lender pursuant to this Section 2.22 and the
     Commitment of such Lender is not assumed in accordance with Section 2.22.3
     on or prior to the applicable Extension Date, the Commitment of such
     Non-Consenting Lender shall automatically terminate in whole on such
     unextended Facility Termination Date without any further notice or other
     action by the Borrower, such Lender or any other Person; provided that such
     Non-Consenting Lender shall continue to be entitled to the benefits of, and
     subject to, those provisions of this Agreement and the other Loan Documents
     which survive payment of the Obligations and termination of the applicable
     agreement. It is understood and agreed that no Lender shall have any
     obligation whatsoever to agree to any request made by the Borrower for any
     requested extension of the Facility Termination Date.

          2.22.3 Assuming Lenders. If less than all of the Lenders consent to
     any such request pursuant to Section 2.22.1, the Borrower may arrange for
     one or more Persons (who may be Consenting Lenders) acceptable to the Agent
     and the Issuing Banks (each an "Assuming Lender") (x) to assume, effective
     as of the Extension Date or such other date as may be agreed among the
     Borrower, the Non-Consenting Lender, such Assuming Lender and the Agent,
     any Non-Consenting Lender's Commitment and all of the obligations of such
     Non-Consenting Lender under this Agreement thereafter arising, without
     recourse to or warranty by, or expense to, such Non-Consenting Lender and
     (y) to accept, effective as of the Extension Date or such later date as any
     Assuming Lender executes and delivers an assignment substantially in the
     form of Exhibit A (an "Assumption Agreement"), the Facility Termination
     Date applicable to Consenting Lenders; provided, however, that the amount
     of the Commitment of any such Assuming Lender as a result of such
     substitution shall in no event be less than $10,000,000 unless the amount
     of the Commitment of such Non-Consenting Lender is less than $10,000,000,
     in which case such Assuming Lender shall assume all of such lesser amount;
     and provided further that:

     (i)  any such Assuming Lender shall have paid to such Non-Consenting Lender
          (A) the aggregate principal amount of, and any interest accrued and
          unpaid to the effective date of the assignment on, the outstanding
          Advances, if any, owing to such Non-Consenting Lender plus (B) any
          accrued but unpaid commitment fees owing to such Non-Consenting Lender
          as of the effective date of such assignment;

     (ii) all additional accrued and unpaid cost reimbursements, expense
          reimbursements and indemnities payable to such Non-Consenting Lender,
          and all other accrued and unpaid amounts owing to such Non-Consenting
          Lender hereunder, as of the effective date of such assignment shall
          have been paid to such Non-Consenting Lender; and

     (iii) with respect to any such Assuming Lender, the applicable processing
          and recordation fee required under Section 12.3.3 for such assignment
          shall have been paid;

                                       26

<PAGE>

          provided further that such Non-Consenting Lender shall continue to be
          entitled to the benefits of, and subject to, those provisions of this
          Agreement and the other Loan Documents which survive payment of the
          Obligations and termination of the applicable agreement. At least
          three Business Days prior to any Extension Date, (A) each such
          Assuming Lender, if any, shall have delivered to the Borrower and the
          Agent an Assumption Agreement, duly executed by such Assuming Lender,
          such Non-Consenting Lender, the Borrower and the Agent, (B) any such
          Consenting Lender shall have delivered confirmation in writing
          satisfactory to the Borrower and the Agent (acting reasonably) as to
          the increase in the amount of its Commitment and (C) each
          Non-Consenting Lender being replaced pursuant to this Section 2.22
          shall have delivered to the Agent any Note held by such Non-Consenting
          Lender. Upon the payment of all amounts referred to in clauses (i),
          (ii) and (iii) of this Section 2.22.3, each such Assuming Lender, as
          of the Extension Date, will be substituted for such Non-Consenting
          Lender under this Agreement and shall be a Lender for all purposes of
          this Agreement, without any further acknowledgment by or the consent
          of the other Lenders, and the obligations of each such Non-Consenting
          Lender hereunder arising after the Extension Date shall, by the
          provisions hereof, be released and discharged.

          2.22.4 Consent of Majority of Existing Lenders. If Lenders holding
     more than 50% of the Commitments (after giving effect to any assignments
     pursuant to Section 2.22.3) consent in a writing delivered to the Agent to
     a requested extension (whether by execution or delivery of an Assumption
     Agreement or otherwise) not later than one Business Day prior to such
     Extension Date, the Agent shall so notify the Borrower, and, so long as (i)
     on the Extension Date, the conditions set forth in Sections 4.2.1 and 4.2.2
     shall be satisfied or waived by Lenders holding more than 50% of the
     Commitments (after giving effect to any assignments pursuant to Section
     2.22.3) and the Agent shall have received a certificate to that effect
     dated such date and executed by an Authorized Officer of the Borrower and
     (ii) the Agent shall have received documents consistent with those
     delivered on the Effective Date as to the corporate power and authority of
     the Borrower to borrow hereunder after giving effect to such extension, the
     Facility Termination Date then in effect shall be extended for the
     additional one-year period as described in Section 2.22.2, and all
     references in this Agreement, and in any Notes to the "Facility Termination
     Date" shall, with respect to each Consenting Lender and each Assuming
     Lender for such Extension Date, refer to the Facility Termination Date as
     so extended. Promptly following each Extension Date, the Agent shall notify
     the Lenders (including, without limitation, each Assuming Lender) of the
     extension of the scheduled Facility Termination Date in effect immediately
     prior thereto and shall thereupon record in the Register the relevant
     information with respect to each such Consenting Lender and each such
     Assuming Lender.

                                  ARTICLE III

                             YIELD PROTECTION; TAXES

     3.1. Yield Protection. If, on or after the date of this Agreement, the
adoption of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive, or any change in the interpretation or
administration thereof by any governmental or quasi-

                                       27

<PAGE>

governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation or Issuing Bank with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency:

     (i)  imposes or increases or deems applicable any reserve, assessment,
          insurance charge, special deposit or similar requirement against
          assets of, deposits with or for the account of, or credit extended by,
          any Lender or any applicable Lending Installation or any Issuing Bank
          (including, without limitation, any such requirement imposed by the
          Board of Governors of the Federal Reserve System but excluding with
          respect to any Eurodollar Loans any such requirement with respect to
          which such Lender is entitled to compensation for the relevant
          Interest Period under Section 2.15.2), or

     (ii) imposes any other condition the result of which is to increase the
          cost to any Lender, Issuing Bank or any applicable Lending
          Installation of making, funding or maintaining its Eurodollar Loans or
          Commitment, or of issuing or participating in any Letter of Credit, or
          reduces any amount receivable by any Lender, Issuing Bank or any
          applicable Lending Installation in connection with its Eurodollar
          Loans, Commitment, Letters of Credit or participations therein, by an
          amount deemed material by such Lender or Issuing Bank,

and the result of any of the foregoing is to increase the cost to such Lender,
Issuing Bank or applicable Lending Installation of making or maintaining its
Eurodollar Loans or Commitment or of issuing or participating in Letters of
Credit or to reduce the return received by such Lender, Issuing Bank or
applicable Lending Installation in connection with such Eurodollar Loans,
Commitment, Letters of Credit or participations therein, then, within 30 days of
demand by such Lender or Issuing Bank, the Borrower shall pay such Lender or
Issuing Bank, as applicable, such additional amount or amounts as will
compensate such Lender or Issuing Bank, as applicable, for such increased cost
or reduction in amount received.

     3.2. Changes in Capital Adequacy Regulations. If a Lender or Issuing Bank
determines the amount of capital required or expected to be maintained by such
Lender or Issuing Bank, any Lending Installation of such Lender or Issuing Bank
or any corporation controlling such Lender or Issuing Bank is increased as a
result of a Change, then, within 30 days of demand by such Lender or Issuing
Bank, the Borrower shall pay such Lender or Issuing Bank, as applicable, the
amount necessary to compensate for any shortfall in the rate of return on the
portion of such increased capital which such Lender or Issuing Bank reasonably
determines is attributable to this Agreement, its Outstanding Credit Exposure or
its Commitment to make Loans, or issue or participate in Letters of Credit,
hereunder (after taking into account such Lender or Issuing Bank's policies as
to capital adequacy). "Change" means (i) any change after the date of this
Agreement in the Risk-Based Capital Guidelines or (ii) any adoption of, or
change in, or change in the interpretation or administration of, any other law,
governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Lender, Issuing Bank or any Lending Installation or any
corporation controlling any Lender or Issuing Bank. "Risk-Based Capital
Guidelines"

                                       28

<PAGE>

means (i) the risk-based capital guidelines in effect in the United States on
the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices Entitled "International Convergence
of Capital Measurements and Capital Standards," including transition rules, and
any amendments to such regulations adopted prior to the date of this Agreement.

     3.3. Availability of Types of Advances. If (i) any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or (ii) the Required Lenders determine that (a)
deposits of a type and maturity appropriate to match fund Eurodollar Advances
are not available, (b) the interest rate applicable to Eurodollar Advances does
not accurately reflect the cost of making or maintaining Eurodollar Advances or
(c) no reasonable basis exists for determining the LIBO Rate, then the Agent
shall suspend the availability of Eurodollar Advances of each affected Lender
and, on the date of such suspension in the case of an event described in clauses
(i) above or on the last day of the then current Interest Period applicable
thereto in the case of an event described in clause (ii) above, require any
affected Eurodollar Advances either to be repaid or, at the election of the
Borrower, converted to Floating Rate Advances (on which interest and principal
shall be payable contemporaneously with the related Eurodollar Loans of the
other Lenders), subject to the payment of any funding indemnification amounts
required by Section 3.4. If the applicable Lender in the case of clause (i)
above, or the Required Lenders in the case of clause (ii) above, notify the
Borrower that the circumstances giving rise to such suspension no longer apply,
the principal amount of each such Floating Rate Advances shall be converted into
Eurodollar Advances on the first day of the next such Interest Period applicable
to the related Eurodollar Loan of the other Lenders.

     3.4. Funding Indemnification. If any payment of a Eurodollar Advance occurs
on a date which is not the last day of the applicable Interest Period, whether
because of acceleration, prepayment or otherwise, or a Eurodollar Advance is not
made or continued, or a Floating Rate Advance is not converted into a Eurodollar
Advance, on the date specified by the Borrower for any reason other than default
by the Lenders or any Lender, or a Eurodollar Advance is not prepaid on the date
specified by the Borrower for any reason, the Borrower will indemnify each
Lender for any loss or cost (excluding loss of anticipated profits) incurred by
it resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurodollar
Advance.

     3.5. Taxes. (i) All payments by the Borrower to or for the account of any
Lender, Issuing Bank or the Agent hereunder or under any Note or Letter of
Credit Application shall be made free and clear of and without deduction for any
and all Taxes. If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder to any Lender, Issuing Bank or the
Agent, (a) the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 3.5) such Lender, Issuing Bank or the Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Borrower shall make such deductions, (c) the
Borrower shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (d) the Borrower shall furnish to the

                                       29

<PAGE>

Agent the original copy of a receipt evidencing payment thereof within 30 days
after such payment is made.

     (ii) In addition, the Borrower hereby agrees to pay any present or future
          stamp or documentary taxes and any other excise or property taxes,
          charges or similar levies which arise from any payment made hereunder
          or under any Note or Letter of Credit Application or from the
          execution or delivery of, or otherwise with respect to, this Agreement
          or any Note or any Letter of Credit Application ("Other Taxes").

     (iii) The Borrower hereby agrees to indemnify the Agent, each Issuing Bank
          and each Lender for the full amount of Taxes or Other Taxes
          (including, without limitation, any Taxes or Other Taxes imposed on
          amounts payable under this Section 3.5) paid by the Agent, such
          Issuing Bank or such Lender as a result of its Commitment, any Credit
          Extensions made by it hereunder, any Letter of Credit issued or
          participated in by it hereunder, or otherwise in connection with its
          participation in this Agreement and any liability (including
          penalties, interest and expenses) arising therefrom or with respect
          thereto. Payments due under this indemnification shall be made within
          30 days of the date the Agent, such Issuing Bank or such Lender makes
          demand therefor pursuant to Section 3.6.

     (iv) Each Lender that is not incorporated under the laws of the United
          States of America or a state thereof (each a "Non-U.S. Lender") agrees
          that it will, not more than ten Business Days after the date on which
          it becomes a party to this Agreement (but in any event before a
          payment is due to it hereunder), (i) deliver to the Agent two duly
          completed copies of United States Internal Revenue Service Form W-8BEN
          or W-8ECI or successor forms, certifying in either case that such
          Lender is entitled to receive payments under this Agreement without
          deduction or withholding of any United States federal income taxes, or
          (ii) deliver to the Agent a United States Internal Revenue Service
          Form W-8IMY or successor form together with the applicable
          accompanying duly completed copies of United States Internal Revenue
          Service applicable Forms W-8 or W-9 or successor forms, as the case
          may be, and certify that it is entitled to an exemption from United
          States backup withholding tax. Each Non-U.S. Lender further undertakes
          to deliver to each of the Borrower and the Agent renewals or
          additional copies of such form (or any amendment thereto or successor
          form) (x) on or before the date that such form expires or becomes
          obsolete, (y) after the occurrence of any event requiring a change in
          the most recent forms so delivered by it and (z) from time to time
          upon reasonable request by the Borrower or the Agent. All forms or
          amendments described in the preceding sentence shall certify that such
          Lender is entitled to receive payments under this Agreement without
          deduction or withholding of any United States federal income taxes,
          unless an event (including without limitation any change in treaty,
          law or regulation) has occurred prior to the date on which any such
          delivery would otherwise be required which renders all such forms
          inapplicable or which would prevent such Lender from duly completing
          and delivering any such form or amendment with respect to it and such
          Lender advises the Borrower and the Agent that it is not capable of
          receiving

                                       30

<PAGE>

          payments without any deduction or withholding of United States federal
          income tax.

     (v)  For any period during which a Non-U.S. Lender has failed to provide
          the Borrower with an appropriate form pursuant to clause (iv) above
          (unless such failure is due to a change in treaty, law or regulation,
          or any change in the interpretation or administration thereof by any
          governmental authority, occurring subsequent to the date on which a
          form originally was required to be provided), the Borrower shall not
          gross up the payments as provided under Section 3.5 with respect to
          such Non-U.S. Lender, and such Non-U.S. Lender shall not be entitled
          to indemnification under this Section 3.5 with respect to Taxes
          imposed by the United States; provided that, should a Non-U.S. Lender
          which is otherwise exempt from or subject to a reduced rate of
          withholding tax become subject to Taxes because of its failure to
          deliver a form required under clause (iv) above, the Borrower shall
          take such steps as such Non-U.S. Lender shall reasonably request to
          assist such Non-U.S. Lender to recover such Taxes.

     (vi) Any Lender or Issuing Bank that is entitled to an exemption from or
          reduction of withholding tax with respect to payments under this
          Agreement or any Note pursuant to the law of any relevant jurisdiction
          or any treaty shall deliver to the Borrower (with a copy to the
          Agent), at the time or times prescribed by applicable law, such
          properly completed and executed documentation prescribed by applicable
          law as will permit such payments to be made without withholding or at
          a reduced rate.

     (vii) If the U.S. Internal Revenue Service or any other governmental
          authority of the United States or any other country or any political
          subdivision thereof asserts a claim that the Agent did not properly
          withhold tax from amounts paid to or for the account of any Lender or
          any Issuing Bank (because the appropriate form was not delivered or
          properly completed, because such Lender or Issuing Bank failed to
          notify the Agent of a change in circumstances which rendered its
          exemption from withholding ineffective, or for any other reason), such
          Lender or Issuing Bank, as applicable, shall indemnify the Agent fully
          for all amounts paid, directly or indirectly, by the Agent as tax,
          withholding therefor, or otherwise, including penalties and interest,
          and including taxes imposed by any jurisdiction on amounts payable to
          the Agent under this subsection, together with all costs and expenses
          related thereto (including attorneys fees for the Agent, which
          attorneys may be employees of the Agent). The obligations of the
          Lenders and Issuing Banks under this Section 3.5(vii) shall survive
          the payment of the Obligations and termination of this Agreement.

     3.6. Lender Statements; Survival of Indemnity. To the extent reasonably
possible, each Lender shall designate an alternate Lending Installation with
respect to its Eurodollar Loans and issuance or participation in Letters of
Credit to reduce any liability of the Borrower to such Lender under Sections
3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar Advances under
Section 3.3, so long as such designation is not, in the judgment of such Lender,
disadvantageous to such Lender. The Borrower shall not be required to compensate
a Lender

                                       31

<PAGE>

pursuant to Section 3.1, 3.2 or 3.5 for any amounts incurred or arising
thereunder more than 90 days prior to the date that such Lender notifies the
Borrower of the event(s) giving rise to such amounts and of such Lender's
intention to claim compensation therefor; provided that, if the adoption or
change described in Section 3.1 or Change described in 3.2 or adoption or
modification of any applicable law under Section 3.5 giving rise to such request
for compensation is retroactive, then the 90 day period referred to above shall
be extended to include the period of retroactive effect thereof. Each Lender
shall deliver a written statement of such Lender to the Borrower (with a copy to
the Agent) as to the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5.
Such written statement shall set forth in reasonable detail the calculations
upon which such Lender determined such amount and shall be final, conclusive and
binding on the Borrower in the absence of manifest error. Determination of
amounts payable under Sections 3.1, 3.2 or 3.4 in connection with a Eurodollar
Loan shall be calculated as though each Lender funded its Eurodollar Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement of any Lender shall be
payable within 30 days after receipt by the Borrower of such written statement.
The obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5 shall
survive payment of the Obligations and termination of this Agreement.

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

     4.1. Effectiveness of Agreement. This Agreement shall become effective as
of the Effective Date, provided that on or prior to the Effective Date the
Borrower has (i) paid to the Agent for the ratable account of each of the
lenders then party to the Existing Credit Agreement, the accrued and unpaid
facility fees and other fees and expenses under the Existing Credit Agreement
through the Effective Date and all fees and other amounts due and payable on or
prior to the Effective Date, including, to the extent invoiced, reimbursement or
payment of all reasonable out-of-pocket expenses required to be reimbursed or
paid by the Borrower hereunder or pursuant to the terms of the fee letter and
commitment letter described in Section 10.13, and (ii) furnished to the Agent
with sufficient copies for the Lenders:

          4.1.1 Copies of the articles of incorporation of the Borrower,
     together with all amendments, and a certificate of good standing, each
     certified by the appropriate governmental officer in its jurisdiction of
     incorporation, as well as any other information required by Section 326 of
     the USA Patriot Act or necessary for the Agent or any Lender to verify the
     identity of the Borrower as required by Section 326 of the USA Patriot Act.

          4.1.2 Copies, certified by the Secretary, Assistant Secretary or an
     Associate Secretary of the Borrower, of its by-laws and of its Board of
     Directors' resolutions and of resolutions or actions of any other body
     authorizing the execution of the Loan Documents to which the Borrower is a
     party.

          4.1.3 An incumbency certificate, executed by the Secretary, Assistant
     Secretary or an Associate Secretary of the Borrower, which shall identify
     by name and title and bear the signatures of the Authorized Officers and
     any other officers of the Borrower

                                       32

<PAGE>

     authorized to sign the Loan Documents to which the Borrower is a party,
     upon which certificate the Agent and the Lenders shall be entitled to rely
     until informed of any change in writing by the Borrower.

          4.1.4 A certificate, signed by the chief financial officer or
     treasurer of the Borrower, stating that on the Effective Date no Default or
     Unmatured Default has occurred and is continuing, which certificate shall
     also set forth in reasonable detail the calculations required to establish
     that the Borrower was in compliance with the requirements of Section 6.9 as
     of the last day of the most recently completed fiscal quarter prior to the
     Effective Date in respect of which financial statements shall have been
     filed with the Securities and Exchange Commission, but including (without
     duplication of outstanding extensions of credit under the Existing Credit
     Agreement) any Credit Extensions made on the Effective Date.

          4.1.5 Written opinion letters of the Borrower's counsel, addressed to
     the Lenders in form and substance reasonably acceptable to the Agent.

          4.1.6 Written opinion of Sidley Austin Brown & Wood, LLP, counsel for
     the Agent, addressed to the Agent and the Lenders, with respect to the
     enforceability of this Agreement and the Notes issued on the Effective
     Date, in form and substance reasonably acceptable to the Agent.

          4.1.7 Any Notes requested by a Lender pursuant to Section 2.13 payable
     to the order of each such requesting Lender.

     4.2. Each Credit Extension. The Lenders shall not be required to make (i)
the initial Credit Extension hereunder unless all of the conditions in Section
4.1 shall have been satisfied as of the Effective Date, and (ii) any Credit
Extension (other than (x) a conversion or continuation of an outstanding Advance
pursuant to Section 2.9 or (y) the financing of any payment under a Letter of
Credit with a Floating Rate Advance made pursuant to Section 2.20.5) unless on
the applicable Credit Extension Date:

          4.2.1 There exists no Default or Unmatured Default.

          4.2.2 The representations and warranties contained in Article V are
     true and correct in all material respects as of such Credit Extension Date
     except to the extent any such representation or warranty is stated to
     relate solely to an earlier date, in which case such representation or
     warranty shall have been true and correct in all material respects on and
     as of such earlier date; provided that this requirement shall not apply to
     the representations and warranties set forth in Sections 5.4.3, 5.5 and 5.7
     with respect to any Credit Extension after the Effective Date, but shall
     apply to the representations and warranties set forth in Sections 5.4.3,
     5.5 and 5.7 with respect to (i) any increase of the aggregate Commitments
     under Section 2.21 and (ii) any extension of the Facility Termination Date
     under Section 2.22.

     Each Borrowing Notice or request for issuance or Modification of a Letter
of Credit with respect to each such Credit Extension shall constitute a
representation and warranty by the Borrower that the conditions contained in
Sections 4.2.1 and 4.2.2 have been satisfied.

                                       33

<PAGE>

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Lenders that:

     5.1. Existence and Standing. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of Arizona,
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, if the failure to have any such license, authorization, consent or
approval is reasonably likely to have a material adverse effect on the financial
condition or financial prospects of the Borrower and its Consolidated
Subsidiaries taken as a whole.

     5.2. Corporate and Governmental Authorization; No Contravention. The
execution, delivery and performance by the Borrower of this Agreement and the
Notes are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any Material Subsidiary or result in the creation or imposition of
any Lien on any asset of the Borrower or any Material Subsidiary except as
otherwise permitted hereunder.

     5.3. Binding Effect. This Agreement constitutes a valid and binding
agreement of the Borrower and each Note, when executed and delivered in
accordance with this Agreement, will constitute a valid and binding obligation
of the Borrower, in each case enforceable in accordance with its terms; subject,
however, to the application by a court of general principles of equity and to
the effect of any applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights generally.

     5.4. Financial Information.

          5.4.1 The consolidated balance sheet of the Borrower and its
     Consolidated Subsidiaries as of December 31, 2004 and the related
     consolidated statements of income and of cash flow for the fiscal year then
     ended, reported on by Deloitte & Touche LLP and set forth in the Borrower's
     2004 Form 10-K, fairly present in all material respects, in conformity with
     generally accepted accounting principles (except as disclosed therein), the
     consolidated financial position of the Borrower and its Consolidated
     Subsidiaries as of such date and their consolidated results of operations
     and cash flows for such fiscal year.

          5.4.2 The unaudited consolidated balance sheet of the Borrower and its
     Consolidated Subsidiaries as of September 30, 2005 and the related
     unaudited consolidated statements of income and of cash flows for the nine
     months then ended, set forth in the Borrower's Latest Form 10-Q, fairly
     present in all material respects, in conformity with generally accepted
     accounting principles applied on a basis consistent with the financial
     statements referred to in Section 5.4.1 (except as disclosed therein), the

                                       34

<PAGE>

     consolidated financial position of the Borrower and its Consolidated
     Subsidiaries as of such date and their consolidated results of operations
     and cash flows for such nine month period (subject to normal year-end
     adjustments).

          5.4.3 Except as disclosed in the Borrower's SEC Reports, since
     September 30, 2005 there has been no material adverse change in the
     financial condition or financial prospects of the Borrower and its
     Consolidated Subsidiaries, considered as a whole.

     5.5. Litigation. Except as disclosed in the Borrower's SEC Reports, there
is no action, suit or proceeding pending against, or to the knowledge of the
Borrower threatened against or affecting, the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
is reasonably likely to have a material adverse effect on the financial
condition or financial prospects of the Borrower and its Consolidated
Subsidiaries, considered as a whole, or which in any manner draws into question
the validity of this Agreement or the Notes.

     5.6. Compliance with ERISA. Each member of the ERISA Group has fulfilled
its obligations under the minimum funding standards of ERISA and the Internal
Revenue Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Internal
Revenue Code with respect to each Plan. No member of the ERISA Group has (i)
sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or is reasonably likely to result in the imposition of a Lien
or the posting of a bond or other security under ERISA or the Internal Revenue
Code or (iii) incurred any liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.

     5.7. Environmental Matters. Except as disclosed in the Borrower's SEC
Reports, the operations and properties of the Borrower and its Material
Subsidiaries comply in all material respects with all Environmental Laws, except
where (i) the necessity of compliance therewith is being contested in good faith
by appropriate proceedings or (ii) the failure to comply therewith is not
reasonably likely to have a material adverse effect on the financial condition
or financial prospects of the Borrower and its Consolidated Subsidiaries taken
as a whole.

     5.8. Taxes. The Borrower and its Material Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by them, except to the
extent that (i) such taxes are being contested in good faith and by appropriate
proceedings and that appropriate reserves for the payment thereof have been
maintained by the Borrower or its Material Subsidiaries in accordance with
generally accepted accounting principles or (ii) the failure to make such
filings or such payments is not reasonably likely to have a material adverse
effect on the financial condition or financial prospects of the Borrower and its
Consolidated Subsidiaries taken as a whole. The charges, accruals and reserves
on the books of the Borrower in respect of taxes or other governmental charges
are, in the opinion of the Borrower, adequate.

                                       35

<PAGE>

     5.9. Material Subsidiaries. Each Material Subsidiary is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, and, except as disclosed in the Borrower's SEC Reports, has all
corporate and other legal powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, if the failure to have any such license, authorization, consent or
approval is reasonably likely to have a material adverse effect on the financial
condition or financial prospects of the Borrower and its Consolidated
Subsidiaries taken as a whole, and as to APS, except that (i) APS from time to
time may make minor extensions of its lines, plants, services or systems prior
to the time a related franchise, certificate of convenience and necessity,
license or permit is procured, (ii) from time to time communities served by APS
may become incorporated and considerable time may elapse before such a franchise
is procured, (iii) certain such franchises may have expired prior to the
renegotiation thereof, (iv) certain minor defects and exceptions may exist
which, individually and in the aggregate, are not material and (v) certain
franchises, certificates, licenses and permits may not be specific as to their
geographical scope.

     5.10. Not an Investment Company. The Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.

     5.11. Public Utility Holding Company Act, Etc. The Borrower is a "holding
company" within the meaning of the Public Utility Holding Company Act of 1935,
as amended ("PUHCA"), and the Public Utility Holding Company Act of 2005 ("PUHCA
2005"). Pursuant to Section 3(a)(1) of PUHCA and Rule 2 promulgated thereunder,
the Borrower is exempt from all provisions of PUHCA, other than Section 9(a)(2)
thereof, until the effective date of the repeal of PUHCA on February 8, 2006.
Thereafter, pursuant to PUHCA 2005, the Borrower will be subject to the limited
jurisdiction of the Federal Energy Regulatory Commission ("FERC"), and any State
commission with jurisdiction to regulate a public utility company in Borrower's
holding company system, with respect to access to the books and records of the
Borrower and its subsidiaries and affiliates. The Borrower is also a "public
utility" within the meaning of the Federal Power Act, as amended ("FPA"), and
subject to FERC regulation under the FPA. The Borrower has obtained blanket
authority from FERC under Section 204 of the FPA to issue securities and assume
liabilities, and such authorization remains in full force and effect.

                                   ARTICLE VI

                                    COVENANTS

     During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:

     6.1. Information. The Borrower will deliver to each of the Lenders:

          6.1.1 As soon as available and in any event within 120 days after the
     end of each fiscal year of the Borrower, a consolidated balance sheet of
     the Borrower and its Consolidated Subsidiaries as of the end of such fiscal
     year and the related consolidated statements of income and cash flow for
     such fiscal year, setting forth in each case in comparative form the
     figures for the previous fiscal year, accompanied by an opinion

                                       36

<PAGE>

     thereon of independent certified public accountants of nationally
     recognized public standing, which opinion shall state that said financial
     statements fairly present in all material respects the financial position
     and results of operations of the Borrower and its Consolidated Subsidiaries
     as at the end of, and for, such fiscal year, in conformity with generally
     accepted accounting principles (except as disclosed therein);

          6.1.2 As soon as available and in any event within 60 days after the
     end of each of the first three quarters of each fiscal year of the
     Borrower, a consolidated balance sheet of the Borrower and its Consolidated
     Subsidiaries as of the end of such quarter and the related consolidated
     statements of income and cash flow for such quarter and for the portion of
     the Borrower's fiscal year ended at the end of such quarter, setting forth
     in the case of such statements of income and of cash flow in comparative
     form the figures for the corresponding quarter and the corresponding
     portion of the Borrower's previous fiscal year, accompanied by a
     certificate of an Authorized Officer, which certificate shall state that
     said financial statements fairly present in all material respects the
     financial condition and results of operations of the Borrower and its
     Consolidated Subsidiaries in accordance with generally accepted accounting
     principles, consistently applied (except as disclosed therein), as at the
     end of, and for, such period (subject to normal year-end audit
     adjustments);

          6.1.3 Simultaneously with the delivery of each set of financial
     statements referred to in Sections 6.1.1 and 6.1.2 above, a certificate of
     an Authorized Officer of the Borrower (i) setting forth in reasonable
     detail the calculations required to establish whether the Borrower was in
     compliance with the requirements of Sections 6.6 and 6.9 on the date of
     such financial statements and (ii) stating whether any Default or Unmatured
     Default exists on the date of such certificate and, if any Default or
     Unmatured Default then exists, setting forth the details thereof and the
     action which the Borrower is taking or proposes to take with respect
     thereto;

          6.1.4 As soon as possible and in any event within five Business Days
     after an Authorized Officer obtains knowledge of any Default or Unmatured
     Default, if such Default or Unmatured Default is then continuing, a
     certificate of an Authorized Officer setting forth the details thereof and
     the action which the Borrower is taking or proposes to take with respect
     thereto;

          6.1.5 Promptly upon the mailing thereof to the shareholders of the
     Borrower generally, copies of all financial statements, reports and proxy
     statements so mailed;

          6.1.6 Promptly upon the filing thereof, copies of all registration
     statements (other than the exhibits thereto and any registration statements
     on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
     their equivalents) which the Borrower shall have filed with the Securities
     and Exchange Commission;

          6.1.7 If and when any member of the ERISA Group (i) gives or is
     required to give notice to the PBGC of any "reportable event" (as defined
     in Section 4043 of ERISA) with respect to any Plan which might constitute
     grounds for a termination of such Plan under Title IV of ERISA, or knows
     that the plan administrator of any Plan has given or is

                                       37

<PAGE>

     required to give notice of any such reportable event, a copy of the notice
     of such reportable event given or required to be given to the PBGC; (ii)
     receives notice of complete or partial withdrawal liability under Title IV
     of ERISA or notice that any Multiemployer Plan is in reorganization, is
     insolvent or has been terminated, a copy of such notice; (iii) receives
     notice from the PBGC under Title IV of ERISA of an intent to terminate,
     impose liability (other than for premiums under Section 4007 of ERISA) in
     respect of, or appoint a trustee to administer any Plan, a copy of such
     notice; (iv) applies for a waiver of the minimum funding standard under
     Section 412 of the Internal Revenue Code, a copy of such application; (v)
     gives notice of intent to terminate any Plan under Section 4041(c) of
     ERISA, a copy of such notice and other information filed with the PBGC;
     (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of
     ERISA, a copy of such notice; or (vii) fails to make any payment or
     contribution to any Plan or Multiemployer Plan or in respect of any Benefit
     Arrangement or makes any amendment to any Plan or Benefit Arrangement which
     has resulted or is reasonably likely to result in the imposition of a Lien
     or the posting of a bond or other security under ERISA and the Internal
     Revenue Code, a certificate of an Authorized Officer setting forth details
     as to such occurrence and action, if any, which the Borrower or applicable
     member of the ERISA Group is required or proposes to take; and

          6.1.8 Promptly after an Authorized Officer becomes aware of the
     occurrence thereof, notice of any change by Moody's or S&P of their
     respective ratings referenced in the Pricing Schedule or of the cessation
     (or subsequent commencement) by Moody's or S&P of publication of their
     respective ratings referenced in the Pricing Schedule; and

          6.1.9 From time to time such additional information regarding the
     financial position or business of the Borrower and its Subsidiaries as the
     Agent, at the request of any Lender, may reasonably request.

Information required to be delivered pursuant to Sections 6.1.1, 6.1.2, 6.1.5 or
6.1.6 above shall be deemed to have been delivered on the date on which the
Borrower provides notice to the Lenders that such information has been posted on
the Borrower's website on the Internet at the website address listed on the
signature pages hereof, at sec.gov/edaux/searches.htm or at another website
identified in such notice and accessible by the Lenders without charge; provided
that (i) such notice may be included in a certificate delivered pursuant to
Section 6.1.3 and (ii) the Borrower shall deliver paper copies of the
information referred to in Sections 6.1.1, 6.1.2, 6.1.5 or 6.1.6 to any Lender
which requests such delivery.

     6.2. Maintenance of Property; Insurance.

          6.2.1 The Borrower will keep, and will cause each Material Subsidiary
     to keep, all property useful and necessary in its business in good working
     order and condition, ordinary wear and tear excepted, if the failure to do
     so is reasonably likely to have a material adverse effect on the financial
     condition or financial prospects of the Borrower and its Consolidated
     Subsidiaries, considered as a whole, it being understood that this covenant
     relates only to the working order and condition of such properties and
     shall not be construed as a covenant not to dispose of properties.

                                       38

<PAGE>

          6.2.2 The Borrower will maintain, and cause each Material Subsidiary
     to maintain, insurance with responsible and reputable insurance companies
     or associations in such amounts and covering such risks as is usually
     carried by companies engaged in similar businesses and owning similar
     properties in the same general areas in which the Borrower or such Material
     Subsidiary operates: provided, however, that the Borrower and each Material
     Subsidiary may self-insure to the same extent as other companies engaged in
     similar businesses and owning similar properties in the same general areas
     in which the Borrower or such Material Subsidiary operates.

     6.3. Conduct of Business and Maintenance of Existence.

          6.3.1 The Borrower (a) will preserve and maintain, and, except to the
     extent permitted under Section 6.7, will cause each Material Subsidiary to
     preserve and maintain, (i) its corporate existence and (ii) all rights and
     privileges (other than, in the case of APS, "franchises" as described in
     Arizona Revised Statutes, Section 40-283 or any successor provision)
     reasonably necessary in the normal conduct of its business, if the failure
     to maintain such rights or privileges is reasonably likely to have a
     material adverse effect on the financial condition or financial prospects
     of the Borrower and its Consolidated Subsidiaries, considered as a whole,
     and (b) will cause APS to use its commercially reasonable efforts to
     preserve and maintain such franchises reasonably necessary in the normal
     conduct of its business, except that, in the case of clause (b) above, (i)
     APS from time to time may make minor extensions of its lines, plants,
     services or systems prior to the time a related franchise, certificate of
     convenience and necessity, license or permit is procured, (ii) from time to
     time communities served by APS may become incorporated and considerable
     time may elapse before such a franchise is procured, (iii) certain such
     franchises may have expired prior to the renegotiation thereof, (iv)
     certain minor defects and exceptions may exist which, individually and in
     the aggregate, are not material and (v) certain franchises, certificates,
     licenses and permits may not be specific as to their geographical scope.

          6.3.2 The Borrower will continue to conduct, directly or through its
     Subsidiaries, the same general type of business conducted by the Borrower
     and its Material Subsidiaries on the date hereof.

     6.4. Compliance with Laws. The Borrower will comply, and cause each
Material Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and the
rules and regulations thereunder) except where (i) the necessity of compliance
therewith is contested in good faith by appropriate proceedings or (ii) the
failure to comply therewith is not reasonably likely to have a material adverse
effect on the financial condition or financial prospects of the Borrower and its
Consolidated Subsidiaries, considered as a whole.

     6.5. Pari Passu. The Borrower will not create, assume or suffer to exist
any Lien on any of the capital stock of any Material Subsidiary owned by the
Borrower or on any Debt of a Material Subsidiary owed to the Borrower unless the
Lenders are also granted a Lien thereon on a pari passu basis securing all of
the Borrower's obligations under this Agreement and the Notes.

                                       39

<PAGE>

     6.6. Ownership of APS. Except to the extent permitted under Section 6.7,
the Borrower will at all times continue to own directly at least 80% of the
outstanding capital stock of APS.

     6.7. Consolidations, Mergers and Sales of Assets.

          6.7.1 The Borrower will not, nor will it permit any Material
     Subsidiary to, merge or consolidate with or into any other Person, except
     (i) any Material Subsidiary may merge or consolidate with the Borrower if
     the Borrower is the corporation surviving such merger, (ii) any Material
     Subsidiary may merge or consolidate with any other Subsidiary, provided
     that the Borrower's aggregate direct and indirect ownership interest in the
     survivor thereof shall not be less than the greater of the Borrower's
     direct and indirect ownership interest in such Subsidiaries prior to such
     merger, and (iii) the Borrower or any Material Subsidiary may merge or
     consolidate with any other Person if (a) such Person was organized under
     the laws of the United States of America or one of its States and (b) the
     Borrower or such Material Subsidiary is the corporation surviving such
     merger; provided that, in each case, after giving effect thereto, no
     Default or Unmatured Default will be in existence.

          6.7.2 The Borrower will not sell, lease, transfer, assign or otherwise
     dispose of all or substantially all of its assets, or permit any of its
     Material Subsidiaries to sell, lease, transfer, assign or otherwise dispose
     of all or substantially all of its assets, except for sales, leases,
     transfers, assignments, and other dispositions of all or substantially all
     of the Borrower's or any such Material Subsidiary's assets to the Borrower
     or any other Subsidiary of the Borrower, provided in each case that no
     Unmatured Default or Default shall have occurred and be continuing after
     giving effect thereto and provided further that (i) in no case will the
     sale, lease, transfer, assignment or other disposition by PWEC of the
     Silverhawk Power Plant or any interest therein be governed or prohibited by
     this Section 6.7.2, and (ii) this Section 6.7.2 will not govern or prohibit
     pledges or the grant of security interests, mortgages or other Liens on any
     assets.

     6.8. Use of Proceeds. The proceeds of the Loans made under this Agreement
will be used by the Borrower to refinance indebtedness from time to time and for
other general corporate purposes. All Letters of Credit issued under this
Agreement will be used for general corporate purposes. None of such proceeds
will be used, directly or indirectly, for the purpose, whether immediate,
incidental, or ultimate, of buying or carrying any "margin stock" within the
meaning of Regulation U; provided, however, that the Borrower may use the
proceeds of the Loans made under this Agreement for the purpose of repurchasing
shares of the Borrower's common stock so long as such repurchases do not subject
any of the Lenders to the requirements of Regulation U in respect of this
Agreement. In accordance with applicable Federal Energy Regulatory Commission
orders and precedent, each Credit Extension will be for some lawful object
within the corporate purposes of the Borrower, compatible with the public
interest, and reasonably necessary or appropriate for such purposes.

     6.9. Indebtedness. Consolidated Debt will not exceed at any time an amount
equal to 65% of Consolidated Capitalization.

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<PAGE>

     6.10. Inspection of Property, Books and Records. The Borrower will keep,
and will cause each Material Subsidiary to keep, proper books of record and
account in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Material Subsidiary to permit, representatives of any Lender
at such Lender's expense to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, all at
such reasonable times and as often as may reasonably be desired; provided,
however, that the Borrower and its Material Subsidiaries reserve the right to
restrict access to any of its properties in accordance with reasonably adopted
policies relating to safety and security.

                                   ARTICLE VII

                                    DEFAULTS

     The occurrence of any one or more of the following events shall constitute
a Default:

     7.1. The Borrower shall fail to pay (i) when due, any principal of any
Loan, (ii) any Reimbursement Obligation within one Business Day after the same
becomes due or (iii) within three Business Days of the date when due, interest
on any Loan, or any fees (including any LC Fee) payable hereunder.

     7.2. The Borrower shall fail to observe or perform any covenant contained
in Sections 6.1.4, 6.3.1(a)(i) (solely with respect to the Borrower) and 6.5 to
6.9, inclusive.

     7.3. The Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by Section 7.1
or Section 7.2 above) for 30 days after notice thereof has been given to the
Borrower by the Agent at the request of any Lender.

     7.4. Any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in any certificate or other document delivered
in connection with this Agreement shall prove to have been incorrect in any
material respect when made or deemed made.

     7.5. The Borrower or any Material Subsidiary shall fail to pay any
principal of or premium or interest on any Material Debt or Material Derivative
Obligation, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and such
failure shall continue after the applicable grace period, if any, specified in
the agreement or instrument relating to such Material Debt or Material
Derivative Obligation; or the Borrower or any Material Subsidiary shall fail to
perform or comply with any other term or covenant in any agreement or instrument
relating to such Material Debt or Material Derivative Obligation and such
failure shall continue after the applicable grace period, if any, specified in
such agreement or instrument, if the effect of such failure is to accelerate, or
to permit the acceleration of, the maturity of such Material Debt or Material
Derivative Obligation.

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<PAGE>

     7.6. The Borrower or any Material Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing.

     7.7. An involuntary case or other proceeding shall be commenced against the
Borrower or any Material Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed or unstayed for a period of 60 days; or an order for
relief shall be entered against the Borrower or any Material Subsidiary under
the federal bankruptcy laws as now or hereafter in effect.

     7.8. Any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $25,000,000 which it shall have become liable
to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan
shall be filed under Title IV of ERISA by any member of the ERISA Group, any
plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or to cause
a trustee to be appointed to administer any Material Plan; or a condition shall
exist by reason of which the PBGC would be entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there shall occur a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $25,000,000.

     7.9. Judgments or orders for the payment of money that exceeds any
applicable insurance coverage by more than $25,000,000 in the aggregate shall be
rendered against the Borrower or any Material Subsidiary and such judgments or
orders shall continue unsatisfied or unstayed for a period of 45 days.

     7.10. Any Change in Control shall occur.

                                  ARTICLE VIII

                 ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES

     8.1. Acceleration. (i) If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder and the obligation and power of the Issuing Banks to issue
Letters of Credit shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on

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<PAGE>

the part of the Agent, any Issuing Bank or any Lender. If any other Default
occurs, the Required Lenders (or the Agent with the consent of the Required
Lenders) may terminate or suspend the obligations of the Lenders to make Loans
hereunder and the obligation and power of the Issuing Banks to issue Letters of
Credit, or declare the Obligations to be due and payable, or both, whereupon the
Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives.

     (ii) If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans and
the obligation and power of the Issuing Banks to issue Letters of Credit
hereunder as a result of any Default (other than any Default as described in
Section 7.6 or 7.7 with respect to the Borrower) and before any judgment or
decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.

     8.2. Amendments. Subject to the provisions of this Section 8.2, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Loan Documents or changing
in any manner the rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender adversely affected thereby:

          8.2.1 Extend the final maturity of any Loan, or extend the expiry date
     of any Letter of Credit to a date after the Facility Termination Date or
     forgive all or any portion of the principal amount thereof or any
     Reimbursement Obligation related thereto, or reduce the rate or extend the
     time of payment of interest or fees thereon or any Reimbursement Obligation
     related thereto.

          8.2.2 Reduce the percentage specified in the definition of Required
     Lenders.

          8.2.3 Extend the Facility Termination Date, or reduce the amount or
     extend the payment date for, the mandatory payments required under Section
     2.2, or increase the amount of the Commitment of any Lender hereunder or
     the commitment to issue Letters of Credit, or permit the Borrower to assign
     its rights under this Agreement.

          8.2.4 Amend the definition of "Applicable Percentage", this Section
     8.2 or any other provision of this Agreement regarding the percentage of
     Lenders required to effect an action under the Loan Documents.

          8.2.5 Amend Section 11.2 of this Agreement in a manner that would
     alter the pro rata sharing of payments required thereby.

No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent, and no amendment of any
provision relating to any Issuing Bank shall be effective without the written
consent of such Issuing Bank. The Agent may waive payment of the fee required
under Section 12.3.3 without obtaining the consent of any other party to this
Agreement.

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<PAGE>

     8.3. Preservation of Rights. No delay or omission of the Lenders, any
Issuing Bank or the Agent to exercise any right under the Loan Documents shall
impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Credit Extension notwithstanding the
existence of a Default or the inability of the Borrower to satisfy the
conditions precedent to such Credit Extension shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by, or by the Agent with the consent of, the requisite number of Lenders
required pursuant to Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Agent, the
Issuing Banks and the Lenders until the Obligations have been paid in full.

                                   ARTICLE IX

                               GENERAL PROVISIONS

     9.1. Survival of Representations. All representations and warranties of the
Borrower contained in this Agreement shall survive the making of the Credit
Extensions herein contemplated.

     9.2. Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, no Lender or Issuing Bank shall be obligated to extend
credit to the Borrower in violation of any limitation or prohibition provided by
any applicable statute or regulation.

     9.3. Headings. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.

     9.4. Entire Agreement. The Loan Documents and the Letter of Credit
Applications embody the entire agreement and understanding among the Borrower,
the Agent, the Issuing Banks and the Lenders and supersede all prior agreements
and understandings among the Borrower, the Agent, the Issuing Banks and the
Lenders relating to the subject matter thereof other than those contained in the
fee letter and, to the extent expressly set forth therein, the commitment
letter, described in Section 10.13 which shall survive and remain in full force
and effect during the term of this Agreement.

     9.5. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner, co-venturer or agent of any other (except to the extent to
which the Agent is authorized to act as such). The failure of any Lender to
perform any of its obligations hereunder shall not relieve any other Lender from
any of its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns and as otherwise expressly
stated herein.

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<PAGE>

     9.6. Expenses; Indemnification. (i) The Borrower shall reimburse the Agent
and the Arrangers for any reasonable out-of-pocket costs and expenses (including
reasonable attorneys' and paralegals' fees for one firm of attorneys for the
Agent and Arrangers, and which attorneys may be employees of the Agent or either
Arranger and expenses of and fees for other advisors and professionals engaged
by the Agent or the Arrangers in consultation with the Borrower) paid or
incurred by the Agent or the Arrangers in connection with the preparation,
investigation, negotiation, documentation, execution, delivery, syndication,
distribution (including, without limitation, via the internet), review,
amendment, modification, and administration of the Loan Documents and incurred
after the Closing Date. The Borrower also agrees to reimburse the Agent, the
Arrangers, the Issuing Banks and the Lenders for any reasonable out-of-pocket
costs and expenses (including reasonable attorneys' and paralegals' fees and
out-of-pocket expenses of attorneys for the Agent, the Arrangers, the Issuing
Banks and the Lenders, which attorneys may be employees of the Agent, the
Arrangers, the Issuing Banks or the Lenders) paid or incurred by the Agent, the
Arrangers, the Issuing Banks or any Lender in connection with the collection and
enforcement of the Loan Documents.

     (ii) The Borrower hereby further agrees to indemnify the Agent, each
          Arranger, each Issuing Bank, each Lender, their respective affiliates,
          and their respective directors, officers, employees, syndication
          consultants and agents (each, an "Indemnified Party") against all
          losses, claims, damages, penalties, judgments, liabilities and
          expenses (including, without limitation, all expenses of litigation or
          preparation therefor whether or not such Indemnified Party is a party
          thereto, and all reasonable outside attorneys' and paralegals' fees
          and expenses of outside attorneys and paralegals of the Indemnified
          Party) which any of them may pay or incur arising out of or relating
          to this Agreement, the other Loan Documents, the transactions
          contemplated hereby or the direct or indirect application or proposed
          application of the proceeds of any Credit Extension hereunder except
          to the extent that they are expressly stated in this Agreement to be
          payable by the Indemnified Party or one of its Affiliates, including,
          but not limited to, expenses payable under Sections 3.5(vii) and 6.10,
          or are determined in a final non-appealable judgment by a court of
          competent jurisdiction to have resulted from the gross negligence or
          willful misconduct of such Indemnified Party or any of its Affiliates,
          in which case any fees and expenses previously paid or advanced by the
          Borrower to such Indemnified Party in respect of such indemnified
          obligation will be returned by such Indemnified Party. In the case of
          an investigation, litigation or other proceeding to which the
          indemnity in this Section 9.6(ii) applies, such indemnity shall be
          effective whether or not such investigation, litigation or proceeding
          is brought by the Borrower, its directors, equityholders or creditors
          or an Indemnified Party or any other Person, whether or not any
          Indemnified Party is otherwise a party thereto, unless such litigation
          or proceeding is brought by or against the Borrower and the Borrower
          prevails in a final, non-appealable judgment, in which case any fees
          or expenses previously paid or advanced by the Borrower to such
          Indemnified Party in respect of such indemnified obligation will be
          returned by such Indemnified Party, and whether or not the
          transactions contemplated hereby are consummated. The obligations of
          the Borrower under this Section 9.6 shall survive the termination of
          this Agreement.

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<PAGE>

     9.7. Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.

     9.8. Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared, in accordance with generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes concurred in by the Borrower's independent public
accountants) with the most recent audited consolidated financial statements of
the Borrower delivered to the Agent; provided that, if the Borrower notifies the
Agent that the Borrower wishes to amend any covenant in Article VI to eliminate
the effect of any change in generally accepted accounting principles on the
operation of such covenant (or if the Agent notifies the Borrower that the
Required Lenders wish to amend Article VI for such purpose), then the Borrower's
compliance with such covenant shall be applied on the basis of generally
accepted accounting principles in effect immediately before the relevant change
in generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Lenders.

     9.9. Severability of Provisions. Any provision in any Loan Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.

     9.10. Nonliability of Lenders. The relationship between the Borrower on the
one hand and the Lenders, the Issuing Banks and the Agent on the other hand
shall be solely that of borrower and lender. Neither the Agent, any Arranger,
any Issuing Bank nor any Lender shall have any fiduciary responsibilities to the
Borrower. Neither the Agent, any Arranger, any Issuing Bank nor any Lender
undertakes any responsibility to the Borrower to review or inform the Borrower
of any matter in connection with any phase of the Borrower's business or
operations. No party hereto shall have any liability with respect to, and each
party hereto hereby waives, releases and agrees not to sue for, any special,
indirect, consequential or punitive damages suffered by such party in connection
with, arising out of, or in any way related to the Loan Documents or the
transactions contemplated thereby.

     9.11. Confidentiality. Each Lender, each Issuing Bank and the Agent shall
exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
Confidential Information received pursuant to this Agreement except that
disclosure of such Confidential Information may be made (i) to the agents,
employees, subsidiaries or affiliates of such Person in connection with its
present or prospective business relations with the Borrower arising out of this
Agreement, provided that such Person will cause such agents, employees,
subsidiaries or affiliates to comply with the provisions of this Section 9.11
with respect to such Confidential Information, (ii) to prospective transferees
or purchasers of any interest in the Outstanding Credit Exposure (including any
Participant), provided that they have agreed to be bound by the provision of
this Section 9.11, (iii) as required by law, regulations, rule, request or
order, subpoena, judicial order or similar

                                       46

<PAGE>

order and in connection with any litigation, (iv) as may be required in
connection with the examination, audit or similar investigation of such Person,
(v) to its direct or indirect contractual counterparties in swap agreements or
to legal counsel, accountants and other professional advisors to such
counterparties, provided that such counterparties, legal counsel, accountants
and other professional advisors shall agree to comply with the provisions of
this Section 9.11 with respect to such Confidential Information, (vi) to rating
agencies if requested or required by such agencies in connection with a rating
relating to the Credit Extensions hereunder, and (vii) to the extent requested
by any regulatory or governmental authority. Without limiting Section 9.4, the
Borrower agrees that the terms of this Section 9.11 shall set forth the entire
agreement between the Borrower and each Lender (including the Issuing Banks and
the Agent) with respect to any confidential information previously or hereafter
received by such Lender in connection with this Agreement, and this Section 9.11
shall supersede any and all prior confidentiality agreements entered into by
such Lender with respect to such confidential information. The obligations under
this Section 9.11 shall survive for a period of two calendar years after the
date of the termination of this Agreement.

     9.12. Nonreliance. Each Lender hereby represents that it is not relying on
or looking to any margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) for the repayment of the Credit
Extensions provided for herein.

     9.13. Disclosure. The Borrower and each Lender hereby acknowledge and agree
that JPMCB and/or its Affiliates from time to time may hold investments in, make
other loans to or have other relationships with the Borrower and its Affiliates.

     9.14. USA Patriot Act Notification. The following notification is provided
to the Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31
U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the
government fight the funding of terrorism and money laundering activities,
Federal law requires all financial institutions to obtain, verify, and record
information that identifies each person or entity that opens an account,
including any deposit account, treasury management account, loan, other
extension of credit, or other financial services product. What this means for
the Borrower: When the Borrower opens an account, the Agent and the Lenders will
ask for the Borrower's name, tax identification number, business address, and
other information that will allow the Agent and the Lenders to identify the
Borrower. The Agent and the Lenders may also ask to see the Borrower's legal
organizational documents or other identifying documents.

     9.15. Relations Among Lenders.

          9.15.1 No Action Without Consent. Except with respect to the exercise
     of setoff rights of any Lender, in accordance with Section 11.1, the
     proceeds of which are applied in accordance with this Agreement, each
     Lender and each Issuing Bank agrees that it will not take any action, nor
     institute any actions or proceedings, against the Borrower or with respect
     to any Loan Document, without the prior written consent of the Required
     Lenders or, as may be provided in this Agreement or the other Loan
     Documents, with the consent of the Agent.

                                       47

<PAGE>

          9.15.2 No Liability. The Agent shall have the exclusive right on
     behalf of the Lenders to enforce the payment of the principal of and
     interest on, or LC Exposure in respect of, any Credit Extension after the
     date such principal or interest has become due and payable pursuant to the
     terms of this Agreement.

                                    ARTICLE X

                                    THE AGENT

     10.1. Appointment; Nature of Relationship. JPMorgan Chase Bank, N.A. is
hereby appointed by each of the Lenders and Issuing Banks as its contractual
representative (herein referred to as the "Agent") hereunder and under each
other Loan Document, and each of the Lenders and Issuing Banks irrevocably
authorizes the Agent to act as the contractual representative of such Lender and
Issuing Banks with the rights and duties expressly set forth herein and in the
other Loan Documents. The Agent agrees to act as such contractual representative
upon the express conditions contained in this Article X. Notwithstanding the use
of the defined term "Agent," it is expressly understood and agreed that the
Agent shall not have any fiduciary responsibilities to any Lender or any Issuing
Bank by reason of this Agreement or any other Loan Document and that the Agent
is merely acting as the contractual representative of the Lenders and the
Issuing Banks with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders' and
Issuing Banks' contractual representative, the Agent (i) does not hereby assume
any fiduciary duties to any of the Lenders or any Issuing Bank and (ii) is
acting as an independent contractor, the rights and duties of which are limited
to those expressly set forth in this Agreement and the other Loan Documents.
Each of the Lenders and the Issuing Banks, for itself and each of its
Affiliates, hereby agrees to assert no claim against the Agent on any agency
theory or any other theory of liability for breach of fiduciary duty, all of
which claims each Lender, each Issuing Bank and each Affiliate of each Lender
and each Issuing Bank hereby waives.

     10.2. Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.

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

     10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (a) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation,

                                       48

<PAGE>

any agreement by an obligor to furnish information directly to each Lender; (c)
the satisfaction of any condition specified in Article IV, except receipt of
items required to be delivered solely to the Agent; (d) the existence or
possible existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any Loan Document
or any other instrument or writing furnished in connection therewith; or (f) the
financial condition of the Borrower or of any of the Borrower's Subsidiaries.
The Agent shall have no duty to disclose to the Lenders information that is not
required to be furnished by the Borrower to the Agent at the time so furnished,
but is voluntarily furnished by the Borrower to the Agent (either in its
capacity as Agent or in its individual capacity).

     10.5. Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders (or all of the Lenders in the event that and to the extent that
this Agreement expressly requires such approval), and such instructions and any
action taken or failure to act pursuant thereto shall be binding on all of the
Lenders. The Lenders hereby acknowledge that the Agent shall be under no duty to
take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement or any other Loan Document unless it shall be
requested in writing to do so by the Required Lenders (or all of the Lenders in
the event that and to the extent that this Agreement expressly requires such
approval). The Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.

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

     10.7. Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex, electronic mail message, statement, paper or document
reasonably (but without any requirement of any additional diligence by the Agent
with respect thereto) believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which counsel may be
employees of the Agent. For purposes of determining compliance with the
conditions specified in Sections 4.1 and 4.2, each Lender that has signed this
Agreement (or otherwise become party hereto pursuant to an assignment under
Section 12.3) shall be deemed to have consented to, approved or accepted or to
be satisfied with, each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to a Lender unless the
Agent shall have received notice from such Lender prior to the applicable date
specifying its objection thereto.

     10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to the Lenders'
respective Applicable Percentages

                                       49

<PAGE>

of the Aggregate Commitment (or, if the Aggregate Commitment has been
terminated, of the Aggregate Outstanding Credit Exposure) to the extent not
reimbursed by or on behalf of the Borrower and without limiting any obligation
of the Borrower to do so (i) for any amounts not reimbursed by the Borrower for
which the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents (including, without limitation, for any
expenses incurred by the Agent in connection with any dispute between the Agent
and any Lender or between two or more of the Lenders) and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against the Agent in any way relating to or
arising out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby (including, without
limitation, for any such amounts incurred by or asserted against the Agent in
connection with any dispute between the Agent and any Lender or between two or
more of the Lenders), or the enforcement of any of the terms of the Loan
Documents or of any such other documents, provided that (i) no Lender shall be
liable for any of the foregoing to the extent any of the foregoing is found in a
final non-appealable judgment by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the Agent and (ii)
any indemnification required pursuant to Section 3.5(vii) shall, notwithstanding
the provisions of this Section 10.8, be paid by the relevant Lender in
accordance with the provisions thereof. The obligations of the Lenders under
this Section 10.8 shall survive payment of the Obligations and termination of
this Agreement.

     10.9. Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Unmatured Default hereunder unless
the Agent has received written notice from a Lender or the Borrower referring to
this Agreement describing such Default or Unmatured Default and stating that
such notice is a "notice of default". In the event that the Agent receives such
a notice, the Agent shall give prompt notice thereof to the Lenders.

     10.10. Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Outstanding Credit Exposure as
any Lender and may exercise the same as though it were not the Agent, and the
term "Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless
the context otherwise indicates, include the Agent in its individual capacity.
The Agent and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries.

     10.11. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, any Arranger or any other
Lender and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, any Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.

                                       50

<PAGE>

     10.12. Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower, such resignation to be effective
upon the appointment of a successor Agent or, if no successor Agent has been
appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. Upon any such resignation, the Required Lenders shall, with
the prior written approval of the Borrower (which approval will not be
unreasonably withheld or delayed and which shall be required only so long as no
Default shall be continuing), have the right to appoint, on behalf of the
Borrower and the Lenders, a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders within thirty days after the resigning
Agent's giving notice of its intention to resign, then the resigning Agent may
appoint, on behalf of the Borrower and the Lenders, a successor Agent.
Notwithstanding the previous sentence, the Agent may at any time without the
consent of the Borrower or any Lender, appoint any of its Affiliates which is a
commercial bank as a successor Agent hereunder. If the Agent has resigned and no
successor Agent has been appointed, the Lenders may perform all the duties of
the Agent hereunder and the Borrower shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning Agent. Upon the effectiveness of the resignation of the Agent, the
resigning Agent shall be discharged from its duties and obligations hereunder
and under the Loan Documents. After the effectiveness of the resignation of an
Agent, the provisions of this Article X shall continue in effect for the benefit
of such Agent in respect of any actions taken or omitted to be taken by it while
it was acting as the Agent hereunder and under the other Loan Documents. In the
event that there is a successor to the Agent by merger, or the Agent assigns its
duties and obligations to an Affiliate or pursuant to this Section 10.12, then
the term "Prime Rate" as used in this Agreement shall mean the prime rate, base
rate or other analogous rate of the new Agent.

     10.13. Agent and Arranger Fees. The Borrower agrees to pay to the Agent and
the Arrangers, for their respective accounts, the fees agreed to by the
Borrower, the Agent, the Syndication Agent and the Arrangers pursuant to that
certain fee letter agreement dated November 15, 2005 entered into in connection
with that certain commitment letter dated as of November 15, 2005 by and among
the Agent, the Syndication Agent, the Arrangers and the Borrower, or as
otherwise agreed from time to time.

     10.14. Delegation to Affiliates. The Borrower and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates; provided that the Agent shall remain solely responsible to the other
parties hereto for the performance of such duties. Any such Affiliate (and such
Affiliate's directors, officers, agents and employees) which performs duties in
connection with this Agreement shall be entitled to the same benefits of the
indemnification, waiver and other protective provisions to which the Agent is
entitled under Articles IX and X.

     10.15. Co-Agents, Managing Agent, Documentation Agent, Syndication Agent,
etc. None of the Lenders identified in this Agreement as a "Co-Agent", "Managing
Agent", "Documentation Agent" or the Syndication Agent shall have any right,
power, obligation,

                                       51

<PAGE>

liability, responsibility or duty under this Agreement other than those
applicable to all Lenders as such. Without limiting the foregoing, none of such
Lenders shall have or be deemed to have a fiduciary relationship with any
Lender. Each Lender hereby makes the same acknowledgments with respect to such
Lenders as it makes with respect to the Agent in Section 10.11.

                                   ARTICLE XI

                            SETOFF; RATABLE PAYMENTS

     11.1. Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Default occurs and is continuing, any and
all deposits of the Borrower (including all account balances, whether
provisional or final and whether or not collected or available) and any other
Debt at any time held or owing by any Lender to or for the credit or account of
the Borrower may be offset and applied toward the payment of the Obligations
owing to such Lender, whether or not the Obligations, or any part thereof, shall
then be due, and each Lender shall endeavor to give notice of any such set-off
to the Borrower, provided that the failure of any Lender to give such notice
shall not in any way limit any Lender's rights under this Section 11.1.

     11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Outstanding Credit Exposure (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than
that received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Aggregate Outstanding Credit Exposure held by the
other Lenders so that after such purchase each Lender will hold its Applicable
Percentage of the Aggregate Outstanding Credit Exposure. In case any such
payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.

                                   ARTICLE XII

                BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

     12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lenders and their respective successors and assigns permitted hereby, except
that (i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents without the prior written consent of each
Lender, (ii) any assignment by any Lender must be made in compliance with
Section 12.3, and (iii) any transfer by participation must be made in compliance
with Section 12.2. Any attempted assignment or transfer by any party not made in
compliance with this Section 12.1 shall be null and void, unless such attempted
assignment or transfer is treated as a participation in accordance with Section
12.3.3. The parties to this Agreement acknowledge that clause (ii) of this
Section 12.1 relates only to absolute assignments and this Section 12.1 does not
prohibit assignments creating security interests, including, without limitation,
(x) any pledge or assignment by any Lender of all or any portion of its rights
under this Agreement and any Note to a Federal Reserve Bank or (y) in the case
of a Lender which is a Fund, any pledge or assignment of all or any portion of
its rights under this Agreement and any Note to its trustee in support of its
obligations to its trustee; provided, however, that no such pledge or assignment
shall release the transferor Lender from its obligations hereunder unless and
until the parties

                                       52

<PAGE>

thereto have complied with the provisions of Section 12.3. The Agent may treat
the Person which made any Credit Extension or which holds any Note as the owner
thereof for all purposes hereof unless and until such Person complies with
Section 12.3; provided, however, that the Agent may in its discretion (but shall
not be required to) follow instructions from the Person which made any Credit
Extension or which holds any Note to direct payments relating to such Credit
Extension or Note to another Person. Any assignee of the rights to any
Outstanding Credit Exposure or any Note agrees by acceptance of such assignment
to be bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the owner of the rights to any Outstanding
Credit Exposure (whether or not a Note has been issued in evidence thereof),
shall be conclusive and binding on any subsequent holder or assignee of the
rights to such Outstanding Credit Exposure.

     12.2. Participations.

          12.2.1 Permitted Participants; Effect. Any Lender may at any time sell
     to one or more banks or other entities ("Participants") participating
     interests in any Outstanding Credit Exposure owing to such Lender, any Note
     held by such Lender, any Commitment of such Lender or any other interest or
     obligation of such Lender under the Loan Documents. In the event of any
     such sale by a Lender of participating interests or obligations to a
     Participant, such Lender's obligations under the Loan Documents shall
     remain unchanged, such Lender shall remain solely responsible to the other
     parties hereto for the performance of such obligations, such Lender shall
     remain the owner of its Outstanding Credit Exposure and the holder of any
     Note issued to it in evidence thereof for all purposes under the Loan
     Documents, all amounts payable by the Borrower under this Agreement shall
     be determined as if such Lender had not sold such participating interests,
     and the Borrower and the Agent shall continue to deal solely and directly
     with such Lender in connection with such Lender's rights and obligations
     under the Loan Documents.

          12.2.2 Voting Rights. Each Lender shall retain the sole right to
     approve, without the consent of any Participant, any amendment,
     modification or waiver of any provision of the Loan Documents other than
     any amendment, modification or waiver with respect to any Outstanding
     Credit Exposure or Commitment in which such Participant has an interest
     which would require consent of all of the Lenders pursuant to the terms of
     Section 8.2 or of any other Loan Document.

          12.2.3 Benefit of Certain Provisions. The Borrower agrees that each
     Participant shall be entitled to the benefits of Sections 3.1, 3.2, 3.4 and
     3.5 to the same extent as if it were a Lender and had acquired its interest
     by assignment pursuant to Section 12.3, provided that (i) a Participant
     shall not be entitled to receive any greater payment under Section 3.1, 3.2
     or 3.5 than the Lender who sold the participating interest to such
     Participant would have received had it retained such interest for its own
     account, unless the sale of such interest to such Participant is made with
     the prior written consent of the Borrower, and (ii) any Participant not
     incorporated under the laws of the United States of America or any State
     thereof agrees to comply with the provisions of Section 3.5 to the same
     extent as if it were a Lender.

                                       53

<PAGE>

     12.3. Assignments.

          12.3.1 Permitted Assignments. Any Lender may at any time assign to one
     or more banks or other entities ("Purchasers") all or any part of its
     rights and obligations under the Loan Documents. Such assignment shall be
     substantially in the form of Exhibit A or in such other form as may be
     agreed to by the parties thereto. Each such assignment with respect to a
     Purchaser which is not a Lender or an Affiliate of a Lender or an Approved
     Fund shall either be in an amount equal to the entire applicable Commitment
     and Outstanding Credit Exposure of the assigning Lender or (unless each of
     the Borrower and the Agent otherwise consents) be in an aggregate amount
     not less than $5,000,000. The amount of the assignment shall be based on
     the Commitment or Outstanding Credit Exposure (if the Commitment has been
     terminated) subject to the assignment, determined as of the date of such
     assignment or as of the "Trade Date," if the "Trade Date" is specified in
     the assignment.

          12.3.2 Consents. The consent of the Borrower shall be required prior
     to an assignment becoming effective unless the Purchaser is a Lender, an
     Affiliate of a Lender or an Approved Fund, provided that the consent of the
     Borrower shall not be required if a Default has occurred and is continuing.
     The consent of the Agent shall be required prior to an assignment becoming
     effective unless the Purchaser is a Lender. The consent of each Issuing
     Bank shall be required prior to any assignment becoming effective. Any
     consent required under this Section 12.3.2 shall not be unreasonably
     withheld or delayed.

          12.3.3 Effect; Effective Date. Upon (i) delivery to the Agent of an
     assignment, together with any consents required by Sections 12.3.1 and
     12.3.2, and (ii) payment of a $3,500 fee by the transferor Lender or the
     Purchaser to the Agent for processing such assignment (unless such fee is
     waived by the Agent), (a) such assignment shall become effective on the
     effective date specified in such assignment and (b) the Agent shall give
     prompt notice thereof to the Borrower. The assignment shall contain a
     representation by the Purchaser to the effect that none of the
     consideration used to make the purchase of the Commitment and Outstanding
     Credit Exposure under the applicable assignment agreement constitutes "plan
     assets" as defined under ERISA and that the rights and interests of the
     Purchaser in and under the Loan Documents will not be "plan assets" under
     ERISA. On and after the effective date of such assignment, such Purchaser
     shall for all purposes be a Lender party to this Agreement and any other
     Loan Document executed by or on behalf of the Lenders and shall have all
     the rights and obligations of a Lender under the Loan Documents, to the
     same extent as if it were an original party thereto, and the transferor
     Lender shall be released with respect to the Commitment and Outstanding
     Credit Exposure assigned to such Purchaser without any further consent or
     action by the Borrower, the Lenders, the Agent or the Issuing Banks. In the
     case of an assignment covering all of the assigning Lender's rights and
     obligations under this Agreement, such Lender shall cease to be a Lender
     hereunder but shall continue to be entitled to the benefits of, and subject
     to, those provisions of this Agreement and the other Loan Documents which
     survive payment of the Obligations and termination of the applicable
     agreement. Any assignment or transfer by a Lender of rights or obligations
     under this Agreement that does not comply with this Section 12.3 shall be
     treated for purposes of this Agreement as a sale by such Lender of a
     participation in such rights and

                                       54

<PAGE>

     obligations in accordance with Section 12.2. Upon the consummation of any
     assignment to a Purchaser pursuant to this Section 12.3.3, the transferor
     Lender, the Agent and the Borrower shall, if the transferor Lender or the
     Purchaser desires that its Loans be evidenced by Notes, make appropriate
     arrangements so that new Notes or, as appropriate, replacement Notes are
     issued to such transferor Lender and new Notes or, as appropriate,
     replacement Notes, are issued to such Purchaser, in each case in principal
     amounts reflecting their respective Commitments, as adjusted pursuant to
     such assignment.

          12.3.4 Register. The Agent, acting solely for this purpose as an agent
     of the Borrower, shall maintain at one of its offices in New York, New York
     a copy of each assignment delivered to it and a register for the
     recordation of the names and addresses of the Lenders, and the Commitments
     of, and principal amounts of the Loans owing to, and participations in
     Letters of Credit by, each Lender pursuant to the terms hereof from time to
     time (the "Register"). The entries in the Register shall be conclusive,
     absent manifest error, and the Borrower, the Agent and the Lenders may
     treat each Person whose name is recorded in the Register pursuant to the
     terms hereof as a Lender hereunder for all purposes of this Agreement,
     notwithstanding notice to the contrary. The Register shall be available for
     inspection by the Borrower at any reasonable time and from time to time
     upon reasonable prior notice.

     12.4. Dissemination of Information. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the Borrower and its Subsidiaries; provided that each Transferee and
prospective Transferee agrees to be bound by Section 9.11 of this Agreement.

     12.5. Tax Treatment. If any interest in any Loan Document is transferred to
any Transferee which is not incorporated under the laws of the United States or
any State thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to comply with the
provisions of Section 3.5(iv).

                                  ARTICLE XIII

                                     NOTICES

     13.1. Notices; Effectiveness; Electronic Communication.

          (a) Notices Generally. Except in the case of notices and other
     communications expressly permitted to be given by telephone (and except as
     provided in paragraph (b) below), all notices and other communications
     provided for herein shall be in writing and shall be delivered by hand or
     overnight courier service, mailed by certified or registered mail or sent
     by telecopier as follows:

     (i)  if to the Borrower, at its address or telecopier number set forth on
          the signature page hereof;

                                       55

<PAGE>

     (ii) if to the Agent or if the applicable Issuing Bank is JPMCB, at its
          address or telecopier number set forth on the signature page hereof;

     (iii) if to a Lender or to any Issuing Bank other than JPMCB, to it at its
          address (or telecopier number) set forth in its administrative
          questionnaire delivered to the Agent.

Notices sent by hand or overnight courier service, or mailed by certified or
registered mail, shall be deemed to have been given when received; notices sent
by telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next Business Day for the
recipient). Notices delivered through electronic communications to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).

          (b) Electronic Communications. Notices and other communications to the
     Lenders may be delivered or furnished by electronic communication
     (including e-mail and internet or intranet websites) pursuant to procedures
     approved by the Agent or as otherwise determined by the Agent and notified
     to the Lenders and the Borrower, provided that the foregoing shall not
     apply to notices to any Lender pursuant to Article II if such Lender has
     notified the Agent and the Borrower that it is incapable of receiving
     notices under such Article by electronic communication. The Agent or the
     Borrower may, in its respective discretion, agree to accept notices and
     other communications to it hereunder by electronic communications pursuant
     to procedures approved by it or as it otherwise determines and notified to
     the other parties, provided that such determination or approval may be
     limited to particular notices or communications.

     Unless the Agent otherwise prescribes, (i) notices and other communications
sent to an e-mail address shall be deemed received upon the sender's receipt of
an acknowledgement from the intended recipient (such as by the "return receipt
requested" function, as available, return e-mail or other written
acknowledgement), provided that if such notice or other communication is not
given during the normal business hours of the recipient, such notice or
communication shall be deemed to have been given at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

          (c) Change of Address, Etc. Any party hereto may change its address or
     telecopier number for notices and other communications hereunder by notice
     to the other parties hereto.

                                   ARTICLE XIV

         COUNTERPARTS; INTEGRATION; EFFECTIVENESS; ELECTRONIC EXECUTION

     14.1. Counterparts; Effectiveness. This Agreement may be executed in
counterparts (and by different parties hereto in different counterparts), each
of which shall constitute an

                                       56

<PAGE>

original, but all of which when taken together shall constitute a single
contract. Except as provided in Article IV, this Agreement shall become
effective when it shall have been executed by the Agent and when the Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the parties hereto, and thereafter shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or electronic PDF file shall be effective as delivery of a
manually executed counterpart of this Agreement.

     14.2. Electronic Execution of Assignments. The words "execution," "signed,"
"signature," and words of like import in any assignment and assumption agreement
shall be deemed to include electronic signatures or the keeping of records in
electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable law, including the Federal Electronic Signatures in Global and
National Commerce Act, or any other state laws based on the Uniform Electronic
Transactions Act.

                                   ARTICLE XV

          CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

     15.1. CHOICE OF LAW. THE LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL
LAWS APPLICABLE TO BANKS.

     15.2. CONSENT TO JURISDICTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK SITTING
IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN
DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY TO THE
FULLEST EXTENT ALLOWED BY LAW IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL
COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH
ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT IN THE COURTS
OF ANY JURISDICTION.

                                       57

<PAGE>

     EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES,
TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO
IN THE IMMEDIATELY PRECEDING PARAGRAPH. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

     15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE ISSUING BANKS AND
EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]

                                       58

<PAGE>

     IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have executed
this Agreement as of the date first above written.

                                        PINNACLE WEST CAPITAL CORPORATION

                                        By: /s/ Barbara M. Gomez
                                            ------------------------------------
                                        Title: Vice President and Treasurer
                                               400 N. 5th Street
                                               Phoenix AZ, 85004
                                        Attention: Ms. Barbara Gomez
                                                   Telephone: (602) 250-5677
                                                   FAX: (602) 250-5640
                                        Website: www.pinnaclewest.com
                                        FEIN: 86-0512431

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        JPMORGAN CHASE BANK, N.A.
                                        Individually, as an Issuing Bank and as
                                        Administrative Agent

                                        By: /s/ Peter M. Ling
                                            ------------------------------------
                                        Title: Managing Director
                                               ---------------------------------
                                        JPM Loan & Agency Services
                                        1111 Fannin St 10th FL
                                        Houston TX, 77002
                                        Ph#: 713-750-2510
                                        Fx#: 713-432-6307
                                        email: sylvia.gutierrez@jpmorgan.com

                                        with a copy to:

                                        JPMorgan Corporate Banking
                                        NA Power & Utilities
                                        270 Park Ave 15 FL
                                        New York, NY 10017
                                        Ph# 212-270-5801
                                        Fx# 212-270-4392
                                        email: maj.sayegh@jpmorgan.com

                                        For Letters of Credit:

                                        JPMorganChase LOC Tampa
                                        10420 Highland Manor Dr-BL 2, FL 2
                                        Tampa, FL 33610
                                        Ph#: 813-432-6339
                                        Fx#: 813-432-5161
                                        email: james.alonzo@chase.com

                                        with a copy to:

                                        Global Trade Services
                                        1 Chase Manhattan Plaza 9 FL
                                        New York, NY 10081
                                        Ph# 212-552-4475
                                        Fx# 212-552-7819
                                        email: olivera.mladenovic@chase.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        UNION BANK OF CALIFORNIA, N.A.
                                        Individually and as Syndication Agent

                                        By: /s/ Efrain Soto
                                            ------------------------------------
                                        Name: Efrain Soto
                                        Title: Vice President

                                        Energy Capital Services
                                        445 S. Figueroa, 15th Floor
                                        Los Angeles, CA 90071
                                        Attention: Efrain Soto
                                        Phone: (213) 236-5779
                                        Fax: (213) 236-4096
                                        E-mail: efrain.soto@uboc.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        CITIBANK, N.A.,
                                        Individually and as Co-Documentation
                                        Agent

                                        By: /s/ Oscar Cragwell
                                            ------------------------------------
                                        Name: Oscar Cragwell
                                        Title: Vice President

                                        Two Penns Way, Suite 110
                                        New Castle, DE 19720
                                        Attention: Nick Perazza
                                        Phone: (302) 894-6110
                                        Fax: (212) 994-0847
                                        E-mail: nicholas.j.perazz@citigroup.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        KEYBANK NATIONAL ASSOCIATION,
                                        Individually and as Co-Documentation
                                        Agent

                                        By: /s/ Keven D. Smith
                                            ------------------------------------
                                        Name: Keven D. Smith
                                        Title: Vice President

                                        127 Public Square
                                        Cleveland, OH 44114
                                        OH-01-27-0847
                                        Attention: Yvett M. Dyson-Owen
                                        Phone: (216) 689-4358
                                        Fax: (216) 689-5962
                                        E-mail: yvette_dysou-owens@keybank.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        MIZUHO CORPORATE BANK, LTD.,
                                        Individually and as Co-Documentation
                                        Agent

                                        By: /s/ Raymond Ventura
                                            ------------------------------------
                                        Name: Raymond Ventura
                                        Title: Deputy General Manager

                                        1251 Avenue of the Americas
                                        32nd Floor
                                        New York, NY 10020
                                        Attention: Mr. Nelson Chang
                                        Phone: (212) 282-3465
                                        Fax: (212) 282-4488
                                        E-mail: nelson.chang@miuhocbus.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        BANK OF AMERICA, N.A.,
                                        as a Lender

                                        By:  /s/ Gabriela Millhorn
                                            ------------------------------------
                                        Name: Gabriela Millhorn
                                        Title: Senior Vice President

                                        100 N. Tryon St. NC1-007-13-13
                                        Charlotte, NC 28255
                                        Attention: Gabriela Millhorn
                                        Phone: (704) 388-4945
                                        Fax: (704) 386-1319
                                        E-mail: daryl.patterson
                                        @bankofamerica.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        THE BANK OF NEW YORK,
                                        as a Lender

                                        By:  /s/ John-Paul Marotta
                                            ------------------------------------
                                        Name: John-Paul Marotta
                                        Title: Managing Director

                                        One Wall Street, 19th Floor
                                        New York, NY 10286
                                        Attention: John-Paul Marotta
                                        Phone: (212) 635-8204
                                        Fax: (212) 635-7923
                                        E-mail: jmarotta@bankofny.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        BARCLAYS BANK PLC,
                                        as a Lender

                                        By: /s/ Alison A. McGuigan
                                            ------------------------------------
                                        Name: Alison A. McGuigan
                                        Title: Associate Director

                                        200 Park Avenue
                                        New York, NY 10166
                                        Attention: Alison McGuigan
                                        Phone: (212) 412-7672
                                        Fax: (212) 412-7600
                                        E-mail: Alison.mcguigan@barcap.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        CREDIT SUISSE, Cayman Islands Branch
                                        as a Lender

                                        By: /s/ Sarah Wu
                                            ------------------------------------
                                        Name: Sarah Wu
                                        Title: Director

                                        By: /s/ Nupur Kumar
                                            ------------------------------------
                                        Name: Nupur Kumar
                                        Title: Associate

                                        11 Madison Avenue
                                        New York, NY 10010
                                        Attention: Sarah Wu
                                        Phone: (212) 325-5813
                                        Fax: (212) 743-1804
                                        E-mail: sarah.wu@csfb.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        LEHMAN BROTHERS COMMERCIAL BANK,
                                        as a Lender

                                        By: /s/ George Janes
                                            ------------------------------------
                                        Name: George Janes
                                        Title: Chief Credit Officer

                                        Attention: Janine Shugan
                                        Phone: (212) 526-8625
                                        Fax: (917) 522-0139
                                        E-mail: jshugan@lehman.com

            SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        UBS LOAN FINANCE LLC,
                                        as a Lender

                                        By: /s/ Richard L. Tavrow
                                            ------------------------------------
                                        Name: Richard L. Tavrow
                                        Title: Director

                                        By: /s/ Marie Haddad
                                            ------------------------------------
                                        Name: Marie Haddad
                                        Title: Associate Director

                                        Attention: Marie Haddad
                                        Phone: (203) 719-5609
                                        Fax: (203) 719-3888
                                        E-mail: Marie.Haddad@ubs.com

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        WELLS FARGO BANK, N.A.
                                        as a Lender

                                        By: /s/ Ling Li
                                            --------------------------------
                                        Name: Ling Li
                                        Title: Vice President

                                        707 Wilshire Blvd. 16th Floor
                                        Los Angeles, CA 90017
                                        Attention: Long Li
                                        Phone: 213-614-2253
                                        Fax: 213-614-2569
                                        E-mail: lilingf@wellsfargo.com

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        MELLON BANK, N.A.,
                                        as a Lender

                                        By: /s/ Mark W. Rogers
                                            ------------------------------------
                                        Name: Mark W. Rogers
                                        Title: Vice President

                                        Attention: Mark W. Rogers
                                        Phone: 412-234-1888
                                        Fax: 412-236-1840
                                        E-mail: rogers.mw@mellon.com

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        U.S. BANK NATIONAL ASSOCIATION,
                                        as a Lender

                                        By: /s/ Scott J. Bell
                                            ------------------------------------
                                        Name: Scott J. Bell
                                        Title: Senior Vice President

                                        555 S.W. Oak Street, Suite 400
                                        Portland, Oregon 97204
                                        Attention: Scott J. Bell
                                        Phone: (503)275-4809
                                        Fax: (503)275-5428
                                        E-mail: scott.bell@usbank.com

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        THE NORTHERN TRUST COMPANY,
                                        as a Lender

                                        By: /s/ Preeti Sullivan
                                            ------------------------------------
                                        Name: Preeti Sullivan
                                        Title: Vice President

                                        50 South LaSalle Street, L8
                                        Chicago, IL 60603
                                        Attention: Preeti Sullivan
                                        Phone: 312.444.2376
                                        Fax: 312.444.4906
                                        E-mail: pj22@ntrs.com

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        UFJ BANK LIMITED,
                                        as a Lender

                                        By: /s/ Toshiko Boyd
                                            ------------------------------------
                                        Name: Toshiko Boyd
                                        Title: Vice President

                                        Los Angeles Branch
                                        601 S. Figueroa St.
                                        Los Angeles, CA 90017
                                        Attention: Toshiko Boyd
                                        Phone: (213) 533-7407
                                        Fax: (213) 533-7495
                                        E-mail: toshiko_boyd@ufjbank.co.jp

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        The undersigned Departing Lender hereby
                                        acknowledges and agrees that, from and
                                        after the Effective Date, it is no
                                        longer a party to the Existing Credit
                                        Agreement.

                                        KBC BANK N.V.,
                                        as a Departing Lender

                                        By: /s/ Michael Curran
                                            ------------------------------------
                                        Name: Michael Curran
                                              ----------------------------------
                                        Title: First Vice President
                                               ---------------------------------

                                        By: /s/ Diane M. Grimmig
                                            ------------------------------------
                                        Name: Diane M. Grimmig
                                              ----------------------------------
                                        Title: First Vice President
                                               ---------------------------------

                                        125 West 55th Street, 10th Floor
                                        New York, NY 10019
                                        Attention: Credit department
                                        Phone: (212) 541-0657
                                        Fax: (212) 956-5581
                                        E-mail:-
                                                 -------------------------------

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                                        The undersigned Departing Lender hereby
                                        acknowledges and agrees that, from and
                                        after the Effective Date, it is no
                                        longer a party to the Existing Credit
                                        Agreement.

                                        BANCA DI ROMA,
                                        as a Departing Lender

                                        By: /s/ Thomas C. Woodruff
                                            ------------------------------------
                                        Name: Thomas C. Woodruff
                                        Title: Vice President

                                        By: /s/ Luca Balestra
                                            ------------------------------------
                                        Name: Luca Balestra
                                        Title: SVP & Manager

                                        One Market Steuart Tower
                                        Suite 1000
                                        San Francisco, CA 94105
                                        Attention: T. Woodruff
                                        Phone: (415) 977-7308
                                        Fax: (415) 357-9869
                                        E-mail: bdrsf@sbcglobal.net

SIGNATURE PAGE TO AMENDED AND RESTATED CREDIT AGREEMENT

<PAGE>

                               COMMITMENT SCHEDULE

                                   COMMITMENTS

<TABLE>
<CAPTION>
Lender                                 Amount of Commitment   % of Aggregate Commitment
------                                 --------------------   -------------------------
<S>                                    <C>                    <C>
JPMorgan Chase Bank, N.A.                 $    28,928,500               9.643%
Union Bank of California, N.A.            $    28,928,500               9.643%
Citibank, N.A.                            $    28,928,500               9.643%
KeyBank National Association              $    28,928,500               9.643%
Mizuho Corporate Bank, Ltd.               $    21,429,000               7.143%
Bank of America, N.A.                     $    17,143,000               5.714%
The Bank of New York                      $    17,143,000               5.714%
Barclays Bank PLC                         $    17,143,000               5.714%
Credit Suisse, Cayman Islands Branch      $    17,143,000               5.714%
Lehman Brothers Commercial Bank           $    17,143,000               5.714%
UBS Loan Finance LLC                      $    17,143,000               5.714%
Wells Fargo Bank, N.A.                    $    17,143,000               5.714%
Mellon Bank, N.A.                         $    12,857,000               4.286%
U.S. Bank National Association            $    12,857,000               4.286%
The Northern Trust Company                $     8,571,000               2.857%
UFJ Bank Limited                          $     8,571,000               2.857%
TOTAL                                     $300,000,000.00              100.00%
</TABLE>

<PAGE>

                                PRICING SCHEDULE

<TABLE>
<CAPTION>
                      LEVEL I   LEVEL II   LEVEL III   LEVEL IV   LEVEL V   LEVEL VI
APPLICABLE MARGIN      STATUS    STATUS      STATUS     STATUS     STATUS    STATUS
-----------------     -------   --------   ---------   --------   -------   --------
<S>                   <C>       <C>        <C>         <C>        <C>       <C>
Eurodollar Rate        0.30%      0.40%      0.50%       0.65%     0.875%     1.00%
Floating Rate           0.0%       0.0%       0.0%        0.0%       0.0%     0.00%
</TABLE>

<TABLE>
<CAPTION>
                      LEVEL I   LEVEL II   LEVEL III   LEVEL IV   LEVEL V   LEVEL VI
APPLICABLE FEE RATE    STATUS    STATUS     STATUS      STATUS     STATUS    STATUS
-------------------   -------   --------   ---------   --------   -------   --------
<S>                   <C>       <C>        <C>         <C>        <C>       <C>
Commitment Fee Rate    0.08%      0.09%      0.11%       0.15%     0.175%     0.20%
Utilization Margin     0.10%      0.10%      0.10%       0.10%      0.10%     0.10%
</TABLE>

          For the purposes of this Schedule, the following terms have the
following meanings, subject to the final paragraph of this Schedule:

          "Level I Status" exists at any date if, on such date, the Borrower's
Moody's Rating is A3 or better or the Borrower's S&P Rating is A- or better.

          "Level II Status" exists at any date if, on such date, (i) the
Borrower has not qualified for Level I Status and (ii) the Borrower's Moody's
Rating is Baa1 or better or the Borrower's S&P Rating is BBB+ or better.

          "Level III Status" exists at any date if, on such date, (i) the
Borrower has not qualified for Level I Status or Level II Status and (ii) the
Borrower's Moody's Rating is Baa2 or better or the Borrower's S&P Rating is BBB
or better.

          "Level IV Status" exists at any date if, on such date, (i) the
Borrower has not qualified for Level I Status, Level II Status or Level III
Status and (ii) the Borrower's Moody's Rating is Baa3 or better or the
Borrower's S&P Rating is BBB- or better.

          "Level V Status" exists at any date if, on such date, (i) the Borrower
has not qualified for Level I Status, Level II Status, Level III Status or Level
IV Status and (ii) the Borrower's Moody's Rating is Ba1 or better or the
Borrower's S&P Rating is BB+ or better.

          "Level VI Status" exists at any date if, on such date, the Borrower
has not qualified for Level I Status, Level II Status, Level III Status, Level
IV Status or Level V Status.

          "Moody's Rating" means, at any time, the Rating issued by Moody's and
then in effect.

          "Rating" means the credit ratings assigned to the senior unsecured
long-term debt securities of the Borrower without third-party credit enhancement
by the applicable rating

<PAGE>

agencies. If there is no Rating assigned to debt securities, the corporate
credit rating of the Borrower will be used. Any Rating assigned to any other
debt security of the Borrower shall be disregarded. The Rating in effect at any
date is that in effect at the close of business on such date.

          "S&P Rating" means, at any time, the Rating issued by S&P and then in
effect.

          "Status" means Level I Status, Level II Status, Level III Status,
Level IV Status, Level V Status or Level VI Status.

          The Applicable Margin and the Applicable Commitment Fee Rate and the
Applicable Utilization Margin shall be determined in accordance with the
foregoing table based on the Borrower's Status as determined from its
then-current Ratings. If at any time the Borrower has no Moody's Rating or no
S&P Rating, Level VI Status shall exist.

          In the case of split Ratings from S&P or Moody's, the Rating to be
used to determine which Status applies is the higher of the two (e.g., BBB+/Baa2
results in Level II Status); provided that if the split is more than one full
rating category, the rating category immediately below the higher of the two
rating categories will be used (e.g., BBB+/Baa3 results in Level III Status, as
does BBB+/Ba1).

<PAGE>

                                  SCHEDULE 2.20

                           EXISTING LETTERS OF CREDIT

<TABLE>
<CAPTION>
Letter of Credit No.       Amount                 Beneficiary
--------------------   -------------   ---------------------------------
<S>                    <C>             <C>
No. P-240053 *         $  570,000.00   New Mexico Self-Insurer's
                                       Guarantee Fund C/O Director,
                                       New Mexico Worker's
                                       Compensation

No. P-226706 *         $3,840,438.00   Sierra Pacific Power Company/
                                       Nevada Power Company

No. P-243249 *         $1,311,298.00   Western Regional Required System
                                       Trust Account on behalf of Nevada
                                       Power Company

No. P-230876 *         $2,036,250.00   Nevada Power Company/
                                       Sierra Pacific Power Company

No. P-236181 *         $3,247,788.00   Industrial Commission of Arizona

*    Issuing Bank - JPMorgan Chase Bank, N.A.
</TABLE>

<PAGE>

                                    EXHIBIT A

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

     This Assignment and Assumption Agreement (the "Assignment and Assumption")
is dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee]
(the "Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Amended and Restated Credit Agreement identified
below (as amended, the "Credit Agreement"), receipt of a copy of which is hereby
acknowledged by the Assignee. The Terms and Conditions set forth in Annex 1
attached hereto are hereby agreed to and incorporated herein by reference and
made a part of this Assignment and Assumption as if set forth herein in full.

     For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Terms and
Conditions and the Credit Agreement, as of the Effective Date inserted by the
Agent as contemplated below, the interest in and to all of the Assignor's rights
and obligations in its capacity as a Lender under the Credit Agreement and any
other documents or instruments delivered pursuant thereto that represents the
amount and percentage interest identified below of all of the Assignor's
outstanding rights and obligations under the respective facilities identified
below (including without limitation any guaranties included in such facilities
and, to the extent permitted to be assigned under applicable law, all claims
(including without limitation contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity), suits, causes of
action and any other right of the Assignor against any Person whether known or
unknown arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby) (the "Assigned Interest"). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

1.   Assignor:  _________________________

2.   Assignee:  _________________________ [and is an Affiliate/Approved
                Fund of [identify Lender]](1)

3.   Borrower:  Pinnacle West Capital Corporation

4.   Agent:     JPMorgan Chase Bank, N.A., as agent under the Credit

----------
(1)  Select as applicable.

<PAGE>

                          Agreement

5.   Assignee: _________________________

6.   Credit Agreement:  The Amended and Restated Credit Agreement dated as of
                        December 9, 2005 among Pinnacle West Capital
                        Corporation, the Lenders party thereto, JPMorgan Chase
                        Bank, N.A., as Agent, and the other agents party
                        thereto.

7.   Assigned Interest:

<TABLE>
<CAPTION>
                              Aggregate Amount of                             Percentage Assigned of
                            Commitment/ Outstanding   Amount of Commitment/   Commitment / Aggregate
                            Credit Exposure for all     Outstanding Credit      Outstanding Credit
Facility Assigned                   Lenders*            Exposure Assigned*          Exposure(2)
-----------------           -----------------------   ---------------------   ----------------------
<S>                         <C>                       <C>                     <C>
Revolving Credit Facility   $                         $                       _______%
</TABLE>

8.   Trade Date: ___________________________(3)

Effective Date: ____________________, 20__ [TO BE INSERTED BY AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE AGENT.]

     The terms set forth in this Assignment and Assumption are hereby agreed to:

                                        ASSIGNOR
                                        [NAME OF ASSIGNOR]

                                        By:
                                            ------------------------------------
                                        Title:
                                               ---------------------------------

                                        ASSIGNEE
                                        [NAME OF ASSIGNEE]

                                        By:
                                            ------------------------------------
                                        Title:
                                               ---------------------------------

----------
*    Amount to be adjusted by the counterparties to take into account any
     payments or prepayments made between the Trade Date and the Effective Date.

(2)  Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
     of all Lenders thereunder.

(3)  Insert if satisfaction of minimum amounts is to be determined as of the
     Trade Date.

<PAGE>

[Consented to and](4) Accepted:

JPMORGAN CHASE BANK, N.A., as Agent

By:
    ------------------------------------
Title:
       ---------------------------------

[Consented to:](5)

PINNACLE WEST CAPITAL CORPORATION

By:
    ------------------------------------
Title:
       ---------------------------------

----------
(4)  To be added only if the consent of the Agent is required by the Credit
     Agreement.

(5)  To be added only if the consent of the Borrower is required by the terms of
     the Credit Agreement.

<PAGE>

                                     ANNEX 1
                            TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

     1. Representations and Warranties.

          1.1 Assignor. The Assignor represents and warrants that (i) it is the
legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest
is free and clear of any lien, encumbrance or other adverse claim and (iii) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby. Neither the Assignor nor any of its officers, directors,
employees, agents or attorneys shall be responsible for (i) any statements,
warranties or representations made in or in connection with the Credit Agreement
or any other Loan Document, (ii) the execution, legality, validity,
enforceability, genuineness, sufficiency, perfection, priority, collectibility,
or value of the Loan Documents or any collateral thereunder, (iii) the financial
condition of the Borrower, any of its Subsidiaries or Affiliates or any other
Person obligated in respect of any Loan Document, (iv) the performance or
observance by the Borrower, any of its Subsidiaries or Affiliates or any other
Person of any of their respective obligations under any Loan Documents, (v)
inspecting any of the property, books or records of the Borrower, or any
guarantor, or (vi) any mistake, error of judgment, or action taken or omitted to
be taken in connection with the Credit Extensions or the Loan Documents.

          1.2. Assignee. The Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) from
and after the Effective Date, it shall be bound by the provisions of the Credit
Agreement as a Lender thereunder and, to the extent of the Assigned Interest,
shall have the obligations of a Lender thereunder, (iii) agrees that its payment
instructions and notice instructions are as set forth in Schedule 1 to this
Assignment and Assumption, (iv) confirms that none of the funds, monies, assets
or other consideration being used to make the purchase and assumption hereunder
are "plan assets" as defined under ERISA and that its rights, benefits and
interests in and under the Loan Documents will not be "plan assets" under ERISA,
(v) agrees to indemnify and hold the Assignor harmless against all losses, costs
and expenses (including, without limitation, reasonable attorneys' fees) and
liabilities incurred by the Assignor in connection with or arising in any manner
from the Assignee's non-performance of the obligations assumed under this
Assignment and Assumption, (vi) it has received a copy of the Credit Agreement,
together with copies of financial statements and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Agent or any other Lender, and (vii)
attached as Schedule 1 to this Assignment and Assumption is any documentation
required to be delivered by the Assignee with respect to its tax status pursuant
to the terms of the Credit Agreement, duly completed and executed by the
Assignee and (b) agrees that (i) it will, independently and without reliance on
the Agent, the Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action

<PAGE>

under the Loan Documents, and (ii) it will perform in accordance with their
terms all of the obligations which by the terms of the Loan Documents are
required to be performed by it as a Lender.

     2. Payments. The Assignee shall pay the Assignor, on the Effective Date,
the amount agreed to by the Assignor and the Assignee. From and after the
Effective Date, the Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignor for amounts which have accrued to but excluding the Effective Date
and to the Assignee for amounts which have accrued from and after the Effective
Date.

     3. General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and Assumption shall be governed
by, and construed in accordance with, the law of the State of New York.

<PAGE>

                          ADMINISTRATIVE QUESTIONNAIRE

<PAGE>

              US AND NON-US TAX INFORMATION REPORTING REQUIREMENTS

<PAGE>

                                    EXHIBIT B

                                      NOTE

                                                                          [Date]

     PINNACLE WEST CAPITAL CORPORATION, an Arizona corporation (the "Borrower"),
promises to pay to the order of ____________________________________ (the
"Lender") the aggregate unpaid principal amount of all Loans made by the Lender
to the Borrower pursuant to Article II of the Agreement (as hereinafter
defined), in immediately available funds at the address of JPMorgan Chase Bank,
N.A. in New York, New York, as Agent, specified pursuant to Section 2.12 of the
Agreement, together with interest on the unpaid principal amount hereof at the
rates and on the dates set forth in the Agreement. The Borrower shall pay the
principal of and accrued and unpaid interest on the Loans in full on the
Facility Termination Date, and the Borrower and shall make such mandatory
payments as are required to be made under the terms of Article II of the
Agreement.

     The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.

     This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Amended and Restated Credit Agreement dated as of December 9,
2005 (which, as it may be amended or modified and in effect from time to time,
is herein called the "Agreement"), among the Borrower, the lenders party
thereto, including the Lender, JPMorgan Chase Bank, N.A., as Administrative
Agent, and the other agents party thereto, to which Agreement reference is
hereby made for a statement of the terms and conditions governing this Note,
including the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the Agreement.

                                        PINNACLE WEST CAPITAL CORPORATION

                                        By:
                                            ------------------------------------
                                        Print Name:
                                                    ----------------------------
                                        Title:
                                               ---------------------------------

<PAGE>

                   SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
                                       TO

                     NOTE OF ______________________________,
                          DATED ______________________,

<TABLE>
<CAPTION>
       Principal     Maturity    Principal
         Amount    of Interest     Amount     Unpaid
Date    of Loan       Period        Paid     Balance
----   ---------   -----------   ---------   -------
<S>    <C>         <C>           <C>         <C>
</TABLE>

<PAGE>

                                    EXHIBIT C

                      FORM OF INCREASING LENDER SUPPLEMENT

          INCREASING LENDER SUPPLEMENT, dated __________, 20___ (this
"Supplement"), by and among each of the signatories hereto, to the Amended and
Restated Credit Agreement, dated as of December 9, 2005 (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Pinnacle West Capital Corporation (the "Borrower"), the Lenders party
thereto, JPMorgan Chase Bank, N.A., as administrative agent (in such capacity,
the "Administrative Agent") and the other agents party thereto.

                                   WITNESSETH

          WHEREAS, pursuant to Section 2.21 of the Credit Agreement, the
Borrower has the right, subject to the terms and conditions thereof, to
effectuate from time to time an increase in the aggregate Commitments under the
Credit Agreement by requesting one or more Lenders to increase the amount of its
Commitment;

          WHEREAS, the Borrower has given notice to the Administrative Agent of
its intention to increase the aggregate Commitments pursuant to such Section
2.21; and

          WHEREAS, pursuant to Section 2.21 of the Credit Agreement, the
undersigned Increasing Lender now desires to increase the amount of its
Commitment under the Credit Agreement by executing and delivering to the
Borrower and the Administrative Agent this Supplement;

          NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

          1. The undersigned Increasing Lender agrees, subject to the terms and
conditions of the Credit Agreement, that on the date of this Supplement it shall
have its Commitment increased by $[__________], thereby making the aggregate
amount of its total Commitments equal to $[__________].

          2. The Borrower hereby represents and warrants that no Default or
Unmatured Default has occurred and is continuing on and as of the date hereof.

          3. Terms defined in the Credit Agreement shall have their defined
meanings when used herein.

          4. This Supplement shall be governed by, and construed in accordance
with, the laws of the State of New York.

          5. This Supplement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same document.

<PAGE>

          IN WITNESS WHEREOF, each of the undersigned has caused this Supplement
to be executed and delivered by a duly authorized officer as of the date first
above written.

                                        [INSERT NAME OF INCREASING LENDER]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

Accepted and agreed to as of the date first written above:

PINNACLE WEST CAPITAL CORPORATION

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

Acknowledged as of the date first written above:

JPMORGAN CHASE BANK, N.A.
as Administrative Agent

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

<PAGE>

                                    EXHIBIT D

                      FORM OF AUGMENTING LENDER SUPPLEMENT

          AUGMENTING LENDER SUPPLEMENT, dated __________, 20___ (this
"Supplement"), to the Amended and Restated Credit Agreement, dated as of
December 9, 2005 (as amended, restated, supplemented or otherwise modified from
time to time, the "Credit Agreement"), among Pinnacle West Capital Corporation
(the "Borrower"), the Lenders party thereto, JPMorgan Chase Bank, N.A., as
administrative agent (in such capacity, the "Administrative Agent") and the
other agents party thereto.

                                   WITNESSETH

          WHEREAS, the Credit Agreement provides in Section 2.21 thereof that
any bank, financial institution or other entity selected by the Administrative
Agent in consultation with the Borrower may extend Commitments under the Credit
Agreement, by executing and delivering to the Borrower and the Administrative
Agent a supplement to the Credit Agreement in substantially the form of this
Supplement; and

          WHEREAS, the undersigned Augmenting Lender was not an original party
to the Agreement but now desires to become a party thereto;

          NOW, THEREFORE, each of the parties hereto hereby agrees as follows:

          1. The undersigned Augmenting Lender agrees to be bound by the
provisions of the Credit Agreement and agrees that it shall, on the date of this
Supplement, become a Lender for all purposes of the Credit Agreement to the same
extent as if originally a party thereto, with a Commitment of $[__________].

          2. The undersigned Augmenting Lender (a) represents and warrants that
it has full power and authority, and has taken all action necessary, to execute
and deliver this Supplement and to consummate the transactions contemplated
hereby and by the Credit Agreement and to become a Lender under the Credit
Agreement; (b) confirms that it has received a copy of the Credit Agreement,
together with copies of the most recent financial statements delivered pursuant
to Section 6.1 thereof, as applicable, and has reviewed such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Supplement; (c) agrees that it will, independently
and without reliance upon the Administrative Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement or any other instrument or document furnished pursuant
hereto or thereto; (d) appoints and authorizes the Administrative Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement or any other instrument or document furnished
pursuant hereto or thereto as are delegated to the Administrative Agent by the
terms thereof, together with such powers as are incidental thereto; (e) agrees
that it will be bound by the provisions of the Credit Agreement and will perform
in accordance with its terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (f) if it
is a Non-U.S. Lender,

<PAGE>

attached to this Supplement is any documentation required to be delivered by it
pursuant to the terms of the Credit Agreement, duly completed and executed by
the undersigned.

          3. The undersigned's address for notices for the purposes of the
Credit Agreement is as follows:

               [___________]

          4. The Borrower hereby represents and warrants that no Default or
Unmatured Default has occurred and is continuing on and as of the date hereof.

          5. Terms defined in the Credit Agreement shall have their defined
meanings when used herein.

          6. This Supplement shall be governed by, and construed in accordance
with, the laws of the State of New York.

          7. This Supplement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same document.

          IN WITNESS WHEREOF, each of the undersigned has caused this Supplement
to be executed and delivered by a duly authorized officer as of the date first
above written.

                                        [INSERT NAME OF AUGMENTING LENDER]

                                        By:
                                            ------------------------------------
                                        Name:
                                              ----------------------------------
                                        Title:
                                               ---------------------------------

Accepted and agreed to as of the date first written above:

PINNACLE WEST CAPITAL CORPORATION

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

Acknowledged as of the date first written above:

JPMORGAN CHASE BANK, N.A., as Administrative Agent

By:
    ---------------------------------
Name:
      -------------------------------
Title:
       ------------------------------

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