-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K/w6jXm+PCsTx/ALhLVrZflC5JX3pJTHMRWgxY6nPlTFl+bN7vPVtl7d7QV65Upw 9rqL5dq7bVKBMW37LL5png== 0000950120-05-000292.txt : 20050418 0000950120-05-000292.hdr.sgml : 20050418 20050418150408 ACCESSION NUMBER: 0000950120-05-000292 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050415 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050418 DATE AS OF CHANGE: 20050418 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNISOURCE ENERGY CORP CENTRAL INDEX KEY: 0000941138 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 860786732 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13739 FILM NUMBER: 05756447 BUSINESS ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE STREET 2: SUITE 100 CITY: TUCSON STATE: AZ ZIP: 85701 BUSINESS PHONE: 520-571-4000 MAIL ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE, SUITE 100 STREET 2: P.O. BOX 711 CITY: TUCSON STATE: AZ ZIP: 85702 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TUCSON ELECTRIC POWER CO CENTRAL INDEX KEY: 0000100122 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 860062700 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05924 FILM NUMBER: 05756448 BUSINESS ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE STREET 2: SUITE 100 CITY: TUCSON STATE: AZ ZIP: 85701 BUSINESS PHONE: 520-571-4000 MAIL ADDRESS: STREET 1: ONE SOUTH CHURCH AVENUE, SUITE 100 STREET 2: P.O. BOX 711 CITY: TUCSON STATE: AZ ZIP: 85702 FORMER COMPANY: FORMER CONFORMED NAME: TUCSON GAS & ELECTRIC CO /AZ/ DATE OF NAME CHANGE: 19790528 8-K 1 form8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): April 15, 2005 IRS Employer Commission Registrant; State of Incorporation; Identification File Number Address; and Telephone Number Number - ----------- ----------------------------------- -------------- 1-13739 UNISOURCE ENERGY CORPORATION 86-0786732 (An Arizona Corporation) One South Church Avenue, Suite 100 Tucson, AZ 85701 (520) 571-4000 1-5924 TUCSON ELECTRIC POWER COMPANY 86-0062700 (An Arizona Corporation) One South Church Avenue, Suite 100 Tucson, AZ 85701 (520) 571-4000 Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT. - ------------------------------------------------------- UNISOURCE ENERGY CORPORATION CREDIT AGREEMENT On April 15, 2005, UniSource Energy Corporation ("UniSource Energy") entered into a $105 million five-year credit agreement with Union Bank of California, N.A., as administrative agent, lead arranger and lender ("Union Bank"), and a group of lenders (the "UniSource Credit Agreement"). The UniSource Credit Agreement includes a $90 million term loan facility and a $15 million revolving credit facility. UniSource Energy expects to borrow the entire $90 million available under the term loan facility by June 30, 2005 and use the loan proceeds to make a capital contribution to TEP. It is anticipated that this capital contribution, together with the proceeds TEP received from a $95 million inter-company note repayment in March 2005 and any additional capital contributions to TEP from the proceeds of UniSource Energy's issuance of convertible senior notes in March 2005, will be used by TEP to retire or repurchase up to $225 million of its outstanding debt obligations. UniSource Energy expects that borrowings will be made from time to time under the revolving credit facility for working capital purposes. Interest is payable on borrowings under the UniSource Credit Agreement at a Eurodollar rate or Alternate Base Rate rate. Eurodollar loans would bear interest at adjusted LIBOR plus 1.75%. Alternate Base Rate loans would bear interest in an amount equal to the sum of (x) the greater of the federal funds rate plus 1/2 of 1% or Union Bank's reference rate, and (y) 0.75%. In the event that, after June 30, 2005, regulatory restrictions do not give TEP the ability to pay 100% of its current year net income as dividends, interest rates would increase by 0.25%. UniSource Energy has entered into a pledge agreement ("Pledge Agreement") with Union Bank to secure its obligations under the UniSource Credit Agreement with a pledge of the capital stock of Millennium Energy Holdings, Inc., UES and UniSource Energy Development Company. The UniSource Credit Agreement will expire on April 15, 2010, at which time all outstanding amounts under the UniSource Credit Agreement will be due and payable. In addition, UniSource is required to repay the outstanding term loans, in quarterly installments of $1.25 million, commencing in June 2005 with the balance due at maturity. The UniSource Credit Agreement contains a number of covenants which restrict UniSource Energy and its subsidiaries, including restrictions on additional indebtedness, liens, mergers, sales of assets and investments and acquisitions. The UniSource Credit Agreement also contains several financial covenants including: (a) a minimum cash flow to interest coverage ratio determined on a UniSource Energy standalone basis and (b) a maximum leverage ratio determined on a consolidated basis. Under the terms of the UniSource Credit Agreement, UniSource Energy may pay dividends so long as it maintains compliance with the agreement and if, on the date of any dividend payment and after giving effect to the dividend payment, the amount of unrestricted cash of UniSource Energy and its subsidiaries plus the unused portion of the revolving credit facility exceeds $15 million. Upon the occurrence and continuance of an event of default under the UniSource Credit Agreement, outstanding borrowings may become immediately due and payable and the lenders may exercise remedies under the Pledge Agreement. Events of default under the UniSource Credit Agreement include failure to make payments required thereunder or to comply with the covenants contained therein and certain events of bankruptcy or the commencement of similar liquidation or reorganization proceedings with respect to UniSource Energy or any Significant Subsidiaries (as defined in the UniSource Credit Agreement to include TEP and certain other subsidiaries). In addition, an event of default would include the failure of UniSource Energy or a Significant Subsidiary to make required payments on indebtedness in excess of $20 million or the events giving the holders of such indebtedness the right to require repayment of such indebtedness. UNS ELECTRIC, INC./UNS GAS, INC. CREDIT AGREEMENT On April 15, 2005, UNS Electric, Inc. ("UNS Electric") and UNS Gas, Inc. ("UNS Gas"), each as a borrower (the "Borrowers"), and UES, as guarantor, entered into a $40 million three-year unsecured revolving credit agreement with Union Bank, as administrative agent, lead arranger and lender, and a group of lenders (the "UNS Electric/UNS Gas Credit Agreement" and, together with the UniSource Credit Agreement, the "Credit Agreements"). The proceeds of any loans or letters of credit will be used for general corporate purposes. Each Borrower will be severally liable for its borrowings under the UNS Electric/UNS Gas Credit Agreement, with UES guaranteeing the obligations of both Borrowers. The maximum borrowings outstanding at any one time for a Borrower under the agreement is not to exceed $30 million. UNS Gas and UNS Electric expect to draw upon the UNS Electric/UNS Gas Credit Agreement from time to time primarily for seasonal working capital purposes. Interest is payable on borrowings under the UNS Electric/UNS Gas Credit Agreement at a Eurodollar rate or Alternate Base Rate rate. Eurodollar loans will bear interest at LIBOR plus 1.50%. Alternate Base Rate loans will bear interest in an amount equal to the sum of (x) the greater of the federal funds rate plus 1/2 of 1% or Union Bank's reference rate, and (y) 0.50%. The UNS Electric/UNS Gas Credit Agreement will expire on April 15, 2008, at which time all outstanding amounts under the UNS Electric/UNS Gas Credit Agreement will be due and payable. The UNS Electric/UNS Gas Credit Agreement contains a number of covenants which restrict the Borrowers, UES and, in certain cases, their respective subsidiaries, including restrictions on additional indebtedness, liens, mergers and sales of assets. The UNS Electric/UNS Gas Credit Agreement also contains several financial covenants including: (a) a maximum consolidated leverage ratio and (b) a minimum cash flow to interest coverage ratio, in each case determined for each Borrower on a standalone basis. Upon the occurrence and continuance of an event of default in respect of a Borrower or UES under the UNS Electric/UNS Gas Credit Agreement, outstanding borrowings of such Borrower may become immediately due and payable. Events of default under the UNS Electric/UNS Gas Credit Agreement include failure to make payments required thereunder or to comply with the covenants contained therein and certain events of bankruptcy or the commencement of similar liquidation or reorganization proceedings or a change of control of the Borrowers. In addition, an event of default may occur if the Borrowers or UES, or any subsidiary of UES, defaults on any payments required in respect of certain indebtedness that is outstanding in an aggregate principal amount of at least $4 million or if any such indebtedness becomes due or capable of being called for payment prior to its scheduled payment date or if there is a default in the performance or compliance with the other terms of such indebtedness and, as a result of such default, such indebtedness has become, or has been declared, due and payable, prior to its scheduled payment date. ITEM 2.03 - CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER - ---------------------------------------------------------------------------- AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT. - ------------------------------------------------- Reference is made to the information set forth under Item 1.01 above, which information is incorporated into this Item 2.03 by reference. ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS. - ---------------------------------------------- Exhibit 4.1 UniSource Credit Agreement, dated as of April 15, 2005, among UniSource Energy Corporation, Union Bank of California, N.A., as Administrative Agent, and a group of lenders Exhibit 4.2 Pledge Agreement, dated as of April 15, 2005, between UniSource Energy Corporation and Union Bank of California, N.A., as Administrative Agent Exhibit 4.3 UNS Electric/UNS Gas Credit Agreement, dated as of April 15, 2005, among UNS Electric, Inc., UNS Gas, Inc., UniSource Energy Services, Inc., Union Bank of California, N.A., as Administrative Agent, and a group of lenders SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: April 18, 2005 UNISOURCE ENERGY CORPORATION ---------------------------- (Registrant) /s/ Kevin P. Larson ---------------------------- Vice President and Principal Financial Officer Date: April 18, 2005 TUCSON ELECTRIC POWER COMPANY ----------------------------- (Registrant) /s/ Kevin P. Larson ---------------------------- Vice President and Principal Financial Officer EX-4 2 e930582_ex4-1.txt EX. 4.1 - UNISOURCE ENERGY CREDIT AGREEMENT [EXECUTION COPY] ================================================================================ CREDIT AGREEMENT dated as of April 15, 2005 among UNISOURCE ENERGY CORPORATION, an Arizona corporation, as Borrower, THE LENDERS PARTY HERETO, THE BANK OF NEW YORK, as Syndication Agent, COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Documentation Agent, and UNION BANK OF CALIFORNIA, N.A., as Administrative Agent ================================================================================ UNION BANK OF CALIFORNIA, N.A., as Lead Arranger TABLE OF CONTENTS Page ---- ARTICLE I Definitions SECTION 1.01. Defined Terms.................................................1 SECTION 1.02. Classification of Loans and Borrowings.......................22 SECTION 1.03. Terms Generally..............................................22 SECTION 1.04. Accounting Terms; GAAP.......................................23 SECTION 1.05. Pro Forma Calculations.......................................23 ARTICLE II The Credits SECTION 2.01. Commitments..................................................23 SECTION 2.02. Loans and Borrowings.........................................24 SECTION 2.03. Requests for Borrowings......................................24 SECTION 2.04. Funding of Borrowings........................................25 SECTION 2.05. Interest Elections...........................................25 SECTION 2.06. Termination and Reduction of Commitments.....................27 SECTION 2.07. Repayment of Loans; Evidence of Debt.........................27 SECTION 2.08. Amortization of Term Loans...................................28 SECTION 2.09. Prepayment of Loans..........................................28 SECTION 2.10. Fees.........................................................29 SECTION 2.11. Interest.....................................................30 SECTION 2.12. Alternate Rate of Interest...................................31 SECTION 2.13. Increased Costs..............................................31 SECTION 2.14. Break Funding Payments.......................................32 SECTION 2.15. Taxes........................................................33 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs..34 SECTION 2.17. Mitigation Obligations; Replacement of Lenders...............35 SECTION 2.18. Illegality...................................................36 ARTICLE III Representations and Warranties SECTION 3.01. Organization; Powers.........................................36 SECTION 3.02. Authorization; Enforceability................................36 SECTION 3.03. Governmental Approvals; No Conflicts.........................37 SECTION 3.04. Financial Condition; No Material Adverse Change..............37 SECTION 3.05. Properties...................................................37 SECTION 3.06. Litigation and Environmental Matters.........................38 SECTION 3.07. Compliance with Laws and Agreements..........................38 SECTION 3.08. Federal Regulations..........................................38 SECTION 3.09. Investment and Holding Company Status........................39 SECTION 3.10. Taxes........................................................39 SECTION 3.11. ERISA........................................................39 SECTION 3.12. Security Documents...........................................39 SECTION 3.13. Disclosure...................................................40 i TABLE OF CONTENTS (Continued) Page ---- SECTION 3.14. Solvency.....................................................40 SECTION 3.15. Labor Matters................................................40 SECTION 3.16. Anti-Terrorism Laws..........................................40 SECTION 3.17. Ownership of Subsidiaries....................................41 ARTICLE IV Conditions Precedent SECTION 4.01. Effective Date...............................................41 SECTION 4.02. Each Credit Event............................................43 ARTICLE V Affirmative Covenants SECTION 5.01. Financial Statements; Ratings Change and Other Information...44 SECTION 5.02. Notices of Material Events...................................46 SECTION 5.03. Information Regarding Collateral.............................46 SECTION 5.04. Existence; Conduct of Business...............................47 SECTION 5.05. Payment of Obligations.......................................47 SECTION 5.06. Maintenance of Properties; Insurance.........................47 SECTION 5.07. Books and Records; Inspection Rights.........................47 SECTION 5.08. Compliance with Laws.........................................48 SECTION 5.09. Use of Proceeds..............................................48 SECTION 5.10. Environmental Laws...........................................48 SECTION 5.11. Further Assurances...........................................48 SECTION 5.12. Additional Security..........................................49 SECTION 5.13. TEP Recapitalization.........................................49 SECTION 5.14. Maintain Ownership of Subsidiaries...........................49 ARTICLE VI Negative Covenants SECTION 6.01. Indebtedness.................................................49 SECTION 6.02. Liens........................................................50 SECTION 6.03. Fundamental Changes..........................................51 SECTION 6.04. Investments, Loans, Advances and Acquisitions................53 SECTION 6.05. Asset Sales..................................................55 SECTION 6.06. Sale and Leaseback Transactions..............................56 SECTION 6.07. Limitation on Hedge Agreements...............................56 SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness........56 SECTION 6.09. Transactions with Affiliates.................................57 SECTION 6.10. Restrictive Agreements.......................................57 SECTION 6.11. Amendment of Material Documents..............................58 SECTION 6.12. Cash Coverage Ratio..........................................58 SECTION 6.13. Leverage Test................................................58 ARTICLE VII Events of Default..............................................59 ARTICLE VIII The Administrative Agent.......................................61 ii TABLE OF CONTENTS (Continued) Page ---- ARTICLE IX Miscellaneous SECTION 9.01. Notices......................................................64 SECTION 9.02. Waivers; Amendments..........................................64 SECTION 9.03. Expenses; Indemnity; Damage Waiver...........................66 SECTION 9.04. Successors and Assigns.......................................67 SECTION 9.05. Survival.....................................................70 SECTION 9.06. Counterparts; Integration; Effectiveness.....................70 SECTION 9.07. Severability.................................................71 SECTION 9.08. Right of Setoff..............................................71 SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process...71 SECTION 9.10. WAIVER OF JURY TRIAL.........................................72 SECTION 9.11. Headings.....................................................72 SECTION 9.12. Confidentiality..............................................72 SECTION 9.13. Interest Rate Limitation.....................................73 SECTION 9.14 Patriot Act Notice...........................................73 SCHEDULES: - --------- Schedule 2.01 - Commitments Schedule 3.04 - Acquisitions Schedule 6.01 - Existing Indebtedness Schedule 6.02 - Existing Liens Schedule 6.04 - Existing Investments Schedule 6.10 - Existing Restrictions EXHIBITS: Exhibit A - Form of Assignment and Assumption Exhibit B - Form of Borrower Pledge Agreement Exhibit C - Form of Opinion of Thelen Reid & Priest LLP, New York counsel for the Borrower Exhibit D - Form of Opinion of the General Counsel of the Borrower iii This CREDIT AGREEMENT, dated as of April 15, 2005, among UNISOURCE ENERGY CORPORATION, the LENDERS party hereto, THE BANK OF NEW YORK, as Syndication Agent, COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Documentation Agent, and UNION BANK OF CALIFORNIA, N.A., as Administrative Agent. The parties hereto agree as follows: ARTICLE I Definitions ----------- SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "ACC" means the Arizona Corporation Commission. "Acquired EBITDA" means, with respect to any Pro Forma Entity for any period, the Consolidated Net Income of such Pro Forma Entity for such period plus the sum, without duplication, of the amounts for such period of the following to the extent deducted in calculating such Consolidated Net Income: (a) interest expense, (b) tax expense based on income, (c) depreciation expense, (d) amortization expense, including amortization of deferred financing fees, (e) extraordinary losses and non-recurring charges, (f) non-cash charges (including the non-cash portion of pension expense and non-cash interest expense), (g) losses on asset sales, (h) expenses or charges incurred in connection with the issuance of debt or equity securities, (i) deductions for minority interest expense and (j) restructuring charges or provisions, minus, to the extent added in computing such Consolidated Net Income, without duplication, the sum of (i) interest income, (ii) extraordinary or non-recurring gains, (iii) gains on asset sales, (iv) additions for minority interest income and (v) other non-cash items increasing Consolidated Net Income of such Pro Forma Entity, all as determined on a consolidated basis in accordance with GAAP. "Acquired Entity or Business" shall have the meaning provided in the definition of the term "Consolidated EBITDA". "Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate. "Administrative Agent" means Union Bank of California, N.A., in its capacity as administrative agent for the Lenders. 1 "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Administrative Agent. "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. "Agents" means the Syndication Agent, the Documentation Agent and the Administrative Agent. "Agreement" means this Credit Agreement, dated as of April 15, 2005, by and among the Borrower, the Lenders party hereto, the Syndication Agent, the Documentation Agent and the Administrative Agent. "Alternate Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Reference Rate in effect on such day, and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Reference Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Reference Rate or the Federal Funds Effective Rate, respectively. "Anti-Terrorism Laws" has the meaning assigned to such term in Section 3.16(a). "Applicable Percentage" means (a) with respect to any Revolving Lender, the percentage of the total Revolving Commitments represented by such Lender's Revolving Commitment, and (b) with respect to any Term Lender, (i) prior to the Initial Funding Date, the percentage of the total Term Commitments represented by such Lender's Term Commitment, and (ii) thereafter, the percentage of the principal amount of the Term Loans represented by such Lender's Term Loans. If the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments. "Applicable Rate" means, for any day, (a) for each ABR Loan, a rate per annum equal to 0.75% and (b) for each Eurodollar Loan, a rate per annum equal to 1.75%; provided, however, that in the event that, and at all times during which, after June 30, 2005, TEP shall not have the ability under all Requirements of Law (including all orders of the ACC) to distribute 100% of its current year net income to its shareholders, "Applicable Rate" shall mean (i) for each ABR Loan, a rate per annum equal to 1.0% and (ii) for each Eurodollar Loan, a rate per annum equal to 2.0%. "Approved Fund" means, with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor. "Arranger" means Union Bank, as Lead Arranger for the credit facilities established by this Agreement. 2 "Assignment and Assumption" means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent. "Board" means the Board of Governors of the Federal Reserve System of the United States of America. "Borrower" means UniSource Energy Corporation, an Arizona corporation. "Borrower Cash Flow" means, for any period, (a) the aggregate amount of Restricted Payments received by the Borrower from the Subsidiaries during such period; plus (b) the aggregate amount of payments received by the Borrower during such period under the UniSource Tax Sharing Agreement; plus (c) the aggregate amount of cash interest earnings and cash dividends received by the Borrower during such period in respect of any Permitted Investments of the Borrower; minus (d) the aggregate amount of Taxes paid by the Borrower in cash during such period. "Borrower Debt Service" means, for any period, (a) the aggregate amount of all cash payments made by the Borrower during such period that, in accordance with GAAP, are or should be included in "interest paid, net of amounts capitalized" and "capital lease interest paid" reflected in the statement of cash flows for the Borrower on a stand alone basis, plus (b) the aggregate amount of all scheduled principal payments on Indebtedness of the Borrower made or required to be made by the Borrower during such period (including any such scheduled principal payments required to be made during such period that were prepaid by the Borrower during such period), determined for the Borrower on a stand alone basis; provided, however, that principal and interest payments with respect to a debt obligation in the principal amount of $95,000,000 owed by the Borrower to TEP, which debt obligation (and all accrued interest thereon) was repaid in full on March 1, 2005, shall be excluded for purposes of calculating Borrower Debt Service. "Borrower Pledge Agreement" means the Borrower Pledge Agreement in the form of Exhibit B, to be executed and delivered by the Borrower. "Borrower Subsidiary" means a Subsidiary of the Borrower that is not a TEP Subsidiary or a UES Subsidiary. "Borrowing" means Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect. "Borrowing Request" means a request by the Borrower for a Borrowing in accordance with Section 2.03. "Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banks in Los Angeles, California or New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term "Business Day" shall also exclude 3 any day on which banks are not open for dealings in dollar deposits in the London interbank market. "Capital Lease Investment" of any Person means the aggregate outstanding capitalized amount of Capital Lease Obligations of such Person and its subsidiaries that are owned by such Person or its subsidiaries and in respect of which such Person or one or more of its subsidiaries has the right to receive all future payments to be made. "Capital Lease Obligations" of any Person means the obligations of such Person and its subsidiaries to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Capital Stock" means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing. "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by any Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender or by such Lender's holding company, if any) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Class", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans or Term Loans, and when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment or Term Commitment. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means all "Collateral", as defined in any applicable Security Document. "Commitment" means a Revolving Commitment, a Term Commitment or any combination thereof (as the context requires). "Consolidated EBITDA" means, with respect to any Person for any period, Consolidated Net Income of such Person and its subsidiaries for such period plus, to the extent deducted in computing such Consolidated Net Income, without duplication, the sum of (a) interest expense, (b) any tax expense based on income, (c) depreciation expense, (d) amortization expense, including amortization of deferred financing fees, (e) extraordinary losses and non-recurring charges, (f) non-cash charges (including the non-cash portion of pension expense and non-cash interest expense), (g) losses on asset sales, (h) 4 restructuring charges or provisions, (i) in the case of any period that includes a period ending during the fiscal year 2005, Transaction Expenses, (j) expenses or charges incurred in connection with any issuance of debt or equity securities, (k) any fees and expenses related to Permitted Acquisitions, (l) deductions for minority interest expense and (m) one-time expenses resulting from the consummation of the Transactions, minus, to the extent added in computing such Consolidated Net Income, without duplication, the sum of (i) interest income, (ii) extraordinary or non-recurring gains, (iii) gains on asset sales, (iv) additions for minority interest income and (v) other non-cash items increasing such Consolidated Net Income, all as determined on a consolidated basis in accordance with GAAP; provided that (A) there shall be included in determining Consolidated EBITDA for the Borrower for any period the Acquired EBITDA of any Person, property, business or asset acquired to the extent not subsequently sold, transferred or otherwise disposed of (but not including the Acquired EBITDA of any related Person, property, business or assets to the extent not so acquired) by the Borrower or any Subsidiary during such period (each such Person, property, business or asset acquired and not subsequently so disposed of, an "Acquired Entity or Business"), in each case based on the actual Acquired EBITDA of such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition), (B) for purposes of the definition of the term "Permitted Acquisition" and Sections 6.04 and 6.13, there shall be an adjustment to Consolidated EBITDA for the Borrower in respect of each Acquired Entity or Business equal to the amount of the Pro Forma Adjustment with respect to such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) as specified in the Pro Forma Adjustment Certificate delivered to the Lenders and the Administrative Agent, and (C) for purposes of Section 6.04 and 6.13 only, there shall be excluded in determining Consolidated EBITDA for the Borrower for any period the Acquired EBITDA of any Person, property, business or asset sold, transferred or otherwise disposed of by the Borrower of any Subsidiary during such period (each Person, property, business or asset so sold or disposed of, a "Sold Entity or Business"), in each case based on the actual Acquired EBITDA of such Sold Entity or Business for such period (including the portion thereof occurring prior to such sale, transfer or disposition). "Consolidated Net Income" means, for any fiscal period for any Person, net income of such Person and its subsidiaries for such period, determined on a consolidated basis in accordance with GAAP. "Consolidated Subsidiary" means, at any date, each Subsidiary the accounts of which would be consolidated with those of the Borrower in the Borrower's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date. "Consolidated Total Indebtedness" means, as of the last day of any fiscal quarter, (a) the sum (without duplication) for the Borrower and the Subsidiaries as of such day of (i) the aggregate outstanding principal amount of the Loans, (ii) the aggregate outstanding principal amount of other Indebtedness for borrowed money (including Guarantees thereof), (iii) the principal amount of all obligations in respect of Hedging Agreements of the Borrower and the Subsidiaries (computed as set forth in the penultimate sentence of the definition of "Material Indebtedness") and (iv) the aggregate outstanding capitalized amount of Capital Lease Obligations, minus (b) the sum (without 5 duplication) as of such day of (i) the aggregate outstanding capitalized amount of the Capital Lease Investments of the Borrower and the Subsidiaries as of such day and (ii) to the extent included in clause (a)(ii) above, any Treasury Indebtedness of the Borrower and the Subsidiaries as of such day, all as determined on a consolidated basis in accordance with GAAP. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlling" and "Controlled" have meanings correlative thereto. "Default" means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default. "Disclosure Documents" means the Annual Report on Form 10-K of the Borrower for the fiscal year ended December 31, 2004, as filed with the SEC. "Documentation Agent" means Commerzbank AG New York and Grand Cayman Branches, in its capacity as documentation agent for the Lenders. "dollars" or "$" refers to lawful money of the United States of America. "Effective Date" means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02). "Environmental Laws" means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material or to health and safety matters. "Environmental Liability" means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "Equity Interests" means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest. 6 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code. "ERISA Event" means (a) any "reportable event", as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC of any notice of its intent to institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan under Section 4042 of ERISA or the providing of notice by a plan administrator of the intent to terminate any Plan under Section 4041 of ERISA; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate. "Event of Default" has the meaning assigned to such term in Article VII. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Excluded Taxes" means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which such recipient is located and (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 2.17(b)), any withholding tax that is imposed by the United States of America on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party to this Agreement (or designates a new lending office) or is attributable to such Foreign Lender's failure to comply with Section 2.15(d). 7 "Fair Value" means, with respect to any assets or property owned by the Borrower or any Subsidiary, the fair market value thereof as determined from time to time by the Board of Directors (or a duly constituted committee thereof) of the Borrower or such Subsidiary in good faith. "Federal Funds Effective Rate" means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FERC" means the Federal Energy Regulatory Commission. "Final Maturity Date" means the date that occurs five (5) years after the Effective Date. "Final Order" means, with respect to the ACC, a final order of the ACC that is subject to no further proceedings before the ACC. "Financial Officer" means the chief financial officer, principal accounting officer, treasurer or controller of the Borrower. "Foreign Lender" means any Lender that is organized under the laws of a jurisdiction other than the United States of America. "GAAP" means generally accepted accounting principles in the United States of America. "Governmental Authority" means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government. "Guarantee" of or by any Person (the "guarantor") means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term "Guarantee" shall not 8 include endorsements for collection or deposit in the ordinary course of business. "Hazardous Materials" means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law. "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement or other interest or currency exchange rate hedging arrangement. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (e) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (g) all Guarantees by such Person of Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Taxes" means Taxes other than Excluded Taxes. "Information Memorandum" means the Confidential Information Memorandum dated March 2005 relating to the Borrower and the Transactions. "Initial Funding Date" means the first date on which all or any portion of the Term Loan is made by the Term Lenders to the Borrower pursuant to the terms and conditions contained herein. "Interest Election Request" means a request by the Borrower to convert or continue a Revolving Borrowing or a Term Borrowing in accordance with Section 2.05. "Interest Payment Date" means (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months' duration, each day 9 prior to the last day of such Interest Period that occurs at intervals of three months' duration after the first day of such Interest Period. "Interest Period" means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing (which initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing) and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrower may elect; provided, that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. "Lenders" means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. "Leverage Ratio" means, as of any date, the ratio of (a) Consolidated Total Indebtedness on the last day of the most recent fiscal quarter ended prior to such date for which financial statements are required to be delivered to the Lenders pursuant to Section 5.01(a) or (b) to (b) Consolidated EBITDA of the Borrower and the Subsidiaries for the four-fiscal-quarter period ended on the last day of such fiscal quarter. "LIBO Rate" means, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers' Association Interest Settlement Rates for deposits in dollars (as set forth by the Bloomberg Information Service or any successor thereto or any other service selected by the Administrative Agent which has been nominated by the British Bankers' Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the "LIBO Rate" with respect to such Eurodollar Borrowing for such Interest Period shall be the rate per annum at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period would be offered to the Administrative Agent in the London interbank market at approximately 12:00 noon, London time, on the date that is two Business Days prior to the beginning of such Interest Period. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the 10 foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities. "Limited Subsidiaries" means all of the Subsidiaries other than TEP, the Millennium Entities, and any other Person that becomes a Subsidiary after the Effective Date. "Loan Documents" means this Agreement, any promissory note delivered pursuant to Section 2.07, and the Security Documents. "Loans" means the loans made by the Lenders to the Borrower pursuant to this Agreement. "Material Adverse Effect" means a material adverse effect on (a) the financial condition, assets, operations or business of the Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower to perform any of its obligations under any Loan Document or (c) the rights of or benefits available to the Administrative Agent or the Lenders under any Loan Document. "Material Indebtedness" means Indebtedness (other than the Loans), or obligations in respect of one or more Hedging Agreements, of any one or more of the Borrower and the Significant Subsidiaries in an aggregate principal amount exceeding $20,000,000. For purposes of determining Material Indebtedness, the "principal amount" of the obligations of the Borrower or any Subsidiary in respect of any Hedging Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Borrower or such Subsidiary would be required to pay if such Hedging Agreement were terminated at such time. "Material Indebtedness" shall not include at any time any Indebtedness that is non-recourse to the Borrower and the Significant Subsidiaries. "MEG" means Millennium Environmental Group, Inc., an Arizona corporation. "Millennium" means Millennium Energy Holdings, Inc., an Arizona corporation. "Millennium Entities" means Millennium, all subsidiaries of Millennium and all other Persons Controlled by Millennium and/or the subsidiaries of Millennium. "Moody's" means Moody's Investors Service, Inc. or any successor thereto. "Multiemployer Plan" means a multiemployer plan as defined in Section 4001(a)(3) of ERISA. "Obligations" means (a)(i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of 11 whether allowed or allowable in such proceeding), of the Borrower under this Agreement, the other Loan Documents and the Specified Hedge Agreements; and (b) the due and punctual performance of all other covenants, agreements, obligations and liabilities of the Borrower under or pursuant to this Agreement, the other Loan Documents and the Specified Hedge Agreements; provided, that (i) obligations of the Borrower under any Specified Hedge Agreement shall be secured pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and (ii) any release of Collateral effected in the manner permitted by this Agreement or the Security Documents shall not require the consent of holders of obligations under Specified Hedge Agreements. "Other Taxes" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "Outside Funding Date" means June 30, 2005. "Participant" has the meaning assigned to such term in Section 9.04. "Patriot Act" has the meaning assigned to such term in Section 9.14. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions. "Permitted Acquisition" means the acquisition of Capital Stock by the Borrower or the acquisition (whether pursuant to any acquisition of Capital Stock, assets or otherwise) by any Subsidiary of (x) assets constituting a business unit located in the United States or (y) Capital Stock of Persons constituted a resident in the United States (or any state thereof), but only if (a) such acquisition and all transactions related thereto shall be consummated in accordance with applicable law; (b) no Default or Event of Default shall have occurred and be continuing at the time of such acquisition or would occur after giving effect to such acquisition and the Borrower and the Subsidiaries shall be in compliance with Section 6.03(b) after giving effect to such acquisition; and (c) the Borrower shall be in compliance, on a pro forma basis after giving effect to such acquisition (including any Indebtedness assumed or permitted to exist or incurred pursuant to Sections 6.01(a)(ix) or (x), respectively, and any related Pro Forma Adjustment), with the covenants set forth in Sections 6.12 and 6.13, as such covenants are recomputed as at the last day of the most recently ended fiscal quarter under such Sections as if such acquisition had occurred on the first day of the four-fiscal-quarter period ended on such date, and such compliance shall have been certified in a certificate of a Financial Officer, in form and substance reasonably satisfactory to the Administrative Agent, delivered to the Administrative Agent. "Permitted Encumbrances" means: (a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.05; 12 (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.05; (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII; (f) ground leases, easements and joint use agreements in respect of real property on which facilities owned or leased by the Borrower or any of the Subsidiaries are located and which in each case, do not interfere in any material respect with the business of the Borrower and the Subsidiaries taken as a whole; (g) any interest or title of a lessor or secured by a lessor's interest under any lease permitted by this Agreement and which in each case, do not interfere in any material respect with the business of the Borrower and the Subsidiaries taken as a whole; (h) Liens incurred by the licensing of trademarks by the Borrower or any Subsidiary to others in the ordinary course of business; (i) leases or subleases granted to others, not interfering in any material respect with the business of the Borrower and the Subsidiaries taken as a whole; (j) easements, licenses, restrictions, exceptions, reservations or other outstanding interests in or against any property and/or rights-of-way of the Borrower or any Subsidiary created or existing by way of, or for the purpose of, public highways, private roads, railroads, railroad sidetracks, pipelines, coal-hauling facilities, ash disposal facilities and fuel-handling activities used in connection with the operation of a generating unit, gas transportation lines, transmission lines, distribution lines, telegraph or telephone lines, mains, ditches, canals and other like purposes; water rights of any Governmental Authorities or other Person; and building and use restrictions, and which in each case, do not interfere in any material respect with the business of the Borrower and the Subsidiaries taken as a whole; (k) any obligations or duties affecting the property of the Borrower or any Subsidiary to any Governmental Authority with respect to any franchise, grant, license or permit from such Governmental Authority; 13 (l) defects in title to overflow and flood lands and rights, and in title to rights-of-way for roads, transmission lines, distribution lines, mains, ditches, canals, telegraph or telephone lines, railroads, railroad sidetracks or for other purposes of the Borrower or any Subsidiary over public or private property, none of which materially impair the use of the property affected thereby; (m) rights reserved to or vested in any Governmental Authority by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to terminate such right, power, franchise, grant, license or permit or to purchase or recapture or to designate a purchaser of any of the property of the Borrower or any Subsidiary or otherwise to control or regulate any property of the Borrower or any Subsidiary and which in each case, do not interfere in any material respect with the business of the Borrower and the Subsidiaries taken as a whole; (n) rights granted or created or burdens assumed by the Borrower or any Subsidiary under agreements for the joint use of poles and equipment, and similar agreements; and burdens created under any law or governmental regulation or permit requiring the Borrower or any Subsidiary to maintain certain facilities or perform certain acts as a condition of the Borrower's or any Subsidiary's occupancy of or interference with any public lands or any river or stream or navigable waters or bridge or highway and which in each case, do not interfere in any material respect with the business of the Borrower and the Subsidiaries taken as a whole; and (o) any right of use, ingress, egress, partition, easement, license or reservation, contractual or otherwise, of any common owner in any property, plant, system or facility owned by the Borrower or any Subsidiary with another party; and any lien securing indebtedness of any such common owner, neither payable by, nor assumed nor guaranteed by, the Borrower or any Subsidiary, existing as to any undivided interest of such other common owner in such common owned property and which in each case, do not interfere in any material respect with the business of the Borrower and the Subsidiaries taken as a whole; provided, that the term "Permitted Encumbrances" shall not include any Lien securing Indebtedness except as set forth in clause (o) above. "Permitted Investments" means: (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within 24 months from the date of acquisition thereof; (b) securities issued by any state of the United States or any political subdivision or public instrumentality of any such state having maturities of not more than 24 months from the date of acquisition thereof 14 and, at the time of acquisition, having an investment grade rating generally obtainable from either S&P or Moody's; (c) investments in commercial paper maturing within 12 months from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A-2 or P-2 from S&P or Moody's (or, if at any time neither S&P nor Moody's shall be rating such obligations, an equivalent rating from another nationally recognized rating service); (d) investments in certificates of deposit, banker's acceptances and time deposits maturing within 12 months from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000; (e) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a), (b), (c) or (d) above and entered into with a financial institution satisfying the criteria described in clause (d) above or a securities dealer of nationally recognized standing; and (f) shares of investment companies that are registered under the Investment Company Act of 1940 and invest solely in one or more of the types of securities described in clauses (a) through (e) above. "Person" means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity. "Plan" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA. "Pro Forma Adjustment" means, for any period that includes any of the four fiscal quarters first following any Permitted Acquisition, with respect to the Acquired EBITDA of the applicable Acquired Entity or Business and/or with respect to the Consolidated EBITDA of the Borrower and the Subsidiaries after giving effect to such Permitted Acquisition, the pro forma increase or decrease in such Acquired EBITDA and/or the Consolidated EBITDA of the Borrower and the Subsidiaries after giving effect to such Permitted Acquisition, as the case may be, projected by the Borrower in good faith as a result of reasonably identifiable and supportable net cost savings or additional net costs, as the case may be, determined in accordance with Sections 1.04 and 1.05. "Pro Forma Adjustment Certificate" means any certificate of a Financial Officer delivered pursuant to Section 5.01(k). 15 "Pro Forma Entity" means any Acquired Entity or Business or any Sold Entity or Business. "PUHCA" means the Public Utility Holding Company Act of 1935, as amended. "Qualified Counterparty" means, with respect to any Specified Hedge Agreement, any counterparty thereto that, at the time such Specified Hedge Agreement was entered into, was a Lender or an affiliate of a Lender. "Rating Agencies" means either of Moody's or S&P. "Reference Rate" means the variable rate of interest per annum established by Union Bank from time to time as its "reference rate". Such "reference rate" is set by Union Bank as a general reference rate of interest, taking into account such factors as Union Bank may deem appropriate, it being understood that many of Union Bank's commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that Union Bank may make various commercial or other loans at rates of interest having no relationship to such rate. For purposes of this Agreement, each change in the Reference Rate shall be effective as of the opening of business on the date announced as the effective date of any change in such "reference rate". "Register" has the meaning assigned to such term in Section 9.04(c). "Regulation D" means Regulation D of the Board. "Regulation U" means Regulation U of the Board. "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such Person and such Person's Affiliates. "Repayment Date" means the last Business Day of each March, June, September and December, commencing with (i) if the Initial Funding Date occurs prior to June 1, 2005, June 30, 2005, or (ii) if the Initial Funding Date occurs on or after June 1, 2005, September 30, 2005. "Required Lenders" means, at any time, Lenders having Revolving Exposures, Term Loans and unused Commitments representing a majority of the sum of the total Revolving Exposures, Term Loans and unused Commitments at such time. "Requirement of Law" means, as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or assets or to which such Person or any of its property or assets is subject. 16 "Restricted Payment" means, as to any Person, any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in such Person, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in such Person or any option, warrant or other right to acquire any such Equity Interests in such Person. "Revolving Availability Period" means the period from and after the Effective Date to but excluding the earlier of the Final Maturity Date and the date of the termination of the Revolving Commitments. "Revolving Borrowing" means Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Revolving Loans, as to which a single Interest Period is in effect. "Revolving Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans hereunder, expressed as an amount representing the maximum aggregate permitted amount of such Lender's Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Revolving Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable. The initial aggregate amount of the Lenders' Revolving Commitments is $15,000,000. "Revolving Exposure" means, with respect to any Lender at any time, the sum of the aggregate outstanding principal amount of such Lender's Revolving Loans at such time. "Revolving Lender" means a Lender with a Revolving Commitment, or if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure. "Revolving Loan" means a Loan made pursuant to clause (b) of Section 2.01. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto. "San Carlos" means San Carlos Resources Inc., an Arizona corporation. "SEC" means the Securities and Exchange Commission. "Security Documents" means the Borrower Pledge Agreement and each of the other security agreements, pledges, mortgages, assignments (collateral or otherwise) and consents, if any, and each other security agreement or other instrument or document executed and delivered pursuant to any of the foregoing documents, in each case to secure any of the Obligations. 17 "Significant Subsidiary" means (a) TEP, (b) San Carlos, (c) any Subsidiary that directly or indirectly owns or Controls any other Significant Subsidiary and (d) any other Subsidiary of the Borrower whose direct or indirect proportionate share of consolidated total assets as of the end of the most recent fiscal quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b) was greater than or equal to 15% of the consolidated total assets as of such date of the Borrower and the Subsidiaries, taken as a whole. For purposes of making the determinations required by this definition, revenues and assets of foreign Subsidiaries shall be converted into dollars at the rates used in preparing the consolidated balance sheet of the Borrower included in the applicable financial statements. "Sold Entity or Business" shall have the meaning provided in the definition of the term "Consolidated EBITDA". "Solvent" means, with respect to any Person, as of any date of determination, that (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "Southwest Energy" means Southwest Energy Solutions, Inc. "Specified Hedge Agreement" means any Hedging Agreement entered into by the Borrower and any Qualified Counterparty. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. 18 "Subordinated Debt" means unsecured Indebtedness of the Borrower and the Subsidiaries subordinated in right of payment to the Obligations. "subsidiary" means, with respect to any Person (the "parent") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled by the parent or one or more subsidiaries of the parent. "Subsidiary" means any subsidiary of the Borrower. "Syndication Agent" means The Bank of New York, in its capacity as syndication agent for the Lenders. "Taxes" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority. "TEP" means Tucson Electric Power Company, an Arizona corporation. "TEP Bond Delivery Agreement" means that certain Bond Delivery Agreement, dated as of March 25, 2004, between TEP and the TEP Paying Agent. "TEP Collateral Mortgage Bonds" means the Second Mortgage Bonds, Collateral Series D, substantially in the form attached to the TEP Fifth Supplemental Indenture. "TEP Credit Agreement" means that certain Credit Agreement, dated as of March 25, 2004, by and among TEP, the lenders party thereto, the issuing banks party thereto, JPMorgan Chase Bank, Credit Suisse First Boston, acting through its Cayman Island Branch, and Lehman Brothers Inc., as co-administrative agents, The Bank of New York, as documentation agent, and the TEP Paying Agent, and any refinancing or renewal thereof so long as such refinancing or renewal complies with the provisions of Section 6.11. "TEP Fifth Supplemental Indenture" means Supplemental Indenture No. 5 under the TEP Second Indenture, by and between TEP and The Bank of New York (successor in trust to Bank of Montreal Trust Company), as trustee. "TEP First Indenture" means the Indenture, dated as of April 1, 1941, of The Tucson Gas, Electric Light and Power Company, a predecessor to TEP, to The Chase National Bank of the City of New York, as trustee, a predecessor to JPMorgan Chase Bank, as amended, supplemented or otherwise modified from time to time. 19 "TEP First Mortgage Bonds" means TEP's First Mortgage Bonds issued under the TEP First Indenture. "TEP Indentures" means the TEP First Indenture and the TEP Second Indenture. "TEP Loan Documents" means the TEP Credit Agreement, the TEP Bond Delivery Agreement, the TEP Fifth Supplemental Indenture, the TEP Collateral Mortgage Bonds, the TEP Revenue Bond Pledge Agreements and the other TEP Security Documents. "TEP Paying Agent" means Credit Suisse First Boston, acting through its Cayman Island Branch, in its capacity as paying agent for the lenders under the TEP Credit Agreement. "TEP Revenue Bond Pledge Agreements" means, collectively, all pledge agreements executed in connection with the TEP Credit Agreement. "TEP Second Indenture" means the Indenture of Mortgage and Deed of Trust, dated as of December 1, 1992, of TEP to The Bank of New York (successor in trust to Bank of Montreal Trust Company), as trustee, as amended, supplemented or otherwise modified from time to time. "TEP Second Mortgage Bonds" means TEP's Second Mortgage Bonds issued under the TEP Second Indenture. "TEP Security Documents" means the TEP Indentures, the TEP Fifth Supplemental Indenture, the TEP Collateral Mortgage Bonds, the TEP Bond Delivery Agreement, the TEP Revenue Bond Pledge Agreements, and each other security agreement or other instrument or document executed and delivered pursuant to the TEP Loan Documents (including, without limitation, (i) any supplemental indenture to the TEP Second Indenture providing for the issuance of TEP Second Mortgage Bonds to secure the obligations of TEP under any refinancing or renewal of the TEP Credit Agreement and (ii) any TEP Second Mortgage Bonds issued pursuant to any such supplemental indenture). "TEP Subsidiary" means any subsidiary of TEP. "Term Borrowing" means Term Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Term Loans, as to which a single Interest Period is in effect. "Term Commitment" means, with respect to each Lender, the commitment, if any, of such Lender to make Term Loans hereunder on or after the Effective Date and on or before the Outside Funding Date, expressed as an amount representing the maximum principal amount of the Term Loans to be made by such Lender hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04. The initial amount of each Lender's Term Commitment is set forth on Schedule 2.01, or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Term Commitment, as applicable. The initial aggregate amount of the Lenders' Term Commitments is $90,000,000. 20 "Term Lender" means a Lender with a Term Commitment or an outstanding Term Loan. "Term Loan" means a Loan made pursuant to clause (a) of Section 2.01. "Transaction Expenses" means any fees or expenses incurred or paid by the Borrower or any Subsidiary in connection with the Transactions and the other transactions contemplated hereby. "Transactions" means the execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof. "Treasury Indebtedness" means, with respect to any Person, the aggregate outstanding principal amount of Indebtedness of such Person and its subsidiaries that is owned by such Person or its subsidiaries and in respect of which such Person or one or more of its subsidiaries has the right to receive, pursuant to the terms of such Indebtedness, all future principal, interest and other payments to be made with respect thereto. "Type", when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. "UED" means UniSource Energy Development Company, an Arizona corporation. "UES" means UniSource Energy Services, Inc., an Arizona corporation. "UES Subsidiary" means any subsidiary of UES. "Union Bank" means Union Bank of California, N.A., a national banking association. "UniSource Tax Sharing Agreement" means the Tucson Electric Power Company and Subsidiaries Income Tax Allocation Policy & Procedures, Effective Date: January 1, 1997, as the same may be amended, supplemented, replaced or otherwise modified from time to time. The Borrower acknowledges and agrees that references in the UniSource Tax Sharing Agreement (as in effect on the Effective Date) to "TEP" and the "TEP Group" have been, and will continue to be, deemed to comprise the Borrower and the Borrower and its Subsidiaries, respectively. "Unrestricted Cash" means cash and Permitted Investments of the Borrower and the Subsidiaries, in each case not subject to a Lien (including, without limitation, any Lien permitted hereunder), setoff (other than ordinary course setoff rights of a depository bank arising under a bank depository agreement for customary fees, charges and other account-related expenses due to such depository bank thereunder), counterclaim, recoupment, defense or other right in favor of any Person and, in the case of any such cash and Permitted Investments of any Subsidiary, not subject to any legal, contractual or other 21 restriction on the ability of such Subsidiary to distribute all such cash and Permitted Investments to the Borrower. "UNS Credit Agreement" means the Credit Agreement, dated as of April 15, 2005, among UNS Gas and UNS Electric, as borrowers, UES, as guarantor, the banks named therein and the other lenders from time to time party thereto, and Union Bank, as administrative agent. "UNS Electric" means UNS Electric, Inc., an Arizona corporation. "UNS Gas" means UNS Gas, Inc., an Arizona corporation. "UNS Note Agreements" means, collectively, (i) the Note Purchase and Guaranty Agreement, dated as of August 11, 2003, among UNS Electric, UES and the Purchasers named therein, and (ii) the Note Purchase and Guaranty Agreement, dated as of August 11, 2003, among UNS Gas, UES and the Purchasers named therein. "UNS Loan Documents" means the UNS Credit Agreement, the UNS Note Agreements and all instruments, documents and agreements entered into by UES, UNS Gas and UNS Electric in connection therewith. "Utility Business" means the business of producing, developing, generating, transmitting, distributing, selling or supplying electrical energy or natural gas for any purpose, or any business incidental thereto or necessary in connection therewith, or any business reasonably desirable in connection therewith which the ACC or other utility regulatory body shall have authorized TEP, any TEP Subsidiary, UES or any UES Subsidiary to enter. "Withdrawal Liability" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a "Eurodollar Revolving Loan"). Borrowings also may be classified and referred to by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing"). SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference 22 herein to any Person shall be construed to include such Person's successors and assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (including the effects of the application or discontinuance of the application of accounting for the effects of regulation to all or any portion of the Borrower's operations), or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose, regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. SECTION 1.05. Pro Forma Calculations. All pro forma calculations permitted or required to be made by the Borrower or any Subsidiary pursuant to this Agreement shall (a) include only those adjustments that would be permitted or required by Regulation S-X under the Securities Act of 1933, as amended, and (b) be certified to by a Financial Officer as having been prepared in good faith based upon assumptions believed to be reasonable. ARTICLE II The Credits ----------- SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein, each Lender agrees (a) to make Term Loans to the Borrower from time to time during the period from and including the Effective Date to and including the Outside Funding Date (but in any event on no more than five (5) dates during such period) in an aggregate principal amount not exceeding its Term Commitment and (b) to make Revolving Loans to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount that will not result in (x) such Lender's Revolving Exposure exceeding such Lender's Revolving Commitment or (y) the sum of the total Revolving Exposures exceeding the Revolving Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts repaid in respect of Term Loans may not be reborrowed. 23 SECTION 2.02. Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, each Revolving Borrowing and Term Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of eight (8) Eurodollar Borrowings outstanding. (d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Final Maturity Date. SECTION 2.03. Requests for Borrowings. To request a Revolving Borrowing or Term Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., Los Angeles, California time, one Business Day before the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) whether the requested Borrowing is to be a Revolving Borrowing or a Term Borrowing; (ii) the aggregate amount of such Borrowing; (iii) the date of such Borrowing, which shall be a Business Day; 24 (iv) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (v) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (vi) the location and number of the Borrower's account to which funds are to be disbursed. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. SECTION 2.04. Funding of Borrowings. (a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 10:00 a.m., Los Angeles, California time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower designated by the Borrower in the applicable Borrowing Request. (b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's share of such Borrowing, the Administrative Agent may in its sole discretion assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender's Loan included in such Borrowing. SECTION 2.05. Interest Elections. (a) Each Revolving Borrowing and Term Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing 25 to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period". If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing (i) no outstanding Borrowing may be 26 converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto. SECTION 2.06. Termination and Reduction of Commitments. (a) Unless previously terminated, (i) the unused Term Commitments shall terminate at 2:00 p.m., Los Angeles, California time, on the Outside Funding Date and (ii) the Revolving Commitments shall terminate on the Final Maturity Date. (b) The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000, and (ii) the Borrower shall not terminate or reduce any Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.09, the aggregate Revolving Exposures would exceed the aggregate Revolving Commitments. (c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class. SECTION 2.07. Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving Lender the then unpaid principal amount of each Revolving Loan on the Final Maturity Date; and (ii) to the Administrative Agent for the account of each Term Lender the then unpaid principal amount of the Term Loans of such Term Lender as provided in Section 2.08. (b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder. (c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by 27 the Administrative Agent hereunder for the account of the Lenders and each Lender's share thereof. (d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement. (e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the order of the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns). SECTION 2.08. Amortization of Term Loans. (a) Subject to adjustment pursuant to paragraph (c) of this Section, on each Repayment Date occurring prior to the Final Maturity Date, the Borrower shall pay to the Administrative Agent, for the account of the Term Lenders, a principal amount of the Term Loans in an aggregate amount equal to $1,250,000. (b) To the extent not previously paid, all Term Loans shall be due and payable on the Final Maturity Date. (c) Any prepayment of a Term Borrowing shall be applied to reduce the subsequent scheduled repayments of Term Borrowings to be made pursuant to this Section ratably. SECTION 2.09. Prepayment of Loans. (a) Subject to prior notice in accordance with paragraph (e) of this Section, the Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty (subject, in the case of any prepayment of a Eurodollar Borrowing, to Section 2.14). (b) On the date of any termination of the Revolving Commitments, the Borrower shall repay or prepay all outstanding Revolving Borrowings. If, as a result of any partial reduction of the Revolving Commitments, the sum of the Revolving Exposures would exceed the total Revolving Commitments after giving effect thereto, then the Borrower shall, on the date of such reduction, repay or prepay Revolving Borrowings in an amount equal to such excess. 28 (c) In the event that (i) all or a majority of the voting Capital Stock of UNS Gas or UNS Electric is sold, transferred or otherwise conveyed to any Person (other than a wholly-owned Subsidiary of UES), or (ii) all or substantially all of the assets of UNS Gas or UNS Electric are sold, transferred, leased or otherwise conveyed to any Person (other than a wholly-owned Subsidiary of UES), in each case in any one transaction or series of transactions, and at any time thereafter UES pays or makes a Restricted Payment in cash to the Borrower, the Borrower shall repay or prepay outstanding Borrowings (if any) in a principal amount equal to 50% of each such cash Restricted Payment; provided, however, that (A) the Borrower shall repay or prepay in full the outstanding principal amount of the Term Loan prior to prepaying any Revolving Borrowings, and (B) the aggregate amount of repayments and prepayments required to be made by the Borrower pursuant to this paragraph (c) shall not exceed 50% of the aggregate net proceeds from any such transaction or transactions. The Borrower acknowledges and agrees that this paragraph (c) shall not constitute (1) a waiver of any Default or Event of Default that may occur if and to the extent that any such transaction is not permitted by the terms of this Agreement or any other Loan Document or (2) a consent by the Lenders to any such prohibited transaction. (d) Prior to any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (e) of this Section. (e) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California time, three Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., Los Angeles, California time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Revolving Commitments as contemplated by Section 2.06, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.06. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11 and any amounts required to be paid pursuant to Section 2.14 in connection with such prepayment. SECTION 2.10. Fees. (a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee, which shall accrue at a rate equal to 0.50% per annum on the daily unused amount of each Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which such Commitment terminates. Accrued commitment fees shall be payable in arrears (i) in the case of commitment fees in respect of the 29 Revolving Commitments, on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, and (ii) in the case of commitment fees in respect of the Term Commitments, on the Outside Funding Date or any earlier date on which such Commitments terminate. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). (b) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon by the Borrower and the Administrative Agent. (c) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of commitment fees, to the Lenders entitled thereto. Fees paid shall not be refundable under any circumstances. SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate. (c) Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, (i) each ABR Loan shall bear interest at a rate of 2.0% per annum in excess of the rate set forth in paragraph (a) of this Section and (ii) each Eurodollar Loan shall bear interest at a rate of 2.0% per annum in excess of the rate set forth in paragraph (b) of this Section until the Interest Period applicable thereto shall have expired and thereafter at a per annum rate equal to the Alternate Base Rate plus the Applicable Rate for ABR Loans plus 2.0%. In addition, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (A) in the case of overdue principal of any Loan, 2.0% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (B) in the case of any other amount, 2.0% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. 30 (e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Reference Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. SECTION 2.12. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or (b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period; then the Administrative Agent shall give notice thereof to the Borrower and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective, and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be made as an ABR Borrowing. SECTION 2.13. Increased Costs. (a) If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or the Administrative Agent (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Lender, the Administrative Agent or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender; and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender or the Administrative Agent hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or the Administrative Agent, as the case may be, such additional amount or amounts 31 as will compensate such Lender or the Administrative Agent, as the case may be, for such additional costs incurred or reduction suffered. (b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender's capital or on the capital of such Lender's holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender's holding company could have achieved but for such Change in Law (taking into consideration such Lender's policies and the policies of such Lender's holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender's holding company for any such reduction suffered. (c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. (d) Failure or delay on the part of any Lender to demand compensation pursuant to this Section shall not constitute a waiver of such Lender's right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs or reductions incurred more than 270 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender's intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof. SECTION 2.14. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.06(c) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any applicable Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such 32 Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof. SECTION 2.15. Taxes. (a) Any and all payments by or on account of any obligation of the Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) The Borrower shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error. (c) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (d) Any Foreign Lender shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law, such properly completed and executed documentation prescribed by the law of the jurisdiction in which the Borrower is located, or by any treaty to which such jurisdiction is a party, or reasonably requested by the Borrower as will permit such payments to be made without withholding. (e) In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. 33 SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Set-offs. (a) The Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest or fees, or of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise) prior to 10:00 a.m., Los Angeles, California time, on the date when due, in immediately available funds, without set-off, counterclaim, recoupment or deduction of any kind. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices located at 445 South Figueroa Street, Los Angeles, California 90071 (or such other office as the Administrative Agent shall from time to time designate to the Borrower), except that payments pursuant to Sections 2.13, 2.14, 2.15 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder or under any other Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any commitments fees or any payment accruing interest, such commitment fees and such interest shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars. (b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties. (c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the 34 foregoing arrangements may exercise against the Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. (d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation. (e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender's obligations under such Sections until all such unsatisfied obligations are fully paid. SECTION 2.17. Mitigation Obligations; Replacement of Lenders. (a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment. (b) If (i) any Lender requests compensation under Section 2.13, (ii) the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, (iii) any Lender defaults in its obligation to fund Loans hereunder, or (iv) any Lender has not consented to a proposed amendment, waiver or modification under this Agreement that requires the consent of all Lenders and which has been approved by the Required Lenders, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (A) the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not 35 unreasonably be withheld, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (C) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.15, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply. SECTION 2.18. Illegality. Notwithstanding any other provision of this Agreement, if any Change in Law makes it unlawful, or any Governmental Authority asserts that it is unlawful, for any Lender to perform its obligations hereunder to make, continue or convert into Eurodollar Loans, then, on notice thereof and demand therefor by such Lender to the Borrower through the Administrative Agent, (a) the obligation of such Lender to make, continue or convert into Eurodollar Loans shall be suspended until the Administrative Agent notifies the Borrower that such Lender has determined that the circumstances causing such suspension no longer exist, and (b) the Borrower shall forthwith prepay in full all Eurodollar Loans of such Lender then outstanding, together with accrued and unpaid interest thereon, unless the Borrower, within five Business Days of such notice and demand, converts all Eurodollar Loans of all Lenders then outstanding into ABR Loans in accordance with the terms hereof. ARTICLE III Representations and Warranties ------------------------------ The Borrower represents and warrants to the Administrative Agent and the Lenders that: SECTION 3.01. Organization; Powers. The Borrower and each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite corporate, partnership, limited liability company or other applicable organizational power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business, and is in good standing, in every jurisdiction where such qualification is required. SECTION 3.02. Authorization; Enforceability. The Transactions are within the Borrower's corporate powers and have been duly authorized by all necessary corporate and, if required, stockholder action. This Agreement has been duly executed and delivered by the Borrower and constitutes, and each other Loan Document to which the Borrower is to be a party, when executed and delivered by the Borrower, will constitute, a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to 36 general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any Requirement of Law, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Borrower or any Subsidiary or its assets, or give rise to a right thereunder to require any payment to be made by the Borrower or any Subsidiary, and (d) will not result in the creation or imposition of any Lien on any asset of the Borrower or any Subsidiary, except Liens created under the Loan Documents. SECTION 3.04. Financial Condition; No Material Adverse Change. (a) The audited consolidated balance sheet and related statements of income, stockholders' equity and cash flows of the Borrower and the Subsidiaries for the fiscal year ended December 31, 2004 and the most recent financial statements delivered by the Borrower pursuant to Section 5.01(a) or (b) present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and the Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements delivered pursuant to Section 5.01(b). Neither the Borrower nor any Subsidiary had, at the date of the most recent balance sheet referred to above, any Guarantee, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including any interest rate or foreign currency swap or exchange transaction, which, in any case, was material to the Borrower and the Subsidiaries, taken as a whole, and which was not reflected in the foregoing statements or in the notes thereto. Except as set forth on Schedule 3.04, during the period from December 31, 2004 to and including the Effective Date there has been no sale, transfer or other disposition by the Borrower or any Subsidiary of any part of its business or property, and no purchase or other acquisition of any business or property (including any Capital Stock of any other Person), which, in either case, is material in relation to the consolidated financial condition of the Borrower and the Subsidiaries taken as a whole at December 31, 2004. (b) Except to the extent that any specific change is explicitly disclosed in the Disclosure Documents, since December 31, 2004, there has been no material adverse change in the financial condition, results of operations, business or prospects of the Borrower and the Subsidiaries, taken as a whole. SECTION 3.05. Properties. (a) Other than as explicitly disclosed in the Disclosure Documents, each of the Borrower and the Subsidiaries has good title to, or valid leasehold interests in, and enjoys peaceful and undisturbed possession of, all of its real and personal property material to its business, except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilize such properties for their intended purposes. 37 (b) Each of the Borrower and the Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Borrower and the Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. Litigation and Environmental Matters. (a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary (i) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would, individually or in the aggregate, result in a Material Adverse Effect (except as explicitly disclosed in the Disclosure Documents) or (ii) that involve any of the Loan Documents or the Transactions. (b) Except as explicitly disclosed in the Disclosure Documents and except with respect to any other matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, neither the Borrower nor any Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability. (c) Since the date of this Agreement, there has been no change in the status of any matters disclosed in the Disclosure Documents that, individually or in the aggregate, has resulted in, or materially increased the likelihood of, a Material Adverse Effect. SECTION 3.07. Compliance with Laws and Agreements. Except as explicitly disclosed in the Disclosure Documents, each of the Borrower and the Subsidiaries is in compliance with all Requirements of Law, including the Fair Labor Standards Act, the Americans with Disabilities Act, the Foreign Corrupt Practices Act and Anti-Terrorism Laws, applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No Default has occurred and is continuing. SECTION 3.08. Federal Regulations. No part of the proceeds of any Loans will be used for "purchasing" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U. 38 SECTION 3.09. Investment and Holding Company Status. (a) Neither the Borrower nor any Subsidiary is an "investment company" or a company "controlled" by an "investment company" as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended. (b) The Borrower and the Subsidiaries are exempt from all provisions of PUHCA, except Section 9(a)(2) thereof; and no order, consent, approval or authorization is required under PUHCA in connection with the making of the Loans hereunder or the consummation of any of the other Transactions. The Borrower and the Subsidiaries are not subject to regulation under any Requirement of Law (other than Regulation X of the Board and Requirements of Law pertaining to utility regulation) which limits its ability to incur Indebtedness. SECTION 3.10. Taxes. Each of the Borrower and the Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which the Borrower or such Subsidiary, as applicable, has set aside on its books adequate reserves or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.11. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan by an amount that has resulted or could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount that has resulted or could reasonably be expected to result in a Material Adverse Effect. SECTION 3.12. Security Documents. On the Effective Date, the provisions of the Security Documents are effective to create, in favor of the Administrative Agent for the benefit of the secured parties thereunder, legal, valid and enforceable Liens on or in all of the Collateral subject thereto, and all necessary deliveries of property to the Administrative Agent and all necessary and appropriate recordings and filings have been made in all necessary and appropriate public offices so that the Liens created by such Security Documents constitute perfected Liens on or in all rights, titles, estates and interests of the Borrower and any applicable Subsidiaries in the Collateral covered thereby, prior and superior to all other Liens, and all necessary and appropriate consents to the creation and perfection of such Liens have been obtained. No mortgage or financing statement or other instrument or recordation covering all or any part of the Collateral is on file in any recording office 39 which has not been terminated or released, except as may have been filed in favor of the Administrative Agent. SECTION 3.13. Disclosure. The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any Subsidiary is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of the Borrower to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder (as modified or supplemented by, and taken together with, other information so furnished) contains any material misstatement of a fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to forward looking statements, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and notes that there can be no assurance that such expectations, beliefs or projections will be achieved or accomplished and that such projections are subject to an increasing degree of uncertainty as they relate to later periods of time. SECTION 3.14. Solvency. The Borrower is Solvent. SECTION 3.15. Labor Matters. There are no strikes or other labor disputes against the Borrower or any Subsidiary pending or, to the knowledge of the Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of the Borrower and the Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from the Borrower or any Subsidiary on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of the Borrower or the relevant Subsidiary. SECTION 3.16. Anti-Terrorism Laws. (a) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates is in violation of any Requirement of Law relating to terrorism or money laundering ("Anti-Terrorism Laws"), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the "Executive Order"), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56. (b) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates is any of the following: (i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order; 40 (ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed on the Annex to, or is otherwise subject to the provisions of, the Executive Order; (iii) a Person with whom the Borrower is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (iv) a Person who commits, threatens or conspires to commit or supports "terrorism" as defined in the Executive Order; or (v) a Person that is named as a "specially designated national or blocked person" on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list. (c) Neither the Borrower nor, to the knowledge of the Borrower, any of its Affiliates (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (b)(i), (ii), (iii) or (v) above or, to the knowledge of the Borrower, clause (b)(iv) above; (ii) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to the Executive Order; or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purposes of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law. (d) No broker or other agent (other than the Arranger) is acting for the benefit of the Borrower or any of its Affiliates, or benefiting in any capacity, in each case in connection with the Loan Documents. SECTION 3.17. Ownership of Subsidiaries. The Borrower is the legal and beneficial owner of all of the outstanding Capital Stock of TEP (other than 121 shares of Capital Stock thereof owned by independent third parties), UES, Millennium and UED. None of such Capital Stock owned by the Borrower is subject to any Lien, except for Liens on the Capital Stock of UES, Millennium and UED in favor of the Administrative Agent. ARTICLE IV Conditions Precedent -------------------- SECTION 4.01. Effective Date. The obligations of the Lenders under this Agreement shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02): (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. 41 (b) The Administrative Agent shall have received a counterpart of the Borrower Pledge Agreement signed on behalf of the Borrower, together with (i) all documents, instruments and filings creating or perfecting the Lien of the Borrower Pledge Agreement; (ii) certificates representing the interest of the Borrower in each of its direct domestic Subsidiaries required to be pledged pursuant to the Borrower Pledge Agreement, accompanied by instruments of transfer and stock powers endorsed in blank; and (iii) all other documents and instruments required by law or reasonably requested by the Administrative Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Borrower Pledge Agreement. (c) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders and dated the Effective Date) of (i) Thelen Reid & Priest LLP, New York counsel for the Borrower, substantially in the form of Exhibit C, and (ii) Vincent Nitido, Jr., Esq., General Counsel for the Borrower, substantially in the form of Exhibit D. The Borrower hereby requests such counsel to deliver such opinion. (d) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of the Transactions and any other legal matters relating to the Borrower, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (e) The representations and warranties of the Borrower set forth in this Agreement and the other Loan Documents shall be true and correct, no Default shall have occurred and be continuing, and the Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer, confirming the same as of the Effective Date. (f) Except for any specific change explicitly disclosed in the Disclosure Documents, since December 31, 2004, there shall have been no material adverse change in the financial condition, results of operations, business or prospects of the Borrower and the Subsidiaries, taken as a whole. (g) The Administrative Agent shall have received a certificate, dated the Effective Date and signed by the President, a Vice President or a Financial Officer, confirming compliance with the conditions set forth in this Section 4.01. (h) The TEP Loan Documents shall be in full force and effect, and the Administrative Agent shall have received copies of the TEP Loan Documents, certified by a Financial Officer as complete and correct. (i) The Administrative Agent and the Lenders shall have received all documentation and other information required by bank regulatory 42 authorities under applicable "know your customer" and anti-money laundering rules and regulations, including without limitation the Patriot Act. (j) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Effective Date, including all up-front fees and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrower hereunder or under any other Loan Document. (k) All requisite Governmental Authorities and third parties, if any, shall have approved or consented to this Agreement and the other Loan Documents and the Transactions to the extent required and material (and the Administrative Agent shall have received certified copies of all such approvals and consents, which shall be in form and substance satisfactory to the Administrative Agent and the Lenders), no stay of any applicable regulatory approval shall have been issued and there shall be no litigation, governmental, administrative or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions on this Agreement and the other Loan Documents or the Transactions. (l) The Administrative Agent shall have received a recapitalization plan for TEP, in form, scope and substance satisfactory to the Administrative Agent, that evidences the Borrower's intent to cause TEP to have the ability under applicable Arizona regulatory law (including orders of the ACC) to distribute 100% of its net income to its shareholders. SECTION 4.02. Each Credit Event. The obligation of each Lender to make a Loan on the occasion of any Borrowing, is subject to the satisfaction of the following conditions: (a) The Administrative Agent shall have received a Borrowing Request with respect to such Borrowing. (b) The representations and warranties of the Borrower set forth in this Agreement and the other Loan Documents shall be true and correct on and as of the date of such Borrowing, both before and after giving effect to such Borrowing and to the application of the proceeds thereof, as though made on and as of such date (except where such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct as of such earlier date). (c) At the time of and immediately after giving effect to such Borrowing, no Default shall have occurred and be continuing. Each Borrowing shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in paragraphs (a), (b) and (c) of this Section. 43 ARTICLE V Affirmative Covenants --------------------- Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees and other amounts payable hereunder shall have been paid in full, the Borrower covenants and agrees with the Administrative Agent and the Lenders that: SECTION 5.01. Financial Statements; Ratings Change and Other Information. The Borrower will furnish to the Administrative Agent (and the Administrative Agent will forward such copies to the Lenders): (a) as soon as available and in any event within 105 days after the end of each fiscal year of the Borrower, or 15 days after the date on which its annual report for such fiscal year is required to be filed with the SEC, whichever is later, audited consolidated statements of income and cash flows of the Borrower and the Subsidiaries for such year and the related consolidated balance sheets as of the end of such year, setting forth in each case in comparative form the corresponding consolidated figures for the preceding fiscal year, and accompanied by an opinion of independent public accountants of recognized national standing selected by the Borrower, which opinion shall not contain any qualification or exception as to the scope of such audit and shall state that the consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of the Borrower and the Subsidiaries as of the end of, and for, such fiscal year and have been prepared in accordance with GAAP, consistently applied (except where noted); (b) as soon as available and in any event within 60 days after the end of each of the first three fiscal quarterly periods of each fiscal year of the Borrower, or 15 days after the date on which its quarterly report for such fiscal quarterly period is required to be filed with the SEC, whichever is later, consolidated statements of income of the Borrower and the Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, consolidated statements of cash flows of the Borrower and the Subsidiaries from the beginning of the applicable fiscal year to the end of such period and the related consolidated balance sheets as of the end of such period, setting forth in each case in comparative form the corresponding consolidated figures for the corresponding period in the preceding fiscal year, accompanied by a certificate of a Financial Officer, which certificate shall state that the financial statements fairly present in all material respects the consolidated financial condition and results of operations, as the case may be, of the Borrower and the Subsidiaries in accordance with GAAP, consistently applied (except where noted), as of the end of, and for, such period (subject to normal year-end audit adjustments and the absence of footnotes); (c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed 44 calculations demonstrating compliance with Sections 6.08, 6.12 and 6.13 and (iii) stating whether any change in GAAP or in the application thereof not disclosed in any prior such certificate has occurred since December 31, 2004 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate; (d) concurrently with any delivery of financial statements under clause (a) above, a certificate of the accounting firm that reported on such financial statements stating whether they obtained knowledge during the course of their examination of such financial statements of any Default (which certificate may be limited to the extent required by accounting rules or guidelines); (e) promptly upon their becoming available, copies of all registration statements (other than on Form S-8 or any successor form) and regular periodic reports, if any, that the Borrower or any Subsidiary shall have filed pursuant to Section 13(a) or 15 of the Exchange Act with the SEC (or any governmental agency substituted therefor) or with any national securities exchange; (f) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all financial statements, reports and proxy statements so mailed; (g) as soon as practicable and in any event within five Business Days after TEP receives written notice of an upgrading or a downgrading of the TEP First Mortgage Bonds or the TEP Second Mortgage Bonds by any Rating Agency, a notice of such upgrading or downgrading; (h) promptly upon their becoming available, copies of all current reports on Form 8-K filed by the Borrower or any Subsidiary with the SEC, and all similar reports filed with any national securities exchange; (i) promptly upon their becoming available, copies of any written notices from the ACC or any other Governmental Authority of non-compliance by TEP or any TEP Subsidiary with any material decision of the ACC or the applicable Governmental Authority, as the case may be, or with any other rules, regulations or orders of the ACC or the applicable Governmental Authority, as the case may be, and any written notices of any extraordinary audit or investigation by the ACC or the applicable Governmental Authority, as the case may be, into the business, affairs or operations of TEP or any TEP Subsidiary; (j) concurrently with any delivery of financial statements under clause (a) or (b) above with regard to each fiscal quarter in which the Borrower elects to make a Pro Forma Adjustment, a certificate of a Financial Officer setting forth the amount of such Pro Forma Adjustment and, in reasonable detail, the calculation and basis therefor; and 45 (k) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request. So long as the Borrower is subject to the financial reporting requirements of the Exchange Act and the financial statements contained in any quarterly or annual reports filed with the SEC are prepared in accordance with the Exchange Act and the rules and regulations promulgated thereunder, such financial statements may be delivered by the Borrower in satisfaction of its obligations to deliver consolidated financial statements pursuant to clauses (a) or (b), as the case may be, of this Section 5.01. SECTION 5.02. Notices of Material Events. The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following: (a) the occurrence of any Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and the Subsidiaries in an aggregate amount exceeding $25,000,000; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. SECTION 5.03. Information Regarding Collateral. The Borrower will furnish to the Administrative Agent prompt written notice of any change (i) in the Borrower's corporate name or in any trade name used to identify it in the conduct of its business or in the ownership of its properties, (ii) in the location of the Borrower's chief executive office, its jurisdiction of organization, its principal place of business, any office in which it maintains books or records relating to Collateral owned by it or any office or facility at which Collateral owned by it is located (including the establishment of any such new office or facility), (iii) in the Borrower's identity or corporate structure or (iv) in the Borrower's Federal Taxpayer Identification Number. The Borrower agrees not to effect or permit any change referred to in the preceding sentence unless all filings have been made under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Collateral. The Borrower also agrees promptly to notify the 46 Administrative Agent if any material portion of the Collateral is damaged or destroyed. SECTION 5.04. Existence; Conduct of Business. The Borrower will, and will cause each of the Subsidiaries to, do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges and franchises material to the conduct of its business, except to the extent the failure to do so could not reasonably be expected to result in a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03. SECTION 5.05. Payment of Obligations. The Borrower will, and will cause each of the Subsidiaries to, pay its obligations, including Tax liabilities and assessments (including water assessments by the Arizona State Land Department), that, if not paid, could reasonably be expected to result in a Material Adverse Effect, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on its books adequate reserves with respect thereto to the extent required by and otherwise in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.06. Maintenance of Properties; Insurance. The Borrower will, and will cause each of the Subsidiaries to, (a) keep and maintain all property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted; provided that the Borrower or any of the Subsidiaries may discontinue the operation of any of its properties to the extent, in the judgment of the Borrower, it is no longer advisable to operate such property, or to the extent the Borrower or such Subsidiary intends to sell or otherwise dispose of such property, which disposition is not prohibited by Section 6.05; and (b) maintain, with financially sound and reputable insurance companies, or through its own program of self-insurance, insurance in such amounts (with no greater risk retention) and against such risks and with such self insurance as are customarily maintained by companies of established reputations engaged in the same or similar businesses operating in the same or similar locations. The Borrower will furnish to the Lenders, upon reasonable request of the Administrative Agent, information in reasonable detail as to the insurance so maintained. SECTION 5.07. Books and Records; Inspection Rights. The Borrower will, and will cause each of the Subsidiaries to, keep proper books of record and account in which entries are made of all dealings and transactions in relation to its business and activities, all in accordance with customary and prudent business practices. The Borrower will, and will cause each of the Subsidiaries to, permit any representatives designated by the Administrative Agent or any Lender, upon reasonable prior notice, to visit and inspect its properties, and, subject to contractual or statutory limitations regarding confidential or proprietary information, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested. 47 SECTION 5.08. Compliance with Laws. The Borrower will, and will cause each of the Subsidiaries to, comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including, without limitation, ERISA and Environmental Laws), except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 5.09. Use of Proceeds. The proceeds of the Term Loans will be used only for the payment of capital contributions to TEP and UES, fees and expenses payable in connection with the Transactions and, with respect to up to $10,000,000 of the proceeds of the Term Loans, other general corporate purposes. The proceeds of the Revolving Loans will be used only for general corporate purposes of the Borrower and the Subsidiaries. No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations G, U and X. SECTION 5.10. Environmental Laws. (a) The Borrower will, and will cause each of the Subsidiaries to, comply with, and use commercially reasonable efforts to insure compliance by all tenants and subtenants, if any, with, all Environmental Laws, and will, and will cause each of the Subsidiaries to, obtain and comply with and maintain, and use commercially reasonable efforts to insure that all tenants and subtenants obtain and comply with and maintain, any and all licenses, approvals, registrations or permits required by Environmental Laws, except to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect. (b) The Borrower will, and will cause each of the Subsidiaries to, conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, except to the extent that the failure to take such actions could not reasonably be expected to have a Material Adverse Effect, and promptly comply with all lawful orders and directives of all Governmental Authorities respecting Environmental Laws, except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings could not reasonably be expected to have a Material Adverse Effect. SECTION 5.11. Further Assurances. The Borrower will, and will cause each of the Subsidiaries to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), which may be required under any applicable law, or which the Administrative Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents or to grant, preserve, protect or perfect the Liens created or intended to be created by the Security Documents or the validity or priority of any such Lien, all at the expense of the Borrower. The Borrower also agrees to provide to the Administrative Agent, from time to time upon request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents. 48 SECTION 5.12. Additional Security. The Borrower will cause all of the Capital Stock of each direct domestic Subsidiary, and 66-2/3% of the Capital Stock of each direct foreign Subsidiary, in each case which is not subject to utility regulation and which is formed or otherwise purchased or acquired by the Borrower after the date hereof to be deposited in pledge with the Administrative Agent pursuant to a Security Document in form and substance reasonably satisfactory to the Administrative Agent and will deliver or cause to be delivered such officer's certificates and legal opinions in connection therewith as may reasonably be requested by the Administrative Agent. SECTION 5.13. TEP Recapitalization. The Borrower will use commercially reasonable efforts to cause TEP, on or before June 30, 2005, to have the ability under applicable Arizona regulatory law (including orders of the ACC) to distribute 100% of its net income to its shareholders. SECTION 5.14. Maintain Ownership of Subsidiaries. The Borrower will maintain legal and beneficial ownership of all of the outstanding Capital Stock of TEP (other than 121 shares of Capital Stock thereof owned by independent third parties), UES, Millennium and UED, free and clear of any Lien (except for Liens on the Capital Stock of UES, Millennium and UED in favor of the Administrative Agent); provided that the foregoing shall not prohibit any merger or consolidation permitted under Section 6.03. ARTICLE VI Negative Covenants ------------------ Until the Commitments have expired or terminated and the principal of and interest on each Loan and all fees and other amounts payable hereunder have been paid in full, the Borrower covenants and agrees with the Lenders that: SECTION 6.01. Indebtedness. (a) The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except: (i) Indebtedness created under the Loan Documents; (ii) Indebtedness of TEP or any TEP Subsidiary that is not prohibited to be incurred pursuant to the TEP Loan Documents; (iii) Indebtedness of UES or any UES Subsidiary that is not prohibited to be incurred pursuant to the UNS Loan Documents; (iv) Indebtedness existing on the date hereof and set forth in Schedule 6.01 and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; (v) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; provided that to the 49 extent such Indebtedness is owed to the Borrower, it is pledged pursuant to the Borrower Pledge Agreement; (vi) (A) Indebtedness of the Borrower or any Borrower Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof, provided that such Indebtedness is incurred prior to or within 270 days after such acquisition or the completion of such construction or improvement and (B) any extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof; (vii) Indebtedness of the Borrower or any Subsidiary as an account party in respect of trade letters of credit; and (viii) other Indebtedness of the Borrower or any Subsidiary which, if created, incurred, assumed or permitted to exist, would not result in the occurrence of a Default or an Event of Default (including, without limitation, a violation of Section 6.13; provided, that for purposes of determining compliance with Section 6.13, such Indebtedness shall be deemed to have been incurred as of the last day of the most recently ended fiscal quarter). (b) The Borrower will not permit any Subsidiary to issue any preferred stock or other preferred Equity Interests except to a wholly-owned Subsidiary. SECTION 6.02. Liens. (a) The Borrower will not, and will not permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (other than accounts receivable) or rights in respect of any thereof, except (subject to paragraph (b) of this Section): (i) Liens created under the Loan Documents; (ii) Permitted Encumbrances; (iii) any Lien on any property or asset of TEP or any TEP Subsidiary not prohibited by the TEP Loan Documents; (iv) any Lien on any property or asset of UES or any UES Subsidiary not prohibited by the UNS Loan Documents; (v) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02; provided that (A) such Lien shall not apply to any other property or asset of the Borrower or any Subsidiary and (B) such Lien shall secure only those 50 obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof; (vi) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Borrower Subsidiary; provided that (A) such security interests secure Indebtedness permitted by Section 6.01(a)(vi), (B) such security interests and the Indebtedness secured thereby are incurred prior to or within 270 days after such acquisition or the completion of such construction or improvement, and (C) such security interests shall not apply to any other property or assets of the Borrower or any Borrower Subsidiary; (vii) Liens existing on the assets of any Person that becomes a Subsidiary, or existing on assets acquired, pursuant to a Permitted Acquisition to the extent the Liens on such assets secure Indebtedness permitted by Section 6.01(a)(viii); provided that (A) such Liens shall not apply to any other property or assets of the Borrower or any Subsidiary and (B) such Liens attach at all times only to the same assets that such Liens attached to and secure only the same Indebtedness that such Liens secured, immediately prior to such Permitted Acquisition, and extensions, renewals and replacements thereof permitted pursuant to Section 6.01(a)(viii); (viii) (A) Liens placed upon the Capital Stock or assets of any Subsidiary acquired pursuant to a Permitted Acquisition to secure Indebtedness of the Borrower or any Subsidiary incurred pursuant to Section 6.01(a)(ix) in connection with such Permitted Acquisition and (B) Liens placed upon the assets of such Subsidiary acquired pursuant to a Permitted Acquisition to secure a Guarantee by such Subsidiary of any such Indebtedness of the Borrower or any Subsidiary to the extent such Guarantee is permitted pursuant to Section 6.01(a)(ix) in connection with such Permitted Acquisition; (ix) Liens comprised by escrow arrangements entered into in connection with assets sales, transfers or other dispositions permitted pursuant to Section 6.05; and (x) additional Liens so long as the aggregate principal amount of the obligations secured by such Liens does not exceed $25,000,000. (b) The Borrower will not, and will not permit UES to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by the Borrower or UES (including Capital Stock in TEP, UNS Gas, UNS Electric or any other Subsidiary), or assign or sell any income or revenues (other than accounts receivable) or rights with respect thereto, except Liens created under the Loan Documents and Permitted Encumbrances. SECTION 6.03. Fundamental Changes. (a) The Borrower will not, and will not permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose 51 of (in one transaction or in a series of transactions) all or any substantial part of its assets, or all or substantially all of the Capital Stock of any Subsidiary (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Default shall have occurred and be continuing: (i) any TEP Subsidiary, MEG or Southwest Energy may merge into TEP in a transaction in which TEP is the surviving corporation; (ii) any TEP Subsidiary, MEG or Southwest Energy may (A) merge into any other TEP Subsidiary or (B) sell, transfer, lease or otherwise dispose of its assets to TEP or any other TEP Subsidiary; (iii) any UES Subsidiary may merge into UES in a transaction in which UES is the surviving corporation; (iv) any UES Subsidiary may (A) merge into any other UES Subsidiary or (B) sell, transfer, lease or otherwise dispose of its assets to UES or any other UES Subsidiary; (v) any Person (other than the Borrower, TEP, any TEP Subsidiary, UES and any UES Subsidiary) may merge into any Borrower Subsidiary in a transaction in which the surviving entity is a Borrower Subsidiary; provided, that in any merger involving Millennium or UED, Millennium or UED (as the case may be) shall be the surviving entity; (vi) any Borrower Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Borrower Subsidiary; provided, however, that neither UES nor UED shall sell, transfer, lease or otherwise dispose of all or any substantial part of its assets except to the Borrower, UES or UED; (vii) any Subsidiary may liquidate or dissolve if the Borrower determines in good faith that such liquidation or dissolution is in the best interests of the Borrower and is not materially disadvantageous to the Lenders; (viii) any transaction permitted pursuant to Section 6.05 (to the extent not prohibited by any other clause contained in this Section); (ix) any transaction by TEP or any TEP Subsidiary permitted pursuant to the TEP Loan Documents; (x) any transaction by UES or any UES Subsidiary permitted pursuant to the UNS Loan Documents; provided, that in any merger involving UES, UES shall be the surviving entity; 52 (xi) any Person (other than TEP, any TEP Subsidiary, UES and any UES Subsidiary) may merge into the Borrower in a transaction in which the Borrower is the surviving corporation; (xii) the Borrower may merge with or into or consolidate with or transfer its assets as an entirety or substantially as an entirety to any Person, so long as (A) immediately prior to and immediately after giving effect to such merger, consolidation or transfer, the Person with or into which the Borrower shall ultimately merge or consolidate or to whom the Borrower shall ultimately transfer its assets as an entirety or substantially as an entirety is in the Utility Business; (B) the Person formed by any such merger, consolidation or transfer of assets or into which the Borrower shall be merged or consolidated or to which such assets are transferred shall be in compliance, on a pro forma basis after giving effect to such merger, consolidation or transfer of assets, with the covenants set forth in Section 6.12 and 6.13 as such covenants are recomputed as at the last day of the most recently ended fiscal quarter under each such Section as if such merger, consolidation or transfer of assets had occurred on the first day of the four-fiscal-quarter period ended on such date; (C) in the case of any merger or consolidation or transfer of assets in which the Borrower is not the surviving corporation, the Person formed by any such consolidation or transfer of assets or into which the Borrower shall be merged or consolidated or to which such assets are transferred shall have executed an agreement in form reasonably satisfactory to the Administrative Agent containing an assumption by the surviving Person of the due and punctual performance of each obligation, agreement, covenant and condition of each of the Loan Documents to be performed or complied with by the Borrower; and (D) the Administrative Agent shall have received an opinion of counsel, in form and substance reasonably satisfactory to the Administrative Agent and its counsel, with respect to the due authorization, execution, delivery, validity and enforceability of the assumption agreement referred to in clause (C) of this clause (xii), of the enforceability and continuation of the Liens created pursuant to the Security Documents and such other matters as the Required Lenders may reasonably require; provided that any such merger involving a Person that is not a wholly-owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.05. (b) The Borrower will not, and will not permit any Subsidiary to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto. SECTION 6.04. Investments, Loans, Advances and Acquisitions. The Borrower will not, and will not permit any of the Subsidiaries to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary prior to such merger) any Capital Stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, 53 any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except: (a) Permitted Investments; (b) investments, loans and advances existing on the date hereof and set forth on Schedule 6.04 and extensions, renewals or reinvestments thereof, so long as the aggregate amount of all such investments, loans and advances pursuant to this clause (b) is not increased at any time above the amount of such investments, loans and advances on the date hereof; (c) investments by the Borrower and the Subsidiaries in Equity Interests in their respective Subsidiaries; (d) loans or advances made by the Borrower to any Subsidiary or made by any Subsidiary to the Borrower or any other Subsidiary; provided, that any such loans or advances made to the Borrower shall be Subordinated Debt; (e) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business; (f) investments by the Borrower and the Subsidiaries (other than the Millennium Entities) in the Millennium Entities in an amount not to exceed $10,000,000; and investments by any Millennium Entity in another Millennium Entity; (g) extensions of trade credit and asset purchases in the ordinary course of business; (h) to the extent permitted by applicable law, loans and advances to officers, directors and employees of the Borrower or any Subsidiary (i) to finance the purchase of Capital Stock of the Borrower or any direct or indirect shareholder of the Borrower; and (ii) for additional purposes not contemplated by subclause (i) above in an aggregate principal amount at any time outstanding with respect to this clause (ii) not exceeding $5,000,000; (i) Permitted Acquisitions; provided that the Borrower shall be in compliance, on a pro forma basis after giving effect to such Permitted Acquisition, with the covenants set forth in Sections 6.12 and 6.13, as such covenants are recomputed as of the last day of the most recently ended fiscal quarter under each such Section as if such Permitted Acquisition had occurred on the first day of the four-fiscal-quarter period ended on such date; (j) investments to the extent that payment for such investments is made solely with Capital Stock of the Borrower; (k) Capital Lease Investments; 54 (l) investments permitted pursuant to Section 6.08; (m) investments by TEP constituting an acquisition by TEP of the Capital Stock or assets of Southwest Energy or MEG; and (n) other investments, loans and advances by the Borrower or the Subsidiaries (other than the Millennium Entities) in an amount not to exceed $50,000,000. Notwithstanding anything to the contrary contained above, the Borrower and the Subsidiaries (other than the Millennium Entities) will not be permitted to invest more than $10,000,000 in the Millennium Entities after the Effective Date. SECTION 6.05. Asset Sales. (a) The Borrower will not, and will not permit any Subsidiary to, convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets (including leasehold interests), whether now owned or hereafter acquired, except: (i) inventory and other property in the ordinary course of business; (ii) sales of accounts receivable; (iii) conveyances, sales, leases, transfers and other dispositions of property, business or assets of TEP or any TEP Subsidiary that is not prohibited pursuant to the TEP Loan Documents; (iv) conveyances, sales, leases, transfers and other dispositions of property, business or assets of UES or any UES Subsidiary that is not prohibited pursuant to the UNS Loan Documents; (v) subject to Section 5.14, Capital Stock or assets of the Millennium Entities and Southwest Energy; (vi) transactions permitted pursuant to Section 6.03(a); and (vii) the Borrower and the Subsidiaries may sell, transfer or otherwise dispose of other assets for Fair Value in transactions not permitted under clauses (i), (ii), (iii), (iv) or (v) above; provided that (A) the aggregate consideration for all sales, transfers and disposals by the Borrower and the Subsidiaries pursuant to this clause (vii) during the term of this Agreement shall at no time exceed in the aggregate $75,000,000; (B) with respect to any such sale, transfer or disposition (or series of related sales, transfers or dispositions) with an aggregate consideration in excess of $10,000,000, (I) the Board of Directors (or authorized committee thereof) of the Borrower shall have approved such sale, transfer or disposition, as the case may be, and (II) the Borrower shall be in compliance, on a pro forma basis after giving effect to such sale, transfer or disposition, as the case may be, with the covenants set forth in Section 6.12 and 6.13, as such covenants are recomputed as at the 55 last day of the most recently ended fiscal quarter under each such Section as if such sale, transfer or disposition had occurred on the first day of the four-fiscal-quarter period ended on such date; and (C) no Default is then existing and after giving effect to any such sale, transfer or disposition, as the case may be, no Default shall have occurred and be continuing; provided, that the Borrower or any Subsidiary may convey, sell, lease, assign, transfer or otherwise dispose of any of its property, business or assets to the Borrower or any other Subsidiary (other than a Millennium Entity), as the case may be; provided further, that the Borrower cannot transfer any interest in any Person pledged to the Administrative Agent as collateral for the Obligations. Investments by the Borrower and the Subsidiaries in, and contributions by the Borrower and the Subsidiaries to, Subsidiaries shall be deemed not to constitute transfers of assets subject to the limitations of this Section 6.05 to the extent such investments or contributions are made in cash. (b) The Borrower will not, and will not permit any Subsidiary to, convey, sell, lease, assign, transfer or otherwise dispose of all or any substantial part of its generating assets (including leasehold interests), whether now owned or hereafter acquired, except as required by applicable law. SECTION 6.06. Sale and Leaseback Transactions. The Borrower will not, and will not permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell, transfer or otherwise dispose of any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for any such sale of any fixed or capital assets that is made for Fair Value and is consummated within 270 days after the Borrower or such Subsidiary acquires or completes the construction of such fixed or capital asset. SECTION 6.07. Limitation on Hedge Agreements. The Borrower will not, and will not permit any of the Subsidiaries to, enter into any Hedge Agreement other than Hedge Agreements entered into in the ordinary course of business. SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness. (a) The Borrower will not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except: (i) the Borrower may declare and pay dividends and make other distributions with respect to its Equity Interests payable solely in additional shares of its common stock; (ii) the Borrower may make Restricted Payments pursuant to and in accordance with stock option plans or other benefit plans for management or employees of the Borrower and the Subsidiaries and in accordance with the terms of employment agreements or shareholder or partnership agreements of the Borrower or any direct or indirect shareholder of the Borrower; 56 (iii) the Borrower may redeem in whole or in part any Capital Stock of the Borrower (A) for another class of Capital Stock or rights to acquire Capital Stock of the Borrower or (B) with proceeds from substantially concurrent capital contributions or issuances of new classes of Capital Stock; provided that such other class of Capital Stock contains terms and provisions at least as advantageous to the Lenders in all respects material to their interests as those contained in the Capital Stock redeemed thereby; and (iv) the Borrower may pay any cash dividend so long as (A) both before and after giving effect to such payment, no Default has occurred and is continuing and (B) on the date of such payment, after giving effect thereto, the sum of (1) the aggregate amount of Unrestricted Cash then existing plus (2) the unused amount of the Revolving Commitments equals or exceeds $15,000,000. (b) The Borrower will not, and will not permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Subordinated Debt, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Subordinated Debt; provided that so long as no Default has occurred and is continuing or would result therefrom, the Borrower or any of its Subsidiaries may pay, prepay, repurchase or redeem or otherwise defease all or any portion of any Subordinated Debt. SECTION 6.09. Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) at prices and on terms and conditions not less favorable to the Borrower or such Subsidiary than could be obtained on an arm's-length basis from unrelated third parties, (b) transactions between or among the Borrower and the Subsidiaries not involving any other Affiliate, (c) any Restricted Payment permitted by Section 6.08, (d) shared corporate or administrative services and staffing with Affiliates, including accounting, legal, human resources and treasury operations, provided on customary terms for similarly situated companies, (e) tax sharing arrangements on customary terms for similarly situated companies, (f) customary fees paid to members of the board of directors of the Borrower and the Subsidiaries who are not officers of the Borrower or any Subsidiary and (g) transactions by TEP or any TEP Subsidiary to acquire, either through asset purchases, mergers or purchases of Capital Stock, the business and operations of Southwest Energy or MEG. SECTION 6.10. Restrictive Agreements. (a) The Borrower will not, and will not permit TEP to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of TEP to pay dividends or other distributions with respect to any shares of its Capital Stock; provided that the foregoing shall not apply to restrictions and conditions (i) imposed by law, (ii) imposed by any Loan Document or TEP Loan Document, (iii) existing on the date hereof identified on Part A of Schedule 6.10 (but shall apply to any amendment or modification materially expanding the 57 scope of any such restriction or condition), (iv) contained in agreements entered into after the Effective Date which contain restrictions no more restrictive than those contained in the TEP Loan Documents and (v) contained in agreements relating to the sale of a Subsidiary pending such sale; provided in the case of this clause (v) such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder. (b) In addition to the restrictions in paragraph (a) above, the Borrower will not, and will not permit any of the Limited Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its Capital Stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (x) the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Documents, TEP Loan Document or UNS Loan Document; (y) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Part B of Schedule 6.10 (but shall apply to any amendment or modification materially expanding the scope of, any such restriction or condition); and (z) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder. SECTION 6.11. Amendment of Material Documents. The Borrower will not, and will not permit any Subsidiary to, amend, modify or change, or consent or agree to any amendment, modification or change to, any TEP Loan Document, except for amendments, modifications and changes that, individually and in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 6.12. Cash Coverage Ratio. The Borrower will not permit the ratio of (a) Borrower Cash Flow to (b) Borrower Debt Service, in each case for the four-fiscal-quarter period ended on the last day of any fiscal quarter, commencing with the fiscal quarter ending June 30, 2005, to be less than 1.25 to 1.0. SECTION 6.13. Leverage Test. The Borrower will not permit the ratio of (a) Consolidated Total Indebtedness at the end of any fiscal quarter, commencing with the fiscal quarter ending June 30, 2005, to (b) Consolidated EBITDA for the four-fiscal-quarter period ended on such date to be greater than the amount specified in the chart below for the period in which such date shall occur:
------------------------------------------------------------------- Period Maximum Ratio ------------------------------------------------------------------- From the Effective Date through and including 5.25 December 31, 2005 ------------------------------------------------------------------- From January 1, 2006 through and including 5.00 December 31, 2006 ------------------------------------------------------------------- 58 ------------------------------------------------------------------- From January 1, 2007 through and including 4.75 December 31, 2008 ------------------------------------------------------------------- After December 31, 2008 4.50 -------------------------------------------------------------------
ARTICLE VII Events of Default ----------------- If any of the following events ("Events of Default") shall occur: (a) the Borrower shall fail to pay any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise; (b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article) payable under this Agreement or any other Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five days; (c) any representation or warranty made or deemed made by or on behalf of the Borrower or any Subsidiary in or in connection with any Loan Document or any amendment or modification hereof or waiver hereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification hereof or waiver hereunder, shall prove to have been incorrect in any material respect when made or deemed made; (d) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02, 5.04 (with respect to the Borrower's existence), 5.09 or 5.14 or in Article VI; (e) the Borrower shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a), (b) or (d) of this Article), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower (which notice will be given at the request of any Lender); (f) the Borrower or any Significant Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable; (g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption (other than pursuant to provisions permitting the tendering of such Indebtedness from 59 time to time for repurchase or redemption without regard to the occurrence or non-occurrence of any event or condition) or defeasance thereof, prior to its scheduled maturity; provided that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness; (h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Borrower or any Significant Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (i) the Borrower or any Significant Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Borrower or any Significant Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing; (j) the Borrower or any Significant Subsidiary shall become unable, admit in writing its inability or fail generally to pay its debts as they become due; (k) one or more judgments for the payment of money in an aggregate amount in excess of $20,000,000 shall be rendered against the Borrower, any Significant Subsidiary or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Borrower or any Significant Subsidiary to enforce any such judgment; (l) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, has resulted or could reasonably be expected to result in a Material Adverse Effect; (m) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by the Borrower or any Subsidiary not to be, a valid and perfected Lien on any Collateral subject thereto, with the priority required by the applicable Security Document except (A) as a result of the sale or other disposition of the applicable Collateral 60 in a transaction permitted under the Loan Documents or (B) as a result of the Administrative Agent's failure to maintain possession of any stock certificates, promissory notes or other instruments delivered to it under any Security Document; or (n) any material provision of this Agreement or any other Loan Document to which the Borrower is a party shall for any reason, except to the extent permitted by the express terms hereof or thereof, cease to be valid and binding on or enforceable against the Borrower, or the Borrower shall so assert in writing; then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower, and/or (iii) subject to the receipt of any required regulatory approvals and any other applicable law, exercise in respect of the Collateral, in addition to the other rights and remedies provided for herein and in the Security Documents or otherwise available to the Administrative Agent or the Lenders, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York and in effect in any other jurisdiction in which any Collateral is located at that time; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. ARTICLE VIII The Administrative Agent ------------------------ Each of the Lenders hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Required Lenders or the Borrower may at any time, with the consent of the Borrower (provided that such consent shall not be required if an Event of Default under clause (a), (b), (h), (i) or (j) of Article VII shall have occurred and be continuing) or the Required Lenders, as the case may be, replace the Administrative Agent (it being understood that any such replacement Administrative Agent shall be a Person that serves as administrative agent for other credit facilities of a comparable size), provided that the Required Lenders or the Borrower may not replace the Administrative Agent unless, after giving effect to such replacement and each contemporaneous 61 assignment the Required Lenders or the Borrower shall have arranged in connection with such replacement, (i) neither the Administrative Agent nor any of its Affiliates shall have outstanding any Loan or Commitment or other obligation of any kind under this Agreement or any other Loan Document and (ii) each of the Administrative Agent and its Affiliates shall have received payment in full of all amounts owing to it under or in respect of this Agreement and each other Loan Document. The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if it were not the Administrative Agent hereunder. The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of the Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. Notwithstanding anything herein to the contrary, no Lender identified as Syndication Agent or Documentation Agent shall have any separate duties, responsibilities, obligations or authority as Syndication Agent or Documentation Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine 62 and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent, which shall be any commercial bank organized under the laws of the United States of America or any State thereof having a combined capital and surplus and undivided profits of not less than $500,000,000. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. 63 ARTICLE IX Miscellaneous ------------- SECTION 9.01. Notices. (a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (i) if to the Borrower, to it at One South Church Avenue, Tucson, Arizona 85701, Attention of Chief Financial Officer (Telecopy No. (520) 884-3612); (ii) if to the Administrative Agent, to Union Bank of California, N.A., 445 South Figueroa Street, 15th Floor, Los Angeles, California 90071, Attention of Robert Olson (Telecopy No. (213) 236-4096); and (iii) if to any other Agent or any Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. (b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications. (c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by the Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any 64 Default, regardless of whether the Administrative Agent or any Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the consent of the Required Lenders, or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Borrower, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender; (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby; (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby; (iv) change Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender; (v) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class) required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender (or each Lender of such Class, if applicable); (vi) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments or Collateral of Lenders holding Loans of any Class differently from those holdings Loans of any other Class, without the written consent of Lenders holding a majority in interest of the outstanding Loans and unused Commitments of each affected Class; (vii) release all or substantially all the Collateral from the Liens of the Security Documents without the consent of each Lender; or (viii) amend, modify or waive any condition precedent set forth in Section 4.02 with respect to the making of Loans of any Class, without the prior written consent of Lenders holding a majority in interest of the Commitments of such Class; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent; and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Revolving Lenders (but not the Term Lenders) or the Term Lenders (but not the Revolving Lenders) may be effected by an agreement or agreements in writing entered into by the Borrower and the requisite percentage in interest of the affected Class of Lenders that would be required to consent thereto under this Section if such Class of Lenders were the only Class of Lenders hereunder at such time. In furtherance of clause (viii) of this Section 9.02(b), (x) any amendment or modification to or waiver of Section 6.12 or 6.13 of this Agreement and (y) any amendment or modification to or waiver of any provision of this Agreement or any other Loan Document at a time when any Default or Event of Default has occurred and is continuing that would have the effect of eliminating any such Default or Event of Default shall not be deemed to be effective for purposes of determining whether the conditions precedent set forth in Section 4.02 to the making of any Loan of any Class have been satisfied unless the Lenders holding a majority in interest of the Commitments of such Class shall have consented to such amendment, modification or waiver, provided 65 that the foregoing shall not be construed to affect any amendment or modification to any provision of this Agreement or any other Loan Document (other than any amendment or modification to Section 6.12 or 6.13 of this Agreement) if no Default or Event of Default has occurred and is continuing at the time of such amendment or modification. Notwithstanding the foregoing, any provision of this Agreement requiring the consent of a Lender unwilling to provide such consent may be amended by an agreement in writing entered into by the Borrower, the Required Lenders and the Administrative Agent if (1) by the terms of such agreement the Commitment of each such opposing Lender shall terminate upon the effectiveness of such amendment and (2) at the time such amendment becomes effective, each such opposing Lender receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under the Loan Documents. SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Arranger and their respective Affiliates (including due diligence expenses and the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Arranger) in connection with the arrangement and syndication of the credit facilities provided for herein, the preparation, execution, delivery and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated); (ii) all out-of-pocket expenses and charges of the Arranger in connection with any evaluations of Collateral conducted by it; and (iii) all out-of-pocket expenses incurred by the Administrative Agent or any Lender, including the fees, charges and disbursements of any counsel for the Administrative Agent or any Lender, in connection with the enforcement or protection of its rights in connection with the Loan Documents, including its rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans. (b) The Borrower shall indemnify the Administrative Agent, the Arranger and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "Indemnitee"), against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated thereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release of Hazardous Materials on or from any property owned or operated by the Borrower or any Subsidiary or any Environmental Liability related in any way to the Borrower or any Subsidiary or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable 66 judgment to have resulted primarily from the gross negligence, willful misconduct or bad faith of such Indemnitee. (c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or the Arranger under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent or the Arranger, as the case may be, such Lender's Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or the Arranger in its capacity as such. (d) To the extent permitted by applicable law, the Borrower shall not assert, and hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplated hereby, the Transactions, any Loan or the use of the proceeds thereof. (e) All amounts due under this Section shall be payable promptly after delivery to the Borrower of a reasonably detailed statement therefor. SECTION 9.04. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Arranger and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Revolving Commitment, its Term Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment of a Term Commitment or a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, the Administrative Agent must give its prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, the Borrower must give its prior written consent to such assignment (which consent shall not be unreasonably withheld), (iii) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender or an assignment of the entire remaining amount of the assigning Lender's Commitments, the aggregate amount of the Commitments of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the 67 Administrative Agent) shall be in an aggregate amount of not less than $5,000,000 (or $1,000,000 in the case of an assignment of a Term Lender's Term Commitment or Term Loans) unless each of the Borrower and the Administrative Agent otherwise consent, (iv) each partial assignment by a Lender of its Revolving Commitment and Revolving Exposure or its Term Commitment and Term Loans shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement in respect of its Revolving Commitment and Revolving Exposure or its Term Commitment and Term Loans, as the case may be, (v) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, and (vi) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Borrower otherwise required under this paragraph shall not be required (A) if an Event of Default shall have occurred and be continuing or (B) in connection with the initial syndication of the Commitments and Loans. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section. (c) The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices in California a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph. 68 (e) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Revolving Commitment, its Term Commitment and the Loans owing to it); provided that (i) such Lender's obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to paragraph (f) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.16(c) as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 2.13 or 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 2.15(d) as though it were a Lender. (g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrower or Administrative Agent, assign or pledge all or any portion of its rights under this Agreement, including the Loans and notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities; provided that any foreclosure or similar action by such trustee or representative shall be subject to the provisions of Section 9.04(b) concerning assignments. (h) Notwithstanding anything to the contrary contained herein, any Lender (a "Granting Lender") may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower, the option to provide to the 69 Borrower all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrower pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC in connection with its activities as an SPC hereunder any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary in this Section 9.04, any SPC may (i) with notice to, but without the prior written consent of, the Borrower and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrower and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis consistent with the provisions of Section 9.12 any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. The provisions of this Section relating any SPC may not be amended without the written consent of such SPC. SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrower in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as any Commitment has not expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Agents and the Arranger constitute the entire contract among the parties 70 relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof, and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have. SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process. (a) This Agreement shall be construed in accordance with and governed by the law of the State of New York. (b) The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against the Borrower or its properties in the courts of any jurisdiction. 71 (c) The Borrower hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION. SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. SECTION 9.12. Confidentiality. Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates' directors, officers, employees and agents, including accountants, auditors, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrower and its obligations, (g) with the consent of the Borrower or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Agent or any Lender on a nonconfidential basis from a 72 source other than the Borrower. For the purposes of this Section, "Information" means all information received from the Borrower relating to the Borrower or its business, other than any such information that is available to any Agent or any Lender on a nonconfidential basis prior to disclosure by the Borrower; provided that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information. SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender. SECTION 9.14. Patriot Act Notice. Each Lender and each Agent (for itself and not on behalf of any other party) hereby notifies the Borrower that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the "Patriot Act"), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Bank or such Agent, as applicable, to identify the Borrower in accordance with the Patriot Act. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 73 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. UNISOURCE ENERGY CORPORATION By: /s/ Kevin P. Larson ---------------------------------- Name: Kevin P. Larson --------------------------- Title: Vice President --------------------------- UNION BANK OF CALIFORNIA, N.A., as Administrative Agent and as a Lender By: /s/ Kevin M. Zitar ---------------------------------- Name: Kevin M. Zitar --------------------------- Title: Vice President --------------------------- S-1 Signature Page to UniSource Energy Corporation Credit Agreement COMMERZBANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, as Documentation Agent and as a Lender By: /s/ Andrew Campbell ---------------------------------- Name: Andrew Campbell --------------------------- Title: Senior Vice President --------------------------- By: /s/ Andrew Kjoller ---------------------------------- Name: Andrew Kjoller --------------------------- Title: Vice President --------------------------- S-2 Signature Page to UniSource Energy Corporation Credit Agreement THE BANK OF NEW YORK, as Syndication Agent and as a Lender By: /s/ Peter Keller ---------------------------------- Name: Peter Keller --------------------------- Title: Managing Director Energy East Division --------------------------- S-3 Signature Page to UniSource Energy Corporation Credit Agreement CREDIT SUISSE FIRST BOSTON, acting through its Cayman Islands Branch, as a Lender By: /s/ David Dodd ---------------------------------- Name: David Dodd --------------------------- Title: Vice President --------------------------- By: /s/ Gregory S. Richards ---------------------------------- Name: Gregory S. Richards --------------------------- Title: Associate --------------------------- S-4 Signature Page to UniSource Energy Corporation Credit Agreement WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender By: /s/ Clyde H. Gossert ---------------------------------- Name: Clyde H. Gossert --------------------------- Title: Vice President --------------------------- S-5 Signature Page to UniSource Energy Corporation Credit Agreement ALLIED IRISH BANKS, P.L.C., as a Lender By: /s/ Vaughn Buck ---------------------------------- Name: Vaughn Buck --------------------------- Title: Senior Vice President --------------------------- By: /s/ Aidan Lanigan ---------------------------------- Name: Aidan Lanigan --------------------------- Title: Vice President --------------------------- S-6 Signature Page to UniSource Energy Corporation Credit Agreement EX-4 3 e940433_ex4-2.txt EX. 4.2 - PLEDGE AGREEMENT EXHIBIT 4.2 PLEDGE AGREEMENT This PLEDGE AGREEMENT, dated as of April 15, 2005, between UNISOURCE ENERGY CORPORATION, an Arizona corporation (the "Pledgor" or the "Borrower"), and UNION BANK OF CALIFORNIA, N.A., as administrative agent (in such capacity, the "Administrative Agent") for the lenders (the "Lenders") from time to time parties to the Credit Agreement, dated as of April 15, 2005 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Lenders, The Bank of New York, as Syndication Agent, Commerzbank AG, New York and Grand Cayman Branches, as Documentation Agent, and the Administrative Agent. Recitals A. Pursuant to the Credit Agreement, the Lenders have severally agreed to make Loans and other extensions of credit (collectively, the "Extensions of Credit") to the Borrower upon the terms and subject to the conditions set forth therein. One or more Lenders or affiliates of Lenders may from time to time enter into Hedge Agreements (as defined in the Credit Agreement) with the Borrower. B. It is a condition precedent to the obligation of the Lenders to make their respective Extensions of Credit to the Borrower under the Credit Agreement that the Pledgor shall have executed and delivered this Pledge Agreement to the Administrative Agent for the benefit of the Lenders. C. The Pledgor is the legal and beneficial owner of the shares of stock, membership interests, partnership interests or similar equity interests, as the case may be (such shares of stock, membership interests, partnership interests or similar equity interests, as the case may be, together with any shares of stock, membership interests, partnership interests or similar equity interests, as the case may be, described in Section 8(b), the "Pledged Shares"), described on Schedule I hereto, as such Schedule may be updated or amended from time to time, and issued by the Persons named therein, which Pledged Shares constitute the percentage of all the issued and outstanding shares of capital stock, membership interests, partnership interests or similar equity interests, as the case may be, of such Persons identified on such Schedule I, as such Schedule may be updated or amended from time to time. The Pledgor is the legal and beneficial owner of the Indebtedness owed to the Pledgor from any Subsidiary (such Indebtedness, together with any future Indebtedness at any time owed to the Pledgor from any Subsidiary, the "Pledged Debt") described on Schedule II hereto, as such Schedule may be updated or amended from time to time. 1 Agreement --------- NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent, the Syndication Agent, the Documentation Agent and the Lenders to enter into the Credit Agreement and to make Loans thereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Pledgor hereby agrees with the Administrative Agent, for the benefit of the Lenders, as follows: 1. Defined Terms. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. (b) As used herein, the term "Obligations" means the collective reference to (i) the unpaid principal of and interest on the Loans and all other obligations and liabilities of any nature of the Borrower to the Administrative Agent or any Lender (including, without limitation, interest accruing at the then-applicable rate provided in the Credit Agreement after the maturity of the Loans and interest accruing at the then-applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, that may arise under, out of, or in connection with, the Credit Agreement, the other Loan Documents or any other documents made, delivered or given in connection therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Administrative Agent or to the Lenders that are required to be paid by the Borrower or any Subsidiary pursuant to the terms of the Credit Agreement or any other Loan Document) and (ii) all obligations and liabilities of the Borrower to any Lender or any affiliate of a Lender, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter incurred, that may arise under, out of, or in connection with, any Specified Hedge Agreement or any other document made, delivered or given in connection therewith. (c) References to "Lenders" in this Pledge Agreement shall be deemed to include affiliates of Lenders that may from time to time enter into Specified Hedge Agreements with the Borrower. (d) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Pledge Agreement shall refer to this Pledge Agreement as a whole and not to any particular provision of this Pledge Agreement, and Section references are to Sections of this Pledge Agreement unless otherwise specified. (e) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms. 2 2. Grant of Security. The Pledgor hereby transfers, assigns and pledges to the Administrative Agent for the benefit of the Lenders, and hereby grants to the Administrative Agent for the benefit of the Lenders a security interest in, the following, whether now owned or existing or hereafter acquired or existing (collectively, the "Collateral"): (a) the Pledged Shares and the certificates representing the Pledged Shares and any interest of the Pledgor in the entries on the books of any financial intermediary pertaining to the Pledged Shares, and all dividends, cash, warrants, rights, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares; (b) the Pledged Debt and the instruments evidencing the Pledged Debt, and all interest, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Debt; and (c) to the extent not covered by clauses (a) and (b) above, respectively, all proceeds of any or all of the foregoing Collateral. For purposes of this Pledge Agreement, the term "proceeds" includes whatever is receivable or received when Collateral or proceeds are sold, exchanged, collected or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, proceeds of any indemnity or guaranty payable to the Pledgor or the Administrative Agent from time to time with respect to any of the Collateral. 3. Security for Obligations. This Pledge Agreement secures, and the Collateral is collateral security for, the payment of all Obligations. Without limiting the generality of the foregoing, this Pledge Agreement secures the payment of all amounts that constitute part of the Obligations and would be owed by the Pledgor to the Administrative Agent or the Lenders under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Pledgor. 4. Delivery of the Collateral. All certificates or instruments, if any, representing or evidencing the Collateral shall be promptly delivered to and held by or on behalf of the Administrative Agent pursuant hereto and shall be in suitable form for transfer by delivery, or shall be accompanied by duly executed instruments of transfer or assignment in blank, all in form and substance reasonably satisfactory to the Administrative Agent. The Administrative Agent shall have the right, at any time after the occurrence and during the continuance of an Event of Default and without notice to the Pledgor, to transfer to or to register in the name of the Administrative Agent or any of its nominees any or all of the Pledged Shares. 5. Representations and Warranties. The Pledgor represents and warrants as follows: (a) The Pledged Shares set forth on Schedule I hereto represents the percentage of all the issued and outstanding Capital Stock of each 3 domestic Subsidiary directly owned by the Pledgor as identified on Schedule I, as such Schedule may be updated or amended from time to time. (b) The Pledged Debt set forth on Schedule II hereto (as such Schedule may be updated or amended from time to time) represents all Indebtedness of any Subsidiary owed to the Pledgor. (c) The Pledgor is the legal and beneficial owner of the Collateral, as indicated on Schedule I and Schedule II, as such Schedules may be updated or amended from time to time, pledged or assigned by the Pledgor hereunder free and clear of any Lien, except for the Lien created by this Pledge Agreement or Liens permitted under Section 8 hereof. (d) As of the date of this Pledge Agreement, the Pledged Shares pledged by the Pledgor hereunder have been duly authorized and validly issued and are fully paid and non-assessable. (e) The execution and delivery by the Pledgor of this Pledge Agreement and the creation of a security interest in the Collateral pledged by the Pledgor hereunder pursuant hereto create a valid and perfected first priority security interest in the Collateral, prior to any other Liens, securing the payment of the Obligations. (f) The Pledgor has full power, authority and legal right to create a security interest in all the Collateral pledged by the Pledgor pursuant to this Pledge Agreement and will defend its and the Administrative Agent's title or interest thereto or therein (and in the proceeds thereof) against any and all Liens (other than the Lien of this Pledge Agreement), however arising, or any and all Persons whomsoever. (g) No authorization, approval or other action by, and no notice to or filing with, any Government Authority or regulatory body, other than the filing of a UCC-1 financing statement with the Arizona Secretary of State, is required for either (i) the pledge by the Pledgor of the Collateral pursuant to this Pledge Agreement and the grant by the Pledgor of the security interest granted hereby, (ii) except as set forth in Section 26, the execution, delivery or performance of this Pledge Agreement by the Pledgor or (iii) except as set forth in Section 26, the exercise by the Administrative Agent of the voting or other rights, or the remedies in respect of the Collateral, provided for in this Pledge Agreement (except as may be required in connection with a disposition of Collateral by laws affecting the offering and sale of securities generally). 6. Further Assurances. The Pledgor agrees that at any time and from time to time, at the expense of the Pledgor, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Administrative Agent may reasonably request, in order to perfect and protect any pledge, assignment or security interest granted or purported to be granted hereby or to enable the Administrative Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. The Pledgor hereby authorizes the Administrative Agent to file one 4 or more financing or continuation statements, and amendments thereto, relative to all or any part of the Collateral without the signature of the Pledgor. 7. Voting Rights, Dividends and Distributions; Etc. (a) So long as no Event of Default shall have occurred and be continuing: (i) the Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Collateral or any part thereof for any purpose not prohibited by the terms of this Pledge Agreement or the other Loan Documents; and (ii) the Administrative Agent shall execute and deliver (or cause to be executed and delivered) to the Pledgor all such proxies and other instruments as the Pledgor may reasonably request for the purpose of enabling the Pledgor to exercise the voting and other rights that it is entitled to exercise pursuant to paragraph (i) above. (b) Subject to paragraph (c) below, the Pledgor shall be entitled to receive and retain and use, free and clear of the Lien of this Pledge Agreement, any and all dividends, distributions, principal and interest made or paid in respect of the Collateral; provided, however, that any and all dividends and other distributions in equity securities included in the Collateral shall be, and shall be forthwith delivered to the Administrative Agent to hold as, Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Administrative Agent, be segregated from the other property or funds of the Pledgor and be forthwith delivered to the Administrative Agent as Collateral in the same form as so received (with any necessary indorsement). (c) Upon written notice to the Pledgor by the Administrative Agent following the occurrence and during the continuance of an Event of Default (or upon the occurrence and during the continuance of an Event of Default under clause (h) or (i) of Article VII of the Credit Agreement, without any requirement that written or any other notice be given), but subject to the terms of Section 26: (i) all rights of the Pledgor to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise pursuant to Section 7(a)(i) shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall thereupon have the sole right to exercise or refrain from exercising such voting and other consensual rights during the continuance of such Event of Default; (ii) all rights of the Pledgor to receive the dividends, distributions and principal and interest payments that the Pledgor would otherwise be authorized to receive and retain pursuant to Section 7(b) shall cease, and all such rights shall thereupon become vested in the Administrative Agent, which shall thereupon have the sole right to receive and hold as Collateral such dividends, 5 distributions and principal and interest payments during the continuance of such Event of Default; (iii) all dividends, distributions and principal and interest payments that are received by the Pledgor contrary to the provisions of Section 7(b) and Section 7(c)(ii) shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other funds of the Pledgor and shall forthwith be paid over to the Administrative Agent as Collateral in the same form as so received (with any necessary indorsements); and (iv) in order to permit the Administrative Agent to receive all dividends, distributions and principal and interest payments to which it may be entitled under Section 7(b) above, to exercise the voting and other consensual rights that it may be entitled to exercise pursuant to Section 7(c)(i) above, and to receive all dividends, distributions and principal and interest payments that it may be entitled to under Section 7(c)(ii) above, the Pledgor shall, if necessary, upon written notice from the Administrative Agent, from time to time execute and deliver to the Administrative Agent appropriate proxies, dividend payment orders and other instruments as the Administrative Agent may reasonably request. 8. Transfers and Other Liens Additional Collateral; Etc. (a) The Pledgor shall not (i) except as expressly permitted by the Credit Agreement, sell or otherwise dispose of, or grant any option or warrant with respect to, any of the Collateral, (ii) create, incur, assume or suffer to exist any consensual Lien upon or with respect to the Capital Stock of TEP, (iii) permit UES to create, incur, assume or suffer to exist any consensual Lien upon or with respect to the Capital Stock of UNS Gas, Inc. or UNS Electric, Inc., or (iv) create, incur, assume or suffer to exist any consensual Lien upon or with respect to any of the Collateral, except for the Lien under this Pledge Agreement, provided that in the event the Pledgor sells assets or any other Collateral expressly permitted by the Credit Agreement and such assets are or include Collateral, the Administrative Agent shall release such Collateral to the Pledgor free and clear of the Lien under this Pledge Agreement concurrently with the consummation of such sale. (b) The Pledgor shall (i) cause UES, UED and Millennium not to issue any stock or other equity securities in addition to or in substitution for the Pledged Shares issued by such Person, except to the Pledgor; (ii) except as expressly permitted by the Credit Agreement, cause each other issuer of Pledged Shares not to issue any stock or other securities in addition to or in substitution for the Pledged Shares issued by such issuer, except to the Pledgor; (iii) pledge hereunder, immediately upon its acquisition (directly or indirectly) thereof, any and all additional shares of stock or other securities of UES, UED, Millennium and, to the extent required by Section 5.12 of the Credit Agreement, each other direct domestic Subsidiary, and 66-2/3% of any and all additional shares of stock or other securities of each direct foreign Subsidiary, in existence on the date hereof or hereafter created or acquired, and such additional shares of stock or other securities shall thereafter constitute Pledged Shares for all purposes; provided that the Pledgor shall not be required to 6 pledge, and the Pledged Shares shall not include the Capital Stock of, any Subsidiary that is subject to regulation as a utility under the laws of any state of the United States; and (iv) pledge hereunder, immediately upon its acquisition or funding thereof, any and all Indebtedness which pursuant to Section 6.01(a)(v) of the Credit Agreement is required to be pledged to the Administrative Agent for the benefit of the Lenders. 9. Administrative Agent Appointed Attorney-in-Fact. The Pledgor hereby irrevocably appoints the Administrative Agent as the Pledgor's attorney-in-fact, with full authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise to take any action and to execute any instrument, in each case after the occurrence and during the continuance of an Event of Default, that the Administrative Agent may deem reasonably necessary or advisable to accomplish the purposes of this Pledge Agreement, including, without limitation, to receive, indorse and collect all instruments made payable to the Pledgor representing any dividend, distribution or principal or interest payment in respect of the Collateral or any part thereof and to give full discharge for the same. 10. The Administrative Agent's Duties. The powers conferred on the Administrative Agent hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Administrative Agent shall have no duty as to any Collateral, as to ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Shares, whether or not the Administrative Agent or any Lender has or is deemed to have knowledge of such matters, or as to the taking of any necessary steps to preserve rights against any parties or any other rights pertaining to any Collateral. The Administrative Agent shall be deemed to have exercised reasonable care in the custody and preservation of any Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Administrative Agen accords its own property consisting of negotiable securities. 11. Remedies. If any Event of Default shall have occurred and be continuing, the provisions set forth below shall apply, subject to the receipt of any required regulatory approvals (including, without limitation, any required approvals from the ACC) with respect to the portion of the Collateral consisting of the common stock of a Subsidiary which owns or controls a company subject to regulation as a utility: (a) The Administrative Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party upon default under the Uniform Commercial Code in effect in the State of New York at such time (the "New York UCC") (whether or not the New York UCC applies to the affected Collateral) and also may without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange broker's board or at any of the Administrative Agent's offices or elsewhere, for cash, on credit or for future delivery, as such time or times at such price or prices and upon such other terms as are commercially reasonable irrespective of the impact of any such sales on the market price of the Collateral. Each purchaser at any such sale shall hold the property sold absolutely free from any claim 7 or right on the part of the Pledgor, and the Pledgor hereby waives (to the extent permitted by law) al rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted. The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Administrative Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Administrative Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. To the extent permitted by law, the Pledgor hereby waives any claim against the Administrative Agent arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale, even if the Administrative Agent accepts the first offer received and does not offer such Collateral to more than one offeree. (b) All cash and cash proceeds received by the Administrative Agent in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral may, in the discretion of the Administrative Agent, be held by the Administrative Agent as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Administrative Agent pursuant to Section 9.03 of the Credit Agreement) in whole or in part by the Administrative Agent for the benefit of the Lenders against, all or any part of the Obligations in such order as the Administrative Agent shall elect. Any surplus of such cash or cash proceeds held by the Administrative Agent and remaining after payment in full of all the Obligations shall be paid over to the Pledgor or to any other Person that may be lawfully entitled to receive such surplus. (c) The Administrative Agent may exercise any and all rights and remedies of the Pledgor in respect of the Collateral. (d) All payments received by the Pledgor after the occurrence and during the continuance of an Event of Default in respect of the Collateral shall be received in trust for the benefit of the Administrative Agent, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Administrative Agent in the same form as so received (with any necessary indorsement). 12. Amendments, etc. with Respect to the Obligations; Waiver of Rights. The Pledgor shall remain obligated hereunder notwithstanding that, without any reservation of rights against the Pledgor and without notice to or further assent by the Pledgor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by such party and any of the Obligations continued, and the Obligations, or the liability of any other party upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and the Credit Agreement, the other Loan Documents and any other documents executed and delivered in connection therewith and the Specified Hedge 8 Agreements and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders, as the case may be, or, in the case of any Specified Hedge Agreement, the Lender or Lender's affiliate party thereto) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released. Neither the Administrative Agent nor any Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Obligations or for this Pledge Agreement or any property subject thereto. When making any demand hereunder against the Pledgor, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on any other pledgor, and any failure by the Administrative Agent or any Lender to make any such demand or to collect any payments from any other pledgor or any release of any other pledgor shall not relieve the Pledgor of its obligations or liabilities hereunder, and shall not impair or affect the rights and remedies, express or implied, or as a matter of law, of the Administrative Agent or any Lender against the Pledgor. For the purposes hereof, "demand" shall include the commencement and continuance of any legal proceedings. 13. Continuing Security Interest, Assignments Under the Credit Agreement. This Pledge Agreement shall create a continuing security interest in the Collateral and shall (a) remain in full force and effect until the payment in full in cash of the Obligations and the termination of all Commitments under the Credit Agreement, (b) be binding upon the Pledgor, its successors and assigns and (c) inure, together with the rights and remedies of the Administrative Agent hereunder, to the benefit of the Administrative Agent, the Lenders and their respective successors, transferees and assigns. 14. Reinstatement. This Pledge Agreement shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Pledgor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Pledgor or any substantial part of the property of the Pledgor, or otherwise, all as though such payments had not been made. 15. Notices. All notices, requests and demands pursuant hereto shall be made in accordance with Section 9.01 of the Credit Agreement, provided that any such notice, request or demand shall be addressed to the Pledgor at the notice address set forth under its signature below. 16. Counterparts. This Pledge Agreement may be executed by one or more of the parties on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the counterparts of this Pledge Agreement signed by the Pledgor and the Administrative Agent shall be lodged with the Administrative Agent and the Pledgor. 17. Severability. Any provision of this Pledge Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without 9 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. 18. Integration. This Pledge Agreement represents the agreement of the Pledgor with respect to the subject matter hereof and there are no promises or representations by the Administrative Agent or any Lender relative to the subject matter hereof not reflected herein or in the other Loan Documents. 19. Amendments in Writing; No Waiver; Cumulative Remedies. (a) None of the terms or provisions of this Pledge Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by the Pledgor and the Administrative Agent in accordance with Section 9.02 of the Credit Agreement. (b) Neither the Administrative Agent nor any Lender shall by any act (except by a written instrument pursuant to Section 19(a)), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or in any breach of any of the terms and conditions hereof. No failure to exercise, nor any delay in exercising, on the part of the Administrative Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Administrative Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Administrative Agent or such Lender would otherwise have on any future occasion. (c) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law. 20. Section Headings. The Section headings used in this Pledge Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. 21. Successors and Assigns. This Pledge Agreement shall be binding upon the successors and assigns of the Pledgor and shall inure to the benefit of the Administrative Agent and the Lenders and their successors and assigns; provided that the Pledgor may not assign, transfer or delegate any of its rights or obligations under this Pledge Agreement without the prior written consent of the Administrative Agent, and any such attempted assignment, transfer or delegation shall be null and void. 22. WAIVER OF JURY TRIAL. EACH OF THE PLEDGOR AND THE ADMINISTRATIVE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS PLEDGE AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN. 10 23. Submission to Jurisdiction; Waivers. The Pledgor hereby irrevocably and unconditionally: (a) submits for itself and its property in any legal action or proceeding relating to this Pledge Agreement or any other Loan Document, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York and appellate courts from any thereof; (b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same; (c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Pledgor at its address referred to in Section 15 or at such other address of which the Administrative Agent shall have been notified pursuant thereto; (d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and (e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section 23 any special, exemplary, punitive or consequential damages. 24. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 25. Obligations Absolute; Waivers and Acknowledgments; Subrogation. (a) Obligations Absolute. The obligations of the Pledgor under or in respect of this Agreement are independent of the Obligations or any other Obligations of the Borrower under or in respect of the Loan Documents, and a separate action or actions may be brought and prosecuted against the Pledgor to enforce this Agreement, irrespective of whether any action is brought against any other Person or pursuant to any other Loan Document or whether any other Person is joined in any such action or actions. The liability of the Pledgor under this Agreement shall be irrevocable, absolute and unconditional irrespective of, and the Pledgor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following: (i) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto; 11 (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations or any other Obligations of the Borrower under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Obligations resulting from the extension of additional credit to the Borrower or any of the Subsidiaries or otherwise; (iii) any taking, exchange, release or non-perfection of any Collateral or any other collateral, or any taking, release or amendment or waiver of, or consent to departure from, any guaranty, for all or any of the Obligations; (iv) any manner of application of Collateral or any other collateral, or proceeds thereof, to all or any of the Obligations, or any manner of sale or other disposition of any Collateral or any other collateral for all or any of the Obligations or any other Obligations of the Borrower under the Loan Documents or any other assets of the Borrower or any of the Subsidiaries; (v) any change, restructuring or termination of the corporate structure or existence of the Borrower or any of the Subsidiaries; (vi) any failure of the Administrative Agent or any Lender to disclose to the Pledgor any information relating to the business, condition (financial or otherwise), operations, performance or properties of the Borrower now or hereafter known to the Administrative Agent or any Lender (the Pledgor waiving any duty on the part of Administrative Agent and the Lenders to disclose such information); (vii) the failure of any other Person to execute or deliver any other agreement or the release or reduction of liability of any other pledgor or any surety with respect to the Obligations; or (viii) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by the Administrative Agent or any Lender that might otherwise constitute a defense available to, or a discharge of, the Pledgor or any surety. (b) Waivers and Acknowledgments. (i) The Pledgor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Obligations and this Agreement and any requirement that the Administrative Agent or any Lender protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against any other Person or any collateral. (ii) The Pledgor hereby unconditionally and irrevocably waives any right to revoke this Agreement and acknowledges that this Agreement is continuing in nature and applies to all Obligations, 12 whether existing now or in the future. (iii) The Pledgor hereby unconditionally and irrevocably waives (x) any defense arising by reason of any claim or defense based upon an election of remedies by the Administrative Agent or any Lender that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of the Pledgor or other rights of the Pledgor to proceed against any guarantor or any other Person or any collateral and (y) any defense based on any right of set-off or counterclaim against or in respect of the obligations of the Pledgor hereunder. (iv) The Pledgor acknowledges that the Administrative Agent or any Lender may, without notice to or demand upon the Pledgor and without affecting the liability of the Pledgor under this Agreement, foreclose under any mortgage by nonjudicial sale, and the Pledgor hereby waives any defense to the recovery by the Administrative Agent or any Lender against the Pledgor of any deficiency after such nonjudicial sale and any defense or benefits that may be afforded by applicable law. (v) The Pledgor hereby unconditionally and irrevocably waives any duty on the part of the Administrative Agent or any the Lender to disclose to the Pledgor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or any of the Subsidiaries now or hereafter known by the Administrative Agent or any Lender. (vi) The Pledgor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in this Section 25 are knowingly made in contemplation of such benefits. (c) Subrogation. The Pledgor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against any insider Person that arise from the existence, payment, performance or enforcement of the Obligations under or in respect of this Agreement or the enforcement of the security interests under this Agreement, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Administrative Agent or any Lender against any insider Person or any collateral, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from any insider Person, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations and all other amounts payable under this Agreement shall have been paid in full in cash and the Commitments shall have expired or been terminated. If any amount shall be paid to the Pledgor in violation of the immediately preceding sentence at any time prior to the later of (i) the payment in full in cash of the Obligations and all other amounts payable under this 13 Agreement and (ii) the Final Maturity Date, such amount shall be received and held in trust for the benefit of the Administrative Agent, shall be segregated from other property and funds of the Pledgor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Obligations and all other amounts payable under this Agreement, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as collateral for any Obligations or other amounts payable under this Agreement thereafter arising. If (x) all of the Obligations and all other amounts payable under this Agreement shall have been paid in full in cash and (y) the Final Maturity Date shall have occurred, the Administrative Agent will, at the Pledgor's request and expense, execute and deliver to the Pledgor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Pledgor of an interest in the Obligations resulting from such payment made by the Pledgor pursuant to this Agreement. 26. Actions Requiring Approval. (a) If an Event of Default shall have occurred and be continuing, the Pledgor shall take any action which the Administrative Agent may request in the exercise of its rights and remedies under this Pledge Agreement in order to transfer or assign the Collateral to the Administrative Agent or to such one or more third parties as the Administrative Agent may designate, or to a combination of the foregoing. The parties hereto acknowledge that, in connection with the exercise of remedies hereunder with respect to any portion of the Collateral consisting of the common stock of a Subsidiary that owns or controls a company subject to regulation as a utility, the receipt of consent or approval from certain Governmental Authorities (including, without limitation, the ACC) may be required. To enforce the provisions of this Section 26, the Administrative Agent is empowered to seek from any Governmental Authority (including, without limitation, the ACC), to the extent required, consent to or approval of any involuntary transfer of control of any entity whose Collateral is subject to this Pledge Agreement for the purpose of seeking a bona fide purchaser to whom control will ultimately be transferred. The Pledgor agrees to cooperate with any such purchaser and with the Administrative Agent in the preparation, execution and filing of any forms and providing any information that may be necessary or helpful in obtaining any applicable Governmental Authority's consent to the assignment to such purchaser of the Collateral. The Pledgor hereby agrees to consent to any such involuntary transfer of control upon the request of the Administrative Agent after and during the continuation of an Event of Default and, without limiting any rights of the Administrative Agent under this Pledge Agreement, to authorize the Administrative Agent to nominate a trustee or receiver to assume control of the Collateral, subject only to required judicial or other consent required by Governmental Authorities, in order to effectuate the transactions contemplated in this Section 26. Such trustee or receiver shall have all the rights and powers as provided to it by law or court order, or to the Administrative Agent under this Pledge Agreement. The Pledgor shall cooperate fully in obtaining the approval or consent of each Governmental Authority required to effectuate the foregoing. 14 (b) If an Event of Default shall have occurred and be continuing, the Pledgor shall use its best efforts to assist in obtaining consent or approval of any Governmental Authority (including, without limitation, the ACC), if required, for any action or transactions contemplated by this Pledge Agreement, including, without limitation, the preparation, execution and filing of the transferor's or assignor's portion of any application or applications for consent to the transfer of control or assignment necessary or appropriate under applicable rules and regulations for approval of the transfer or assignment of any portion of the Collateral. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 15 IN WITNESS WHEREOF, each of the undersigned has caused this Pledge Agreement to be duly executed and delivered by its duly authorized officer as of the day and year first above written. - -------------------------------------------------------------------------------- Address for Notices: UNISOURCE ENERGY CORPORATION One South Church Avenue Tucson, Arizona 85701 By: /s/ Kevin P. Larson Attention: Chief Financial Officer ----------------------------- Telecopy No.: (520) 884-3612 Name: Kevin P. Larson Title: Vice President - -------------------------------------------------------------------------------- UNION BANK OF CALIFORNIA, N.A., as Administrative Agent By: /s/ Kevin M. Zitar ----------------------------- Name: Kevin M. Zitar Title: Vice President - -------------------------------------------------------------------------------- 16 SCHEDULE I LIST OF PLEDGED SHARES
- ------------------------------------------------------------------------------------------------ Issuer Class of Stock Number Percentage of Stock/Par Certificate of Outstanding Value No(s) Shares Shares/Interests - ------------------------------------------------------------------------------------------------ UniSource Energy Services, Inc. Common/No Par Value 1 1000 100% - ------------------------------------------------------------------------------------------------ Millennium Energy Holdings, Inc. Common/$1.00 3 1 100% - ------------------------------------------------------------------------------------------------ UniSource Energy Development Common/$1.00 2 1 100% Company - ------------------------------------------------------------------------------------------------
17 SCHEDULE II LIST OF PLEDGED DEBT
- -------------------------------------------------------------------------------- Maker Date Principal Original Amount - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
18 EX-4 4 e933125_ex4-3.txt EX. 4.3 - UNS GAS/UNS ELECTRIC CREDIT AGREEMENT [EXECUTION COPY] ------------------------------------------------------ $40,000,000 CREDIT AGREEMENT Dated as of April 15, 2005, Among UNS ELECTRIC, INC. and UNS GAS, INC., each as a Borrower and UNISOURCE ENERGY SERVICES, INC., as Guarantor and THE BANKS NAMED HEREIN AND THE OTHER LENDERS FROM TIME TO TIME PARTY HERETO, as Lenders and THE BANK OF NEW YORK, as Syndication Agent, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Documentation Agent, and UNION BANK OF CALIFORNIA, N.A., as Administrative Agent ------------------------------------------------------ UNION BANK OF CALIFORNIA, N.A., as Lead Arranger TABLE OF CONTENTS SECTION PAGE PRELIMINARY STATEMENTS.........................................................1 ARTICLE I DEFINITIONS AND ACCOUNTING TERMS...........................1 SECTION 1.01. Certain Defined Terms.................................1 SECTION 1.02. Computation of Time Periods; Construction............20 SECTION 1.03. Accounting Terms.....................................20 ARTICLE II COMMITMENTS...............................................21 SECTION 2.01. The Commitments......................................21 SECTION 2.02. Fees.................................................21 SECTION 2.03. Reduction of the Commitments.........................22 SECTION 2.04. Computations of Outstandings.........................23 ARTICLE III LOANS.....................................................23 SECTION 3.01. Loans................................................23 SECTION 3.02. Conversion of Loans..................................24 SECTION 3.03. Interest Periods.....................................25 SECTION 3.04. Other Terms Relating to the Making and Conversion of Loans................................25 SECTION 3.05. Repayment of Loans; Interest.........................27 SECTION 3.06. Additional Interest on Eurodollar Rate Loans.........28 ARTICLE IV LETTERS OF CREDIT.........................................28 SECTION 4.01. Issuing Banks........................................28 SECTION 4.02. Letters of Credit....................................29 SECTION 4.03. Issuing Bank Fees....................................29 SECTION 4.04. Reimbursement to Issuing Banks.......................29 SECTION 4.05. Obligations Absolute.................................31 SECTION 4.06. Liability of Issuing Banks and the Lenders...........31 ARTICLE V PAYMENTS, COMPUTATIONS AND YIELD PROTECTION...............32 SECTION 5.01. Payments and Computations............................32 -i- SECTION 5.02. Interest Rate Determination..........................33 SECTION 5.03. Prepayments..........................................34 SECTION 5.04. Yield Protection.....................................34 SECTION 5.05. Sharing of Payments, Etc.............................36 SECTION 5.06. Taxes................................................36 ARTICLE VI CONDITIONS PRECEDENT......................................38 SECTION 6.01. Conditions Precedent to the Initial Extension of Credit................................38 SECTION 6.02. Conditions Precedent to Each Extension of Credit.....40 SECTION 6.03. Determinations Under Section 6.01....................40 SECTION 6.04. Reliance on Certificates.............................40 ARTICLE VII REPRESENTATIONS AND WARRANTIES............................41 SECTION 7.01. Representations and Warranties of the Obligors.......41 ARTICLE VIII COVENANTS OF THE OBLIGORS.................................47 SECTION 8.01. Affirmative Covenants................................47 SECTION 8.02. Negative Covenants...................................54 SECTION 8.03. Financial Covenants..................................57 ARTICLE IX DEFAULTS..................................................57 SECTION 9.01. Events of Default....................................57 SECTION 9.02. Remedies.............................................60 ARTICLE X THE ADMINISTRATIVE AGENT..................................61 SECTION 10.01. Authorization and Action.............................61 SECTION 10.02. Indemnification......................................63 ARTICLE XI GUARANTY..................................................64 SECTION 11.01. The Guaranty.........................................64 SECTION 11.02. Obligations Unconditional............................65 SECTION 11.03. Subrogation..........................................67 SECTION 11.04. Reinstatement........................................67 SECTION 11.05. Remedies Unaffected..................................67 SECTION 11.06. Continuing Guarantee; Liability in Respect of Successor...............................67 -ii- ARTICLE XII MISCELLANEOUS.............................................68 SECTION 12.01. Amendments, Etc......................................68 SECTION 12.02. Notices, Etc.........................................68 SECTION 12.03. No Waiver of Remedies................................69 SECTION 12.04. Costs, Expenses and Indemnification..................69 SECTION 12.05. Right of Set-off.....................................70 SECTION 12.06. Binding Effect.......................................71 SECTION 12.07. Assignments and Participation........................71 SECTION 12.08. Confidentiality......................................75 SECTION 12.09. WAIVER OF JURY TRIAL.................................76 SECTION 12.10. Governing Law; Submission to Jurisdiction............76 SECTION 12.11. Relation of the Parties; No Beneficiary..............76 SECTION 12.12. Execution in Counterparts............................76 SECTION 12.13. Survival of Agreement................................77 SECTION 12.14. Patriot Act Notice...................................77 Exhibits EXHIBIT A - Form of Notice of Borrowing EXHIBIT B - Form of Notice of Conversion EXHIBIT C - Form of Opinion of Thelen Reid & Priest LLP, New York counsel to the Obligors EXHIBIT D - Form of Opinion of the General Counsel of the Guarantor and counsel to the Borrowers EXHIBIT E - Form of Lender Assignment Schedules - --------- SCHEDULE 1.01 Applicable Lending Offices SCHEDULE 7.01(e) Subsidiaries SCHEDULE 7.01(h) Material Litigation SCHEDULE 7.01(n) Existing Indebtedness SCHEDULE 7.01(s) Environmental Matters -iii- CREDIT AGREEMENT Dated as of April 15, 2005 THIS CREDIT AGREEMENT is made by and among: (i) UNS Electric, Inc., an Arizona corporation ("UNS ELECTRIC") and UNS Gas, Inc., an Arizona corporation ("UNS GAS", and together with UNS Electric being referred to herein, individually, as a "BORROWER" and, collectively, as the "BORROWERS"), (ii) UniSource Energy Services, Inc., an Arizona corporation (the "GUARANTOR", and together with the Borrowers being referred to herein, individually, as an "OBLIGOR" and, collectively, as the "Obligors"), (iii) the banks (the "BANKS") listed on the signature pages hereof and the other Lenders (as hereinafter defined) from time to time party hereto, and (iv) Union Bank of California, N.A. ("UNION BANK"), as administrative agent (in such capacity, together with its successors and assigns in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders hereunder. PRELIMINARY STATEMENTS The Borrowers have requested the Banks to provide the credit facilities hereinafter described in the amounts and on the terms and conditions set forth herein. The Banks have so agreed on the terms and conditions set forth herein, and the Administrative Agent has agreed to act as agent for the Lenders on such terms and conditions. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS AND ACCOUNTING TERMS SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings: "ABR", when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate. "ABR LOAN" means a Loan that bears interest as provided in Section 3.05(b)(i). "ACC" means the Arizona Corporation Commission. 2 "ACC ORDER" means Opinion and Order No. 66028 issued by the ACC on July 3, 2003. "ACC SETTLEMENT AGREEMENT" means the settlement agreement dated as of April 1, 2003 between the Staff of the ACC Utilities Division, UniSource Energy, Tucson Electric Power Company and Citizens Communications Company. "ADMINISTRATIVE AGENT" has the meaning assigned to such term in the preamble hereto. "AFFILIATE" means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of any Obligor or any Subsidiary or any Person of which any Obligor and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of an Obligor. "AGREEMENT" means this Credit Agreement, as amended, supplemented or otherwise modified from time to time. "ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the greater of (a) the Reference Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Reference Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Reference Rate or the Federal Funds Effective Rate, respectively. "APPLICABLE LENDING OFFICE" means, with respect to each Lender, (i) such Lender's Domestic Lending Office, in the case of an ABR Loan, and (ii) such Lender's Eurodollar Lending Office, in the case of a Eurodollar Rate Loan. "APPLICABLE MARGIN" means, for any day, (a) with respect to any Eurodollar Rate Loan, 1.50% per annum, and (b) with respect to any ABR Loan, 0.50% per annum. Notwithstanding the foregoing, each of the foregoing Applicable Margins shall be increased by 2.0% per annum upon the occurrence and during the continuance of an Event of Default. "APPLICABLE RATE" means: (i) in the case of each ABR Loan, a rate per annum equal at all times to the sum of the Alternate Base Rate in effect from time to time plus the Applicable Margin in effect from time to time; and 3 (ii) in the case of each Eurodollar Rate Loan comprising part of the same Borrowing, a rate per annum during each Interest Period equal at all times to the sum of the Eurodollar Rate for such Interest Period plus the Applicable Margin in effect from time to time during such Interest Period. "AVAILABILITY SUBLIMIT" means, with respect to any Borrower at any time, the lesser of (i) 75% of the aggregate amount of the Commitments at such time and (ii) the maximum amount of Indebtedness that such Borrower may incur at such time pursuant to Section 10.5 of the Note Purchase Agreement to which it is a party and Sections 8.02(e) and 8.03(a) hereof. The Availability Sublimit for any Borrower shall in no event exceed $30,000,000. "AVAILABLE COMMITMENT" means, for each Lender on any day, the unused portion of such Lender's Commitment, computed after giving effect to all Extensions of Credit or prepayments to be made on such day and the application of proceeds therefrom. "AVAILABLE COMMITMENTS" means the aggregate of the Lenders' Available Commitments. "BOARD" means the Board of Governors of the Federal Reserve System of the United States of America (or any successor). "BORROWER" or "BORROWERS" has the meaning assigned to such term in the preamble hereto. "BORROWER SUCCESSOR" has the meaning assigned to such term in Section 8.02(b). "BORROWING" means a borrowing consisting of Loans of the same Type, having the same Interest Period and made or Converted on the same day by the Lenders, ratably in accordance with their respective Percentages. Any Borrowing consisting of Loans of a particular Type may be referred to as being a Borrowing of such "TYPE". All Loans of the same Type, having the same Interest Period and made or Converted on the same day shall be deemed a single Borrowing hereunder until repaid or next Converted. "BUSINESS DAY" means (a) for all purposes other than as covered by clause (b) below, a day other than a Saturday, Sunday or other day on which commercial banks in New York City or Los Angeles, California are authorized or required by law to close and (b) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Rate Loans, any day which is a Business Day described in clause (a) and which is also a day for trading by and between banks in Dollar deposits in the London interbank market. "CAPITAL LEASE" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "CAPITAL LEASE OBLIGATION" means, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person. 4 "CHANGE OF CONTROL" means the failure of UniSource Energy directly or indirectly to beneficially own 100% of the shares of the Guarantor's voting stock outstanding. "CLOSING DATE" means the date upon which each of the conditions precedent enumerated in Section 6.01 and, only with respect to the initial Extension of Credit, Section 6.02 has been fulfilled to the satisfaction of the Lenders, the Administrative Agent and the Borrowers. The Closing Date shall take place on or before April 15, 2005 at the offices of Hughes Hubbard & Reed LLP, One Battery Park Plaza, New York, New York 10004, at 10:00 A.M. (New York, New York time), or such other time and/or location as the parties hereto may mutually agree. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "COMMITMENT" means, for each Lender, the obligation of such Lender to make Loans to any Borrower and to participate in Extensions of Credit resulting from the issuance (or extension, modification or amendment) of any Letter of Credit in an aggregate amount no greater than (i) the amount set forth opposite such Lender's name on the signature pages hereof or (ii) if such Lender has entered into one or more Lender Assignments, the amount set forth for such Lender in the Register maintained by the Administrative Agent pursuant to Section 12.07(c), in each such case as such amount may be reduced from time to time pursuant to Section 2.03. "COMMITMENTS" means the total of the Lenders' Commitments hereunder. The Commitments shall in no event exceed $40,000,000. "CONFIDENTIAL INFORMATION" has the meaning assigned to such term in Section 12.08. "CONSOLIDATED DEBT" means, with respect to any Borrower as of any date of determination, the total of all Indebtedness of such Borrower and its Subsidiaries outstanding on such date, after eliminating all offsetting debits and credits between such Borrower and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of such Borrower and its Subsidiaries in accordance with GAAP. "CONSOLIDATED INCOME AVAILABLE FOR INTEREST CHARGES" means, with respect to any Borrower for any period, Consolidated Net Income of such Borrower for such period plus all amounts deducted in the computation thereof on account of (a) Interest Charges, (b) taxes imposed on or measured by income or excess profits, and (c) the amount of all depreciation and amortization allowances and other non-cash expenses of such Borrower and its Subsidiaries for such period. "CONSOLIDATED LONG TERM DEBT" means, with respect to any Borrower as of any date of determination, the total of all Long Term Debt of such Borrower and its Subsidiaries outstanding on such date, after eliminating all offsetting debits and credits between such Borrower and its Subsidiaries and all other items required to be eliminated in the course of 5 the preparation of consolidated financial statements of such Borrower and its Subsidiaries in accordance with GAAP. "CONSOLIDATED NET INCOME" means, with respect to any Borrower and with reference to any fiscal period, the net income (or loss) of such Borrower and its Subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after eliminating all offsetting debits and credits between such Borrower and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of such Borrower and its Subsidiaries in accordance with GAAP, adjusted to exclude (a) any extraordinary gain or loss reflected in the net income (or loss) for such Borrower and its Subsidiaries for such period and (b) any cumulative effect of a change in accounting principles reflected in the net income (or loss) for such Borrower and its Subsidiaries for such period. "CONSOLIDATED NET WORTH" means, with respect to any Person at any time: (a) the total assets of such Person and its Subsidiaries which would be shown as assets on a consolidated balance sheet of such Person and its Subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries; minus (b) the total liabilities of such Person and its Subsidiaries which would be shown as liabilities on a consolidated balance sheet of such Person and its Subsidiaries as of such time prepared in accordance with GAAP; minus (c) the net book value of all assets (other than intangible assets eligible for cost recovery through regulatory rates) of such Person and its Subsidiaries, after deducting any reserves applicable thereto, which would be treated as intangible under GAAP, including, without limitation, goodwill, trademarks, trade names, service marks, brand names, copyrights, patents, unamortized debt discount and expense and organizational expenses. "CONSOLIDATED TOTAL CAPITALIZATION" means, with respect to any Borrower at any time, the sum of Consolidated Net Worth and Consolidated Debt of such Borrower at such time. "CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its Property is bound. "CONVERSION", "CONVERT" or "CONVERTED" refers to a conversion of Loans of one Type into Loans of another Type, or to the selection of a new, or the renewal of the same, Interest Period for Loans, as the case may be, pursuant to Section 3.02. "CURRENT MATURITIES OF LONG TERM DEBT" means, at any time and with respect to any item of Long Term Debt, the portion of such Long Term Debt outstanding at such time which by the terms of such Long Term Debt or the terms of any instrument or agreement relating thereto is due on demand or 6 within one year from such time (whether by sinking fund, other required prepayment or final payment at maturity) and is not directly or indirectly renewable, extendible or refundable at the option of the obligor under an agreement or firm commitment in effect at such time to a date one year or more from such time. "DEFAULT" means any of the events specified in Section 9.01, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "DEFAULT RATE" means a rate per annum equal at all times to the Applicable Rate for an ABR Loan in effect from time to time. "DISCLOSURE DOCUMENTS" means the Annual Report on Form 10-K of UniSource Energy for the fiscal year ended December 31, 2004, as filed with the SEC. "DISPOSITION" means, with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof; and the terms "DISPOSE" and "DISPOSED OF" shall have correlative meanings. "DISTRIBUTION" means, in respect of any corporation, association or other business entity: (a) dividends or other distributions or payments on capital stock or other equity interests of such corporation, association or other business entity (except distributions in such stock or other equity interests); and (b) the redemption or acquisition of such stock or other equity interests or of warrants, rights or other options to purchase such stock or other equity interests (except when solely in exchange for such stock or other equity interests) unless made, contemporaneously, from the net proceeds of a sale of such stock or other equity interests. "DOLLARS" and the sign "$" each means lawful money of the United States. "DOMESTIC LENDING OFFICE" means, with respect to any Lender, the office or Affiliate of such Lender specified as its "Domestic Lending Office" opposite its name on Schedule 1.01 hereto or in the Lender Assignment pursuant to which it became a Lender, or such other office or Affiliate of such Lender as such Lender may from time to time specify in writing to the Borrower and the Administrative Agent. "ELIGIBLE ASSIGNEE" means (a) a commercial bank or trust company organized under the laws of the United States, or any State thereof; (b) a commercial bank organized under the laws of any other country that is a member of the OECD, or a political subdivision of any such country, provided that such bank is acting through a branch or agency located in the United States; (c) the central bank of any country that is a member of the OECD; (d) any other commercial bank or other financial institution engaged generally in the business of extending credit or purchasing debt instruments; and (e) a Lender or an Affiliate of a Lender; provided, however, that (A) any such Person described in clauses (a) through (e) 7 above shall also (i) have outstanding unsecured indebtedness that is rated A- or better by S&P or A3 or better by Moody's (or an equivalent rating by another nationally-recognized credit rating agency of similar standing if neither of such corporations is then in the business of rating unsecured indebtedness of entities engaged in such businesses) or (ii) have combined capital and surplus (as established in its most recent report of condition to its primary regulator) of not less than $250,000,000 (or its equivalent in foreign currency), (B) any Person described in clause (b), (c), or (d) above, shall, on the date on which it is to become a Lender hereunder, (1) be entitled to receive payments hereunder without deduction or withholding of any United States Federal income taxes (as contemplated by Section 5.06) and (2) not be incurring any losses, costs or expenses of the type for which such Person could demand payment under Section 5.04(a) or (c) (except to the extent that, in the absence of the making of an assignment to such Person, the assigning Lender would have incurred an equal or greater amount of such losses, costs or expenses and such losses, costs or expenses would have been payable by the Borrowers to such assigning Lender hereunder), and (C) any Person described in clause (a), (b), (c), (d) or (e) above that is not a Lender shall, in addition, be acceptable to each Issuing Bank based upon its then-existing credit criteria. "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ENVIRONMENTAL LIABILITY" means, with respect to any Person, any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of such Person or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA AFFILIATE" means, with respect to any Obligor, any trade or business (whether or not incorporated) that is treated as a single employer together with such Obligor under section 414 of the Code. "EUROCURRENCY LIABILITIES" has the meaning assigned to such term in Regulation D of the Board, as in effect from time to time. 8 "EURODOLLAR LENDING OFFICE" means, with respect to any Lender, the office or Affiliate of such Lender specified as its "Eurodollar Lending Office" opposite its name on Schedule 1.01 hereto or in the Lender Assignment pursuant to which it became a Lender (or, if no such office or Affiliate is specified, its Domestic Lending Office), or such other office or Affiliate of such Lender as such Lender may from time to time specify in writing to the Borrower and the Administrative Agent. "EURODOLLAR RATE" means, for each Interest Period for each Eurodollar Rate Loan made as part of the same Borrowing, an interest rate per annum (rounded upwards, if necessary, to the nearest whole multiple of 1/16 of 1%) equal to the rate at which Dollar deposits are offered for such Interest Period as displayed on the Reuters Screen LIBO Page (or, if such rate is not displayed on the Reuters Screen LIBO Page, then on the Telerate Screen LIBO Page) at or about 9:00 A.M. (Los Angeles, California time) two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period, and in an amount approximately equal to the amount of such Eurodollar Rate Loan and for a period approximately equal to such Interest Period. If for any Interest Period for a Eurodollar Rate Loan no such displayed rate is available, the Administrative Agent shall determine such rate based on the average rate at which the Administrative Agent is offered deposits in Dollars of such duration and in the amount of $5,000,000 by prime banks in the London interbank market as of approximately 11:00 A.M. (London, England time) two Business Days before the commencement of such Interest Period. "EURODOLLAR RATE LOAN" means a Loan that bears interest as provided in Section 3.05(b)(ii). "EURODOLLAR RESERVE PERCENTAGE" of any Lender for each Interest Period for each Eurodollar Rate Loan means the reserve percentage applicable to such Lender during such Interest Period (or if more than one such percentage shall be so applicable, the daily average of such percentages for those days in such Interest Period during which any such percentage shall be so applicable) under Regulation D or other regulations issued from time to time by the Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) then applicable to such Lender with respect to liabilities or assets consisting of or including Eurocurrency Liabilities having a term equal to such Interest Period. "EVENT OF DEFAULT" means any of the events specified in Section 9.01, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "EXTENSION OF CREDIT" means (i) the making of a Borrowing (including any Conversion), (ii) the issuance of a Letter of Credit, or (iii) the amendment of any Letter of Credit having the effect of extending the stated 9 termination date thereof, increasing the LC Outstandings thereunder, or otherwise altering any of the material terms or conditions thereof. "FAIR MARKET VALUE" means, at any time and with respect to any Property, the sale value of such Property that would be realized in an arm's-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell). "FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to 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 necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent. "FEE LETTER" has the meaning assigned to such term in Section 2.02(c). "FINAL MATURITY DATE" means April 15, 2008. "FOREIGN LENDER" means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrowers are located. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time. "GOVERNMENTAL APPROVAL" means all authorizations, approvals, certificates, permits, waivers, exemptions, consents, variances, franchises, registrations, filings, authorizations, licenses or similar orders of, or from, any Governmental Authority. "GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which any Obligor or any Subsidiary thereof conducts all or any part of its business, or which asserts jurisdiction over any Properties of any Obligor or any Subsidiary thereof, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "GOVERNMENTAL RULE" means any statute, law, regulation, ordinance, rule, judgment, order, decree, permit, license, concession, directive, guideline, policy or rule of common law, requirement of, or other governmental restriction or any similar form of decision of or determination by, or any interpretation or administration of any of the foregoing by, any Governmental Authority, whether now or hereafter in effect. "GRANTING LENDER" has the meaning assigned to such term in Section 12.07(j). 10 "GUARANTY" means the guaranty set forth in Article XI of this Agreement. "GUARANTOR" has the meaning assigned to such term in the preamble hereto. "GUARANTOR SUCCESSOR" has the meaning assigned to such term in Section 8.02(b). "GUARANTY OBLIGATION" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any Property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation; (c) to lease Properties or to purchase Properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or (d) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof. In any computation of the Indebtedness or other liabilities of the obligor under any Guaranty Obligation, the Indebtedness or other obligations that are the subject of such Guaranty Obligation shall be assumed to be direct obligations of such obligor. "HAZARDOUS MATERIAL" means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polycholorinated biphenyls). "INDEBTEDNESS" with respect to any Person means, at any time, without duplication: (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; 11 (b) its liabilities for the deferred purchase price of Property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such Property); (c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases; (d) all liabilities for borrowed money secured by any Lien with respect to any Property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; and (g) any Guaranty Obligation of such Person with respect to liabilities of a type described in any of clauses (a) through (f) above. Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) above to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP. "INFORMATION MEMORANDUM" means the Confidential Information Memorandum dated March 2005 relating to the Obligors and the Transactions. "INTEREST CHARGES" means, with respect to any Borrower for any period, the sum (without duplication) of the following (in each case, eliminating all offsetting debits and credits between such Borrower and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of such Borrower and its Subsidiaries in accordance with GAAP): (a) all interest in respect of Indebtedness of such Borrower and its Subsidiaries (including imputed interest on Capital Lease Obligations) deducted in determining Consolidated Net Income for such period, together with all interest capitalized or deferred during such period and not deducted in determining Consolidated Net Income for such period, and (b) to the extent actually paid, all debt discount and expense amortized or required to be amortized in the determination of Consolidated Net Income for such period. "INTEREST COVERAGE RATIO" means, with respect to any Borrower for any period, the ratio of (a) Consolidated Income Available for Interest Charges of such Borrower for such period to (b) Interest Charges of such Borrower for such period. "INTEREST PERIOD" has the meaning assigned to such term in Section 3.03. 12 "ISSUING BANK" means any Lender designated by a Borrower, and acceptable to the Administrative Agent, in accordance with Section 4.01, as the issuer of a Letter of Credit pursuant to an Issuing Bank Agreement. As of the Closing Date, the Borrowers have designated Union Bank as an Issuing Bank, such designee has agreed to act as an Issuing Bank hereunder, and the Administrative Agent has accepted such designee pursuant to Section 4.01. "ISSUING BANK AGREEMENT" means an agreement between an Issuing Bank and a Borrower, in form and substance satisfactory to the Administrative Agent, providing for the issuance of one or more Letters of Credit, in form and substance satisfactory to the Administrative Agent, in support of general corporate activities of such Borrower. "LC PAYMENT NOTICE" has the meaning assigned to such term in Section 4.04(b). "LC OUTSTANDINGS" means, for any Letter of Credit on any date of determination, the maximum amount available to be drawn under such Letter of Credit at any time on or after such date (assuming the satisfaction of all conditions for drawing enumerated therein). "LENDER ASSIGNMENT" means an assignment and assumption agreement entered into by a Lender and an Eligible Assignee, and accepted by the Administrative Agent, in substantially the form of Exhibit E. "LENDERS" means the Banks listed on the signature pages hereof, each Eligible Assignee that shall become a party hereto pursuant to Section 12.07, and, to the extent provided in Section 4.04(c), each Issuing Bank. "LETTER OF CREDIT" means a letter of credit issued by an Issuing Bank pursuant to Section 4.02, as such letter of credit may from time to time be amended, modified or extended in accordance with the terms of this Agreement and the Issuing Bank Agreement to which it relates. "LETTER OF CREDIT EXPIRATION DATE" means the date that occurs five Business Days prior to the Final Maturity Date. "LETTER OF CREDIT SUBLIMIT" means $15,000,000. In no event shall the aggregate LC Outstandings of all Letters of Credit outstanding on any date of determination (after giving effect to all Extensions of Credit on such date) exceed the Letter of Credit Sublimit. "LIEN" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any Property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). 13 "LOAN" means a loan by a Lender to a Borrower pursuant to Section 3.01 (or deemed made pursuant to Section 4.04(c) or (d)), and refers to an ABR Loan or a Eurodollar Rate Loan (each of which shall be a "TYPE" of Loan). All Loans by a Lender of the same Type, having the same Interest Period and made or Converted on the same day shall be deemed to be a single Loan by such Lender until repaid or next Converted. "LOAN DOCUMENTS" means this Agreement, any Promissory Notes, the Fee Letter, and the Issuing Bank Agreement(s), and any amendment, waiver, supplement or other modification to any of the foregoing. "LONG TERM DEBT" means, with respect to any Borrower, all Indebtedness of such Borrower which by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, one year or more from, or is directly or indirectly renewable or extendible at the option of the obligor in respect thereof to a date one year or more (including, without limitation, an option of such obligor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more) from, the date of the creation thereof, provided that Long Term Debt shall include, as at any date of determination, Current Maturities of Long Term Debt. "MATERIAL" means, with respect to any Obligor, material in relation to the business, operations, affairs, financial condition, assets, Properties or prospects of such Obligor and its Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means, with respect to any Obligor, a material adverse effect on (a) the business, operations, affairs, financial condition, assets or Properties of such Obligor and its Subsidiaries taken as a whole, or (b) the ability of such Obligor to perform its obligations under this Agreement and the other Loan Documents to which it is a party, or (c) the validity or enforceability of this Agreement or any other Loan Document to which it is a party. "MOODY'S" means Moody's Investors Service, Inc. or any successor thereto. "MULTIEMPLOYER PLAN" means a Plan that is a "multiemployer plan" (as such term is defined in Section 4001(a)(3) of ERISA). "NOTE PURCHASE AGREEMENTS" means, collectively, (i) the Note Purchase and Guaranty Agreement, dated as of August 11, 2003, among UNS Electric, the Guarantor and the Purchasers named therein, and (ii) the Note Purchase and Guaranty Agreement, dated as of August 11, 2003, among UNS Gas, the Guarantor and the Purchasers named therein. "NOTICE OF BORROWING" has the meaning assigned to such term in Section 3.01(a). "OECD" means the Organization for Economic Cooperation and Development. "OBLIGATIONS" means, with respect to any Borrower, the unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans made to such Borrower and interest 14 accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to such Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans made to such Borrower and all other obligations and liabilities of such Borrower to the Administrative Agent, any Issuing Bank or any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any Promissory Note, any Letter of Credit, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, fees, indemnities, costs, expenses (including, without limitation, all fees, charges and disbursements of counsel to the Administrative Agent, any Issuing Bank or any Lender that are required to be paid by such Borrower pursuant hereto) or otherwise. Each Borrower's Obligations are and shall be the several obligations of such Borrower, and shall not be the joint and several obligations of the Borrowers. "OBLIGOR" or "OBLIGORS" has the meaning assigned to such term in the preamble hereto. "OFFICER'S CERTIFICATE" means, with respect to an Obligor, a certificate of a Senior Financial Officer of such Obligor or of any other officer of such Obligor whose responsibilities extend to the subject matter of such certificate. "PARTICIPANT" has the meaning assigned to such term in Section 12.07(e). "PBGC" means the Pension Benefit Guaranty Corporation referred to in ERISA or any successor thereto. "PERCENTAGE" means, for any Lender on any date of determination, the percentage obtained by dividing such Lender's Commitment on such date by the total of the Commitments on such date, and multiplying the quotient so obtained by 100%. In the event that the Commitments have been terminated, each Lender's Percentage shall be calculated on the basis of the Commitments in effect immediately prior to such termination. "PERSON" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PERMITTED LIEN" means, with respect to any Person, each of the following: (a) Liens for taxes, assessments or other governmental charges which are not yet due and payable or the payment of which is not at the time required by Section 8.01(g); (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each 15 case, incurred in the ordinary course of business for sums not yet due and payable or the payment of which is not at the time required by Section 8.01(g); (c) Liens (other than any Lien imposed by ERISA) incurred or deposits made in the ordinary course of business (i) in connection with workers' compensation, unemployment insurance and other types of social security or retirement benefits, or (ii) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of Property; (d) any attachment or judgment Lien, unless the judgment it secures shall not, within sixty days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within sixty days after the expiration of any such stay; (e) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of such Person, provided that such Liens do not, in the aggregate, materially detract from the value of such Person's Property subject to any such leases, subleases, easements, rights-of-way, restrictions or other similar charges or encumbrances; (f) any Lien created to secure all or any part of the purchase price, or to secure Indebtedness incurred or assumed to pay all or any part of the purchase price or cost of construction, of property (or any improvement thereon) acquired or constructed by such Person or a Subsidiary of such Person after the Closing Date, provided that: (i) any such Lien shall extend solely to the item or items of such property (or improvement thereon) so acquired or constructed and, if required by the terms of the instrument originally creating such Lien, other property (or improvement thereon) which is an improvement to or is acquired for specific use in connection with such acquired or constructed property (or improvement thereon) or which is real property being improved by such acquired or constructed property (or improvement thereon); (ii) the principal amount of the Indebtedness secured by any such Lien shall not, at the time such Lien is created, exceed an amount equal to the lesser of (A) the cost to such Person or such Subsidiary of the property (or improvement thereon) so acquired or constructed and (B) the Fair Market Value (as determined in good faith by the board of directors of such Person) of such property (or improvement thereon) at the time of such acquisition or construction; and 16 (iii) any such Lien shall be created contemporaneously with, or within 90 days after, the acquisition or construction of such property; (g) Liens in existence on the Closing Date securing the payment or performance of any liabilities assumed by (i) UNS Gas pursuant to that certain asset purchase agreement, dated as of October 29, 2002, between UniSource Energy and Citizens Communications Company, pursuant to which Citizens Communications Company transferred certain assets (the "GAS ASSETS") and liabilities to UNS Gas, and the agreements and instruments referred to therein, and (ii) UNS Electric pursuant to that certain asset purchase agreement, dated as of October 29, 2002, between UniSource Energy and Citizens Communications Company, pursuant to which Citizens Communications Company transferred certain assets (the "ELECTRIC ASSETS", and together with the Gas Assets being referred to herein, collectively, as the "ASSETS") and liabilities to UNS Electric, and the agreements and instruments referred to therein; and (h) with respect to any Asset which consists of a leasehold or other possessory interest in real property, Liens to which the underlying fee estate in such real property is subject that do not and could not reasonably be expected to result in a Material Adverse Effect. "PLAN" means, with respect to any Obligor, an "employee benefit plan" (as defined in section 3(3) of ERISA) that is subject to Title IV of ERISA and Section 412 of the Code and that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by such Obligor or any ERISA Affiliate or with respect to which such Obligor or any ERISA Affiliate may have any liability. "PREFERRED STOCK" means any class of capital stock of a corporation that is preferred over any other class of capital stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "PROMISSORY NOTE" means any promissory note of any Borrower payable to the order of a Lender (and, if requested, its registered assigns), issued pursuant to Section 3.01(d); and "PROMISSORY NOTES" means any or all of the foregoing. "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate, including cash, securities, accounts and contract rights; and the words "asset" and "property" as used herein shall be construed to have the same meaning and effect as the foregoing. "PUHCA" means the Public Utility Holding Company Act of 1935, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "RECIPIENT" has the meaning assigned to such term in Section 12.08. "REFERENCE RATE" means the variable rate of interest per annum 17 established by Union Bank from time to time as its "reference rate". Such "reference rate" is set by Union Bank as a general reference rate of interest, taking into account such factors as Union Bank may deem appropriate, it being understood that many of Union Bank's commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that Union Bank may make various commercial or other loans at rates of interest having no relationship to such rate. For purposes of this Agreement, each change in the Reference Rate shall be effective as of the opening of business on the date announced as the effective date of any change in such "reference rate". "REGISTER" has the meaning assigned to such term in Section 12.07(c). "REGULATION U" means Regulation U of the Board as in effect from time to time. "RELATED PARTIES" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees and agents of such Person and of such Person's Affiliates. "REQUEST FOR ISSUANCE" has the meaning assigned to such term in Section 4.02(a). "REQUIRED LENDERS" means, on any date of determination, Lenders that, collectively, on such date (i) hold at least 51% of the then aggregate outstanding principal amount of the Loans owing to Lenders or (ii) if no Loans are then outstanding, have Percentages in the aggregate of at least 51%. Any determination of those Lenders constituting the Required Lenders shall be made by the Administrative Agent and shall be conclusive and binding on all parties absent manifest error. "REQUIREMENT OF LAW" means, as to any Person, the articles of incorporation and by-laws or other organizational or governing documents of such Person, and any Governmental Rules or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject. "RESPONSIBLE OFFICER" means, with respect to any Obligor, any Senior Financial Officer of such Obligor and any other officer of such Obligor with responsibility for the administration of the relevant portion of this Agreement. "RESTRICTED PAYMENT" means (i) any Distribution in respect of any Person or any Subsidiary of such Person (other than on account of capital stock or other equity interests of a Subsidiary owned legally and beneficially by such Person or another Subsidiary of such Person), including, without limitation, any Distribution resulting in the acquisition by such Person of Securities which would constitute treasury stock, (ii) the purchase or acquisition (including pursuant to any merger with any Person that was not a wholly-owned Subsidiary of such Person prior to such merger) of any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of any other Person, (iii) the making of any loans or advances to, or any other investment in, any other Person, and (iv) the purchase or acquisition (in one transaction or a series of transactions) of 18 any assets of any other Person constituting a business unit. For purposes of this Agreement, the amount of any Restricted Payment made in Property shall be the greater of (x) the Fair Market Value of such Property (as determined in good faith by the board of directors (or equivalent governing body) of the Person making such Restricted Payment) and (y) the net book value thereof on the books of such Person, in each case determined as of the date on which such Restricted Payment is made. "REVOLVING CREDIT TERMINATION DATE" means the earlier to occur of (i) the Final Maturity Date and (ii) the date of termination or reduction in whole of the Commitments pursuant to Section 2.03 or 9.02. "S&P" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto. "SANCTIONED PERSON" means (i) any Person designated in the list of Specially Designated Nationals and Blocked Persons published by the Office of Foreign Assets Control of the U.S. Department of the Treasury, as amended from time to time; and (ii) any other Person with which transactions are prohibited under U.S. Economic Sanctions Law. "SEC" means the Securities and Exchange Commission (or any successors thereto or an analogous Governmental Authority). "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "SECURITY" has the meaning set forth in section 2(a)(1) of the Securities Act. "SENIOR FINANCIAL OFFICER" means, with respect to any Person, the chief financial officer, principal accounting officer, treasurer or comptroller of such Person. "SOLVENT" means, with respect to any Person as of any date of determination, that (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, 19 fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured. "SPC" has the meaning assigned to such term in Section 12.07(j). "SUBSIDIARY" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a Subsidiary is a reference to a Subsidiary of the Guarantor. "SWAPS" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "TRANSACTIONS" means the execution, delivery and performance by the Obligors of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowing of Loans and the use of the proceeds thereof. "TYPE" has the meaning assigned to such term (i) in the definition of "Loan" when used in such context and (ii) in the definition of "Borrowing" when used in such context. "UNION BANK" has the meaning assigned to such term in the preamble hereto. "UNISOURCE ENERGY" means UniSource Energy Corporation, a corporation incorporated under the law of the State of Arizona. "UNS ELECTRIC" has the meaning assigned to such term in the preamble hereto. "UNS GAS" has the meaning assigned to such term in the preamble hereto. "U.S. ECONOMIC SANCTIONS LAW" means (a) the International Emergency Economic Powers Act of 1977, as amended, the Trading with the Enemy Act of 20 1917, as amended, and any executive order issued thereunder and in effect from time to time and (b) the foreign assets control regulations of the U.S. Department of the Treasury, codified at Title 31, Subtitle B, Chapter V of the Code of Federal Regulations, as amended, and any enabling legislation thereof. "UTILITY BUSINESS" means the business of producing, developing, generating, transmitting, distributing, selling or supplying electrical energy or natural gas for any purpose, or any business incidental thereto or necessary in connection therewith, or any business reasonably desirable in connection therewith which the ACC or other utility regulatory body shall have authorized the Guarantor or any Subsidiary to enter. "WHOLLY-OWNED SUBSIDIARY" means, at any time, any Subsidiary one hundred percent (100%) of all of the equity interests (except directors' qualifying shares) and voting interests of which are owned by any one or more of any Obligor and such Obligor's other Wholly-Owned Subsidiaries at such time. SECTION 1.02. COMPUTATION OF TIME PERIODS; CONSTRUCTION. (a) Unless otherwise indicated, each reference in this Agreement to a specific time of day is a reference to Los Angeles, California time. In the computation of periods of time under this Agreement, any period of a specified number of days or months shall be computed by including the first day or month occurring during such period and excluding the last such day or month. Unless the context requires otherwise, in the case of a period of time "from" a specified date "to" or "until" a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding". (b) Unless the context requires otherwise, the definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include", "includes", and "including" shall be deemed to be followed by the phrase "without limitation". The word "will" shall be construed to have the same meaning and effect as the word "shall". Unless the context requires otherwise (i) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein), (ii) any reference herein to any Person shall be construed to include such Person's successors and assigns, (iii) the words "herein", "hereof" and "hereunder", and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof and (iv) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement. SECTION 1.03. ACCOUNTING TERMS. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if a Borrower notifies the Administrative Agent that such Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (including the effects of the application or discontinuance of the application of accounting for the effects of regulation to 21 all or any portion of such Borrower's operations), or if the Administrative Agent notifies a Borrower that the Required Lenders request an amendment to any provision hereof for such purpose, regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. ARTICLE II COMMITMENTS SECTION 2.01. THE COMMITMENTS. (a) Each Lender severally agrees, on the terms and conditions hereinafter set forth, to make Loans to each Borrower and to participate in the issuance of Letters of Credit (and the LC Outstandings thereunder) during the period from the Closing Date until the Revolving Credit Termination Date, in an aggregate outstanding amount not to exceed on any day such Lender's Available Commitment (after giving effect to all Extensions of Credit to be made on such day and the application of the proceeds thereof). Within the limits hereinafter set forth, each Borrower may, from the Closing Date until the Revolving Credit Termination Date, request Extensions of Credit hereunder, prepay Loans, or reduce or cancel Letters of Credit, and use the resulting increase in the Available Commitments for further Extensions of Credit in accordance with the terms hereof. (b) In no event shall any Borrower be entitled to request or receive any Extensions of Credit that would cause (i) the principal amount outstanding hereunder to exceed the Commitments or (ii) the sum of (A) the aggregate outstanding principal amount of Loans made to such Borrower and (B) the aggregate LC Outstandings of all Letters of Credit issued at the request of such Borrower and then outstanding, in each case after giving effect to such Extensions of Credit and the application of the proceeds thereof, to exceed such Borrower's Availability Sublimit. SECTION 2.02. FEES. (a) Each Borrower agrees to pay to the Administrative Agent for the account of each Lender a commitment fee at a rate equal to 0.45% per annum on 50% of the daily amount of such Lender's Available Commitment, from the date hereof, in the case of each Bank, and from the effective date specified in the Lender Assignment pursuant to which it became a Lender, in the case of each other Lender, until the Revolving Credit Termination Date, payable quarterly in arrears on the last day of each March, June, September and December, commencing on the first such date to occur following the date hereof, and on the Revolving Credit Termination Date. (b) Each Borrower agrees to pay to the Administrative Agent for the account of each Lender a commission on the daily aggregate amount of the LC Outstandings of all Letters of Credit issued at the request of such Borrower, from the date hereof until the Letter of Credit Expiration Date, at a rate per annum equal to the Applicable Margin with respect to Eurodollar Rate Loans from time to time, payable quarterly in arrears on the last day of each March, June, September and December, commencing on the first such date to occur following the date hereof, and on the Letter of Credit Expiration Date. 22 (c) In addition to the fees provided for in subsections (a) and (b) above, the Borrowers shall pay to the Administrative Agent, for its own account, such other fees as are provided for in that certain letter agreement, dated the Closing Date, among the Borrowers and the Administrative Agent (the "FEE LETTER"), in the amounts and at the times specified therein. SECTION 2.03. REDUCTION OF THE COMMITMENTS. (a) The Commitments shall be automatically and permanently terminated on the Revolving Credit Termination Date. (b) The Borrowers may, upon at least three Business Days' prior written notice (duly executed by a Responsible Officer of each Borrower) to the Administrative Agent (which shall promptly distribute copies thereof to the Lenders), terminate in whole or reduce ratably in part the unused portions of the Commitments; provided that any such partial reduction shall be in the aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; and provided, further, that the Commitments shall in no event be reduced to an amount which is less than the aggregate LC Outstandings on the date of such reduction. (c) In the event that, at any time, (i) all or a majority of the voting capital stock of any Borrower or Borrower Successor is sold, transferred or otherwise conveyed to any Person (other than a Wholly-Owned Subsidiary), (ii) all or substantially all of the assets of any Borrower or Borrower Successor are sold, transferred, leased or otherwise conveyed to any Person (other than a Wholly-Owned Subsidiary), or (iii) any Borrower or Borrower Successor no longer constitutes a Subsidiary, in each case as a result of or pursuant to a transaction (or series of transactions) permitted hereunder (including Section 8.02(b)) or otherwise, then (A) all Obligations of such Borrower or Borrower Successor (as the case may be) shall be immediately due and payable, (B) all outstanding Letters of Credit issued at the request and for the account of such Borrower or Borrower Successor (as the case may be) shall be cancelled, or such Borrower or Borrower Successor (as the case may be) shall pay immediately to the Administrative Agent an amount equal to the aggregate LC Outstandings of all such Letters of Credit, to be held by the Administrative Agent (for its benefit and the benefit of the Issuing Banks and the Lenders) as cash collateral securing such LC Outstandings and such Borrower's or Borrower Successor's (as the case may be) reimbursement obligations with respect thereto, (C) the Commitments shall be automatically and permanently reduced by an amount equal to the excess (if any) of (1) the aggregate amount of the Commitments at such time over (2) $30,000,000, (D) such Borrower or Borrower Successor (as the case may be) shall no longer be permitted to request or receive any Extension of Credit and (E) upon the payment in full of all outstanding Obligations of such Borrower or Borrower Successor (as the case may be) and the satisfaction of the requirements set forth in clause (B) above, such Borrower or Borrower Successor (as the case may be) shall automatically and immediately cease to be a party to this Agreement; provided, however, that this paragraph (c) shall not apply to any transaction described in clause (i), (ii) or (iii) above with respect to any Borrower if (x) the Commitments have previously been reduced pursuant to clause (C) above, (y) such Borrower is the only borrower under this Agreement and (z) in connection with such transaction, both a Guarantor Successor and a Borrower Successor have assumed all obligations of the Guarantor and such Borrower, respectively, under this Agreement and the other Loan Documents in accordance with Section 8.02(b)(i)(D), and the other conditions set forth in Section 8.02(b)(i)(A) through (E) have been satisfied. 23 SECTION 2.04. COMPUTATIONS OF OUTSTANDINGS. Whenever reference is made in this Agreement to the principal amount outstanding on any date under this Agreement, such reference shall refer to the sum of (i) the aggregate principal amount of all Loans outstanding on such date plus (ii) the aggregate LC Outstandings of all Letters of Credit outstanding on such date, in each case after giving effect to all Extensions of Credit to be made on such date and the application of the proceeds thereof. At no time shall the principal amount outstanding under this Agreement exceed the aggregate amount of the Commitments, and at no time shall the portion of the principal amount outstanding under this Agreement attributed to any Borrower exceed such Borrower's Availability Sublimit. References to the unused portion of the Commitments shall refer to the excess, if any, of the Commitments over the principal amount outstanding hereunder; and references to the unused portion of any Lender's Commitment shall refer to such Lender's Percentage of the unused Commitments. ARTICLE III LOANS SECTION 3.01. LOANS. (a) Each Borrower may request a Borrowing (other than a Conversion) by delivering a notice (a "NOTICE OF BORROWING") to the Administrative Agent no later than 11:00 A.M. on the third Business Day or, in the case of ABR Loans, on the first Business Day, prior to the date of the proposed Borrowing. The Administrative Agent shall give each Lender prompt notice of each Notice of Borrowing. Each Notice of Borrowing shall be in substantially the form of Exhibit A and shall specify the requested (i) date of such Borrowing (which shall be a Business Day, but in no event later than the Business Day immediately preceding the Revolving Credit Termination Date), (ii) Type of Loans to be made in connection with such Borrowing, (iii) Interest Period, if any, for such Loans and (iv) amount of such Borrowing. Each proposed Borrowing shall conform to the requirements of Sections 3.03 and 3.04. (b) Each Lender shall, before 10:00 A.M. on the date of such Borrowing, make available for the account of its Applicable Lending Office to the Administrative Agent at the Administrative Agent's address referred to in Section 12.02, in same day funds, such Lender's Percentage of such Borrowing. After the Administrative Agent's receipt of such funds and upon fulfillment of the applicable conditions set forth in Article VI, the Administrative Agent will make such funds available to the applicable Borrower at the Administrative Agent's aforesaid address. Notwithstanding the foregoing, unless the Administrative Agent shall have received notice from a Lender prior to the date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender's Percentage of such Borrowing, the Administrative Agent may assume that such Lender has made such Percentage available to the Administrative Agent on the date of such Borrowing in accordance with the first sentence of this subsection (b), and the Administrative Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. (c) If and to the extent that any Lender (a "NON-PERFORMING LENDER") shall not have made available to the Administrative Agent, in accordance with subsection (b) above, such Lender's Percentage of any Borrowing, the non-performing Lender and the applicable Borrower severally agree to repay to the Administrative Agent forthwith on demand corresponding amounts (not to 24 exceed the aggregate amount that such non-performing Lender failed to make available to the Administrative Agent), together with interest thereon for each day from the date such amount is made available to such Borrower until the date such amount is repaid to the Administrative Agent, at (i) in the case of such Borrower, the interest rate applicable at the time to Loans made in connection with such Borrowing and (ii) in the case of such Lender, the Federal Funds Effective Rate. Within the limits of each Lender's Available Commitment and subject to the other terms and conditions set forth in this Agreement for the making of Loans, each Borrower may request (and the Lenders shall honor) one or more additional Borrowings from the performing Lenders to fund such repayment to the Administrative Agent. If a non-performing Lender shall repay to the Administrative Agent such corresponding amount in full (with interest as above provided), (x) the Administrative Agent shall apply such corresponding amount and interest to the repayment to the Administrative Agent (or repayment of Loans made to fund such repayment to the Administrative Agent), and shall make any remainder available to the applicable Borrower and (y) such amount so repaid shall be deemed to constitute such Lender's Loan, made as part of such Borrowing for purposes of this Agreement as if funded concurrently with the other Loans made as part of such Borrowing, and such Lender shall forthwith cease to be deemed a non-performing Lender; if and so long as such non-performing Lender shall not repay such amount, and unless and until an Eligible Assignee shall have assumed and performed the obligations of such non-performing Lender, all computations by the Administrative Agent of Percentages, Commitments and payments hereunder shall be made without regard to the Commitments, or outstanding Loans, of such non-performing Lender, and any amounts paid to the Administrative Agent for the account of such non-performing Lender shall be held by the Administrative Agent in trust for such non-performing Lender in a non-interest-bearing special purpose account. Nothing herein shall in any way limit, waive or otherwise reduce any claims that any party hereto may have against any non-performing Lender. The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing. (d) Any Lender may request that Loans made by it hereunder be evidenced by a Promissory Note. In such event, the Borrowers shall prepare, execute and deliver to such Lender a Promissory Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such Promissory Note and interest thereon shall at all times (including after assignment pursuant to Section 12.07) be represented by one or more Promissory Notes in such form payable to the order of the payee named therein (or, if such Promissory Note is a registered note, to such payee and its registered assigns). SECTION 3.02. CONVERSION OF LOANS. Each Borrower may from time to time Convert any Loan (or portion thereof) of any Type made to such Borrower to one or more Loans of the same or any other Type by delivering a notice of such Conversion (a "NOTICE OF CONVERSION") to the Administrative Agent no later than 11:00 A.M. on (x) the third Business Day prior to the date of any proposed Conversion into a Eurodollar Rate Loan and (y) the first Business Day prior to the date of any proposed Conversion into an ABR Loan. The Administrative Agent shall give each Lender prompt notice of each Notice of Conversion. Each Notice of Conversion shall be in substantially the form of Exhibit B and shall specify (i) the requested date of such Conversion (which shall be a Business Day), (ii) 25 the Type of, and Interest Period, if any, applicable to, the Loans (or portions thereof) proposed to be Converted, (iii) the requested Type of Loans to which such Loans (or portions thereof) are proposed to be Converted, (iv) the requested initial Interest Period, if any, to be applicable to the Loans resulting from such Conversion and (v) the aggregate amount of Loans (or portions thereof) proposed to be Converted. Each proposed Conversion shall be subject to the provisions of Sections 3.03 and 3.04. SECTION 3.03. INTEREST PERIODS. The period between the date of each Eurodollar Rate Loan and the date of payment in full of such Loan shall be divided into successive periods ("INTEREST PERIODS") for purposes of computing interest applicable thereto. The initial Interest Period for each such Loan shall begin on the day such Loan is made, and each subsequent Interest Period shall begin on the last day of the immediately preceding Interest Period for such Loan. The duration of each Interest Period shall be one, two, three or six months, as the applicable Borrower may, in accordance with Section 3.01 or 3.02, select; provided, however, that: (i) a Borrower may not select any Interest Period that ends after the Revolving Credit Termination Date; (ii) whenever the last day of any Interest Period would otherwise occur on a day other than a Business Day, the last day of such Interest Period shall occur on the next succeeding Business Day, provided that if such extension would cause the last day of such Interest Period to occur in the next following calendar month, the last day of such Interest Period shall occur on the next preceding Business Day; and (iii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period. SECTION 3.04. OTHER TERMS RELATING TO THE MAKING AND CONVERSION OF LOANS. (a) Notwithstanding anything in Section 3.01 or 3.02 to the contrary: (i) each Borrowing (other than a Borrowing deemed made under Section 4.04(c) or (d)) shall be in an aggregate amount not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof (or, in each case, such lesser amount as shall be equal to the total amount of the Available Commitments on such date, after giving effect to all other Extensions of Credit to be made on such date), and shall consist of Loans of the same Type, having the same Interest Period and made or Converted on the same day by the Lenders ratably according to their respective Percentages; (ii) a Borrower may request that more than one Borrowing be made on the same day; (iii) at no time shall more than eight (8) different Borrowings comprising Eurodollar Rate Loans be outstanding hereunder; 26 (iv) no Eurodollar Rate Loan may be Converted on a date other than the last day of the Interest Period applicable to such Loan unless the corresponding amounts, if any, payable to the Lenders pursuant to Section 5.04(b) are paid contemporaneously with such Conversion; (v) if a Borrower shall either fail to give a timely Notice of Conversion pursuant to Section 3.02 in respect of any Loans made to such Borrower or fail, in any Notice of Conversion that has been timely given by such Borrower, to select the duration of any Interest Period for Loans to be Converted into Eurodollar Rate Loans in accordance with Section 3.03, such Loans shall, on the last day of the then existing Interest Period therefor, automatically Convert into, or remain as, as the case may be, ABR Loans; and (vi) if an Event of Default has occurred and is continuing with respect to any Borrower or the Guarantor, (A) no outstanding Loans made to such Borrower (or, in the case of any Event of Default with respect to the Guarantor, made to any Borrower) may be Converted to or continued as Eurodollar Rate Loans and (B) unless repaid, each Eurodollar Rate Loan made to such Borrower (or, in the case of any Event of Default with respect to the Guarantor, made to any Borrower) shall be Converted to an ABR Loan at the end of the Interest Period applicable thereto. (b) If any Lender shall notify the Administrative Agent that the introduction of or any change in, or in the interpretation of, any law or regulation makes it unlawful, or that any central bank or other Governmental Authority asserts that it is unlawful, for such Lender or its Applicable Lending Office to perform its obligations hereunder to make, or to fund or maintain, Eurodollar Rate Loans hereunder, (i) the obligation of such Lender to make, or to Convert Loans into, Eurodollar Rate Loans for any Borrowing from such Lender shall be forthwith suspended until the earlier to occur of the date upon which (A) such Lender shall cease to be a party hereto and (B) it is no longer unlawful for such Lender to make, fund or maintain Eurodollar Rate Loans, and (ii) if the maintenance of Eurodollar Rate Loans then outstanding through the last day of the Interest Period therefor would cause such Lender to be in violation of such law, regulation or assertion, such Lender may require each Borrower to either prepay or Convert all Eurodollar Rate Loans made by such Lender to such Borrower within five days after such Borrower's receipt of such notice, and if such Borrower shall not have so prepaid or Converted such Eurodollar Rate Loans by such fifth day, then such Eurodollar Rate Loans shall be deemed automatically Converted to ABR Loans on such fifth day. Promptly upon becoming aware that the circumstances that caused such Lender to deliver such notice no longer exist, such Lender shall deliver notice thereof to the Administrative Agent (but the failure to do so shall impose no liability upon such Lender). Promptly upon receipt of such notice from such Lender (or upon such Lender's assigning all of its Commitments, Loans, participation and other rights and obligations hereunder to an Eligible Assignee), the Administrative Agent shall deliver notice thereof to the Borrowers and the Lenders and such suspension shall terminate. (c) If the Required Lenders shall, at least one Business Day before the date of any requested Borrowing, notify the Administrative Agent that the Eurodollar Rate for Eurodollar Rate Loans to be made in connection with such Borrowing will not adequately reflect the cost to such Required Lenders of 27 making, funding or maintaining their respective Eurodollar Rate Loans for such Borrowing, the right of the Borrowers to select Eurodollar Rate Loans for such Borrowing and any subsequent Borrowing shall be suspended until the Administrative Agent shall notify the Borrowers and the Lenders that the circumstances causing such suspension no longer exist, and each Loan to be made or Converted in connection with such Borrowing shall be an ABR Loan. (d) If any Lender shall have delivered a notice to any Borrower or the Administrative Agent described in Section 3.04(b) or Section 3.06, or shall become a non-performing Lender under Section 3.01(c) or Section 4.04(c), and if and so long as such Lender shall not have withdrawn such notice or corrected such non-performance in accordance with said Section 3.04(b), Section 3.06, Section 3.01(c) or Section 4.04(c), the Borrowers or the Administrative Agent may demand that such Lender assign in accordance with Section 12.07, to one or more Eligible Assignees designated by the Borrowers or the Administrative Agent, all (but not less than all) of such Lender's Commitments, Loans, participation and other rights and obligations hereunder; provided that any such demand by the Borrowers during the continuance of a Default or an Event of Default shall be ineffective without the consent of the Required Lenders. If, within 30 days following any such demand by the Administrative Agent or the Borrowers, any such Eligible Assignee so designated shall fail to consummate such assignment on terms reasonably satisfactory to such Lender, or the Borrowers and the Administrative Agent shall have failed to designate any such Eligible Assignee, then such demand by the Borrowers or the Administrative Agent shall become ineffective, it being understood for purposes of this provision that such assignment shall be conclusively deemed to be on terms reasonably satisfactory to such Lender, and such Lender shall be compelled to consummate such assignment forthwith, if such Eligible Assignee (i) shall agree to such assignment in substantially the form of the Lender Assignment attached hereto as Exhibit E and (ii) shall tender payment to such Lender in an amount equal to the full outstanding Dollar amount accrued in favor of such Lender hereunder (as computed in accordance with the records of the Administrative Agent), including, without limitation, all accrued interest and fees and, to the extent not paid by the Borrowers, any payments required pursuant to Section 5.04(b). (e) Each Notice of Borrowing and Notice of Conversion shall be irrevocable and binding on the applicable Borrower. In the case of any Borrowing which the related Notice of Borrowing or Notice of Conversion specifies is to be comprised of Eurodollar Rate Loans, the applicable Borrower shall severally indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure by such Borrower to fulfill, on or before the date specified in such Notice of Borrowing or Notice of Conversion for such Borrowing, the applicable conditions (if any) set forth in this Article III (other than failure pursuant to the provisions of Section 3.04(c) hereof) or in Article VI, including any such loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund the Loan to be made by such Lender when such Loan, as a result of such failure, is not made on such date. SECTION 3.05. REPAYMENT OF LOANS; INTEREST. (a) Principal. Each Borrower shall repay in full, on the Revolving Credit Termination Date, the outstanding principal amount of the Loans made to such Borrower. 28 (b) Interest. Each Borrower shall pay interest on the unpaid principal amount of each Loan made to such Borrower from the date of such Loan until such principal amount shall be paid in full, at the Applicable Rate for such Loan, payable as follows: (i) ABR Loans. If such Loan is an ABR Loan, interest thereon shall be payable quarterly in arrears on the last day of each March, June, September and December, on the date of any Conversion of such ABR Loan and on the date such ABR Loan shall become due and payable or shall otherwise be paid in full; provided, however, that interest accruing on the principal amount of any ABR Loan that is not paid when due (whether at stated maturity, by acceleration or otherwise) shall be payable on demand. (ii) Eurodollar Rate Loans. If such Loan is a Eurodollar Rate Loan, interest thereon shall be payable on the last day of each Interest Period for such Loan and, if the Interest Period for such Loan has a duration of more than three months, on that day of each third month during such Interest Period that corresponds to the first day of such Interest Period (or, if any such month does not have a corresponding day, then on the last day of such month); provided, however, that interest accruing on the principal amount of any Eurodollar Rate Loan that is not paid when due (whether at stated maturity, by acceleration or otherwise) shall be payable on demand. SECTION 3.06. ADDITIONAL INTEREST ON EURODOLLAR RATE LOANS. Each Borrower shall pay to the Administrative Agent for the account of each Lender any costs actually incurred by such Lender with respect to Eurodollar Rate Loans made to such Borrower that are attributable to such Lender's compliance with regulations of the Board requiring the maintenance of reserves with respect to liabilities or assets consisting of or including Eurocurrency Liabilities. Such costs shall be paid to the Administrative Agent for the account of such Lender in the form of additional interest on the unpaid principal amount of each Eurodollar Rate Loan of such Lender made to such Borrower, from the date of such Eurodollar Rate Loan until such principal amount is paid in full, at an interest rate per annum equal at all times to the remainder obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such Eurodollar Rate Loan from (ii) the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100% minus the Eurodollar Reserve Percentage of such Lender for such Interest Period, payable on each date on which interest is payable on such Eurodollar Rate Loan (but in no event earlier than five Business Days after the Borrower's receipt of the certificate referred to in the last sentence of this Section 3.06). Such additional interest shall be determined by such Lender and notified to the applicable Borrower through the Administrative Agent. A certificate as to the amount of such additional interest and giving a reasonable explanation and calculation thereof shall be submitted to the applicable Borrower and the Administrative Agent by such Lender and shall be conclusive and binding for all purposes, absent manifest error. ARTICLE IV LETTERS OF CREDIT SECTION 4.01. ISSUING BANKS. Subject to the terms and conditions hereof, each Borrower may from time to time identify and arrange for one or more Lenders to act as Issuing Banks hereunder. Notice of any such designation by a Borrower shall be given to the Administrative Agent at least four Business Days prior to 29 the first date upon which such Borrower proposes that such Issuing Bank issue its first Letter of Credit, so as to provide adequate time for such proposed Issuing Bank to be approved by the Administrative Agent hereunder (such approval not to be unreasonably withheld). Within two Business Days following the receipt of any such designation of a proposed Issuing Bank, the Administrative Agent shall notify the applicable Borrower as to whether such designee is acceptable to the Administrative Agent. Nothing contained herein shall be deemed to require any Lender to agree to act as an Issuing Bank, if it does not so desire. SECTION 4.02. LETTERS OF CREDIT. (a) Each Letter of Credit shall be issued (or the stated maturity thereof extended or terms thereof modified or amended) on not less than three Business Days' prior written notice thereof to the Administrative Agent (which shall promptly distribute copies thereof to the Lenders) and the relevant Issuing Bank. Each such notice (a "REQUEST FOR ISSUANCE") shall specify (i) the date (which shall be a Business Day, but in no event later than the date that occurs ten (10) Business Days prior to the Revolving Credit Termination Date) of issuance of such Letter of Credit (or the date of effectiveness of such extension, modification or amendment) and the stated expiry date thereof (which shall be no later than the date that occurs one year from the date of issuance of such Letter of Credit (or, in the case of any extension of a Letter of Credit, one year from the date of effectiveness of such extension), and in any event no later than the Letter of Credit Expiration Date, (ii) the proposed stated amount of such Letter of Credit (which shall not be less than $250,000) and (iii) such other information as shall demonstrate compliance of such Letter of Credit with the requirements specified therefor in this Agreement and the relevant Issuing Bank Agreement. Each Request for Issuance shall be irrevocable unless modified or rescinded by the applicable Borrower not less than one Business Day prior to the proposed date of issuance (or effectiveness) specified therein. Not later than 10:00 A.M. on the proposed date of issuance (or effectiveness) specified in such Request for Issuance, and upon fulfillment of the applicable conditions precedent and the other requirements set forth herein and in the relevant Issuing Bank Agreement, such Issuing Bank shall issue (or extend, amend or modify) such Letter of Credit and provide notice and a copy thereof to the Administrative Agent, which shall promptly furnish copies thereof to the Lenders. (b) Each Lender severally agrees with such Issuing Bank to participate in the Extension of Credit resulting from the issuance (or extension, modification or amendment) of such Letter of Credit, in the manner and the amount provided in Section 4.04(b), and the issuance of such Letter of Credit shall be deemed to be a confirmation by such Issuing Bank and each Lender of such participation in such amount. (c) Notwithstanding anything herein to the contrary, the aggregate LC Outstandings of all Letters of Credit outstanding at any one time shall not exceed the Letter of Credit Sublimit. SECTION 4.03. ISSUING BANK FEES. Each Borrower shall pay directly to each Issuing Bank such fees and expenses, if any, specified to be paid by it to such Issuing Bank pursuant to the Issuing Bank Agreement to which such Borrower and such Issuing Bank are parties, at the times, and in the manner, specified in such Issuing Bank Agreement. SECTION 4.04. REIMBURSEMENT TO ISSUING BANKS. (a) Each Borrower hereby agrees to pay to the Administrative Agent for the account of each Issuing Bank, on demand made by such Issuing Bank to such Borrower and the Administrative 30 Agent, on and after each date on which such Issuing Bank shall pay any amount under any Letter of Credit issued by such Issuing Bank at the request of such Borrower, a sum equal to the amount so paid plus interest on such amount from the date so paid by such Issuing Bank until repayment to such Issuing Bank in full at a fluctuating interest rate per annum equal at all times to the Applicable Rate for ABR Loans. (b) If any Issuing Bank shall not have been reimbursed in full for any payment made by such Issuing Bank under any Letter of Credit issued by such Issuing Bank on the date of such payment, such Issuing Bank shall give the Administrative Agent and each Lender prompt notice thereof (an "LC PAYMENT NOTICE") no later than 10:00 A.M. on the Business Day immediately succeeding the date of such payment by such Issuing Bank. Each Lender severally agrees to purchase a participation in the reimbursement obligation of the applicable Borrower to such Issuing Bank under subsection (a) above, by paying to the Administrative Agent for the account of such Issuing Bank an amount equal to such Lender's Percentage of such unreimbursed amount paid by such Issuing Bank, plus interest on such amount at a rate per annum equal to the Federal Funds Effective Rate from the date of such payment by such Issuing Bank to the date of payment to such Issuing Bank by such Lender. Each such payment by a Lender shall be made not later than 1:00 P.M. on the later to occur of (i) the Business Day immediately following the date of such payment by such Issuing Bank and (ii) the Business Day on which such Lender shall have received an LC Payment Notice from such Issuing Bank. Each Lender's obligation to make each such payment to the Administrative Agent for the account of such Issuing Bank shall be several and shall not be affected by (A) the occurrence or continuance of any Default or Event of Default, (B) the failure of any other Lender to make any payment under this Section 4.04, or (C) the date of the drawing under the applicable Letter of Credit issued by such Issuing Bank. Each Lender further agrees that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. (c) The failure of any Lender to make any payment to the Administrative Agent for the account of an Issuing Bank in accordance with subsection (b) above shall not relieve any other Lender of its obligation to make payment, but no Lender shall be responsible for the failure of any other Lender. If any Lender (a "NON-PERFORMING LENDER") shall fail to make any payment to the Administrative Agent for the account of an Issuing Bank in accordance with subsection (b) above within five Business Days after such Lender's receipt of the LC Payment Notice relating thereto, then, for so long as such failure shall continue, such Issuing Bank shall be deemed, for purposes of Section 5.05 and Article IX hereof, to be a Lender hereunder owed a Loan in an amount equal to the outstanding principal amount due and payable by such Lender to the Administrative Agent for the account of such Issuing Bank pursuant to subsection (b) above. (d) Each participation purchased by a Lender under subsection (b) above shall constitute an ABR Loan deemed made by such Lender to the applicable Borrower on the date of such payment by the relevant Issuing Bank under the applicable Letter of Credit issued by such Issuing Bank at the request of such Borrower (irrespective of such Borrower's noncompliance, if any, with the conditions precedent for Loans hereunder); and all such payments by the Lenders in respect of any one such payment by such Issuing Bank shall constitute a single Borrowing hereunder. 31 SECTION 4.05. OBLIGATIONS ABSOLUTE. The payment obligations of each Lender under Section 4.04(b) and of each Borrower under this Agreement in respect of any payment under any Letter of Credit and any Loan deemed made under Section 4.04(c) or (d) shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following circumstances: (i) any lack of validity or enforceability of any Loan Document or any other agreement or instrument relating thereto or to such Letter of Credit; (ii) any amendment or waiver of, or any consent to departure from, all or any of the Loan Documents; (iii) the existence of any claim, set-off, defense or other right which any Borrower may have at any time against any beneficiary, or any transferee, of such Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), any Issuing Bank, or any other Person, whether in connection with this Agreement, the transactions contemplated herein or by such Letter of Credit, or any unrelated transaction; (iv) any statement or any other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) payment in good faith by any Issuing Bank under any Letter of Credit issued by such Issuing Bank against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or (vi) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing. SECTION 4.06. LIABILITY OF ISSUING BANKS AND THE LENDERS. Each Borrower assumes all risks of the acts and omissions of any beneficiary or transferee of any Letter of Credit issued at the request of such Borrower in connection with such Letter of Credit, and neither the Issuing Bank that has issued such Letter of Credit, the Lenders nor any of their respective officers, directors, employees, agents or Affiliates shall be liable or responsible for (a) the use that may be made of such Letter of Credit or any acts or omissions of any beneficiary or transferee thereof in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of such Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under such Letter of Credit, except that the applicable Borrower shall have the right to bring suit against such Issuing Bank, and such Issuing Bank shall be liable to such Borrower and any Lender, to the extent of any direct, as opposed to consequential, damages suffered by such Borrower or such Lender which such Borrower or such Lender proves were caused by such Issuing Bank's willful misconduct or gross negligence, including such Issuing Bank's 32 willful failure to make timely payment under such Letter of Credit following the presentation to it by the beneficiary thereof of a draft and accompanying certificate(s) which strictly comply with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, any Issuing Bank may accept sight drafts and accompanying certificates presented under any Letter of Credit issued by such Issuing Bank that appear on their face to be in order, without responsibility for further investigation. Notwithstanding the foregoing, no Lender shall be obligated to indemnify any Borrower for damages caused by any Issuing Bank's willful misconduct or gross negligence, and the obligation of each Borrower to reimburse the Lenders hereunder in accordance with the terms hereof shall be absolute and unconditional, notwithstanding the gross negligence or willful misconduct of any Issuing Bank. ARTICLE V PAYMENTS, COMPUTATIONS AND YIELD PROTECTION SECTION 5.01. PAYMENTS AND COMPUTATIONS. (a) The Borrowers shall make each payment hereunder and under the other Loan Documents not later than 10:00 A.M. on the day when due in Dollars to the Administrative Agent at its address referred to in Section 12.02 in same day funds, except payments to be made directly to any Issuing Bank as expressly provided herein; any payment received after 10:00 A.M. shall be deemed to have been received at the start of business on the next succeeding Business Day. The Administrative Agent will promptly thereafter cause to be distributed like funds relating to the payment of principal, interest, fees or other amounts payable to the Lenders, to the respective Lenders to which the same are payable, for the account of their respective Applicable Lending Offices, in each case to be applied in accordance with the terms of this Agreement. If and to the extent that any distribution of any payment from a Borrower required to be made to any Lender pursuant to the preceding sentence shall not be made in full by the Administrative Agent on the date such payment was received by the Administrative Agent, the Administrative Agent shall pay to such Lender, upon demand, interest on the unpaid amount of such distribution, at a rate per annum equal to the Federal Funds Effective Rate, from the date of such payment by such Borrower to the Administrative Agent to the date of payment in full by the Administrative Agent to such Lender of such unpaid amount. Upon the Administrative Agent's acceptance of a Lender Assignment and recording of the information contained therein in the Register pursuant to Section 12.07, from and after the effective date specified in such Lender Assignment, the Administrative Agent shall make all payments hereunder and under any Promissory Notes in respect of the interest assigned thereby to the Lender assignee thereunder, and the parties to such Lender Assignment shall make all appropriate adjustments in such payments for periods prior to such effective date directly between themselves. (b) Each Borrower hereby authorizes the Administrative Agent, each Lender and each Issuing Bank, if and to the extent payment owed by such Borrower to the Administrative Agent, such Lender or such Issuing Bank, as the case may be, is not made when due hereunder (or, in the case of a Lender, under any Promissory Note held by such Lender), to charge from time to time against any or all of such Borrower's accounts with the Administrative Agent, such Lender or such Issuing Bank, as the case may be, any amount so due. 33 (c) All computations of interest based on the Alternate Base Rate (when the Alternate Base Rate is based on the Reference Rate) shall be made by the Administrative Agent on the basis of a year of 365 or 366 days, as the case may be. All other computations of interest and fees hereunder (including computations of interest based on the Eurodollar Rate and the Federal Funds Effective Rate) shall be made by the Administrative Agent on the basis of a year of 360 days. In each such case, such computation shall be made for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest or fees are payable. Each such determination by the Administrative Agent or a Lender shall be conclusive and binding for all purposes, absent manifest error. (d) Whenever any payment hereunder or under any other Loan Document shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest and fees hereunder; provided, however, that if such extension would cause payment of interest on or principal of Eurodollar Rate Loans to be made in the next following calendar month, such payment shall be made on the next preceding Business Day. (e) Unless the Administrative Agent shall have received notice from a Borrower prior to the date on which any payment by such Borrower is due to the Lenders hereunder that such Borrower will not make such payment in full, the Administrative Agent may assume that such Borrower has made such payment in full to the Administrative Agent on such date, and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due by such Borrower to such Lender. If and to the extent such Borrower shall not have so made such payment in full to the Administrative Agent, such Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender, together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Effective Rate. (f) Any fees, interest, costs, expenses or other amount (other than the principal amount of any Loan, which shall accrue interest at the Applicable Rate for such Loan) payable by the Borrower hereunder or under any of the Promissory Notes that is not paid when due (whether at stated maturity, by acceleration or otherwise) shall (to the fullest extent permitted by law) bear interest, from the date when due until paid in full, at a rate per annum equal at all times to the Default Rate, payable on demand. (g) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due by any Borrower hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due by such Borrower hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due from such Borrower to such parties, and (ii) second, towards payment of principal then due by such Borrower hereunder, ratably among the parties entitled thereto. SECTION 5.02. INTEREST RATE DETERMINATION. The Administrative Agent shall give prompt notice to the applicable Borrower and the Lenders of the interest 34 rate determined by the Administrative Agent for purposes of Section 3.05(b)(i) or (ii) applicable to Loans made to such Borrower. SECTION 5.03. PREPAYMENTS. No Borrower shall have any right to prepay any principal amount of any Loans made to such Borrower other than as provided in subsections (a) and (b) below. (a) Each Borrower may, upon at least three Business Days' written notice, with respect to Eurodollar Rate Loans, and one Business Day's written notice, with respect to ABR Loans, to the Administrative Agent stating the proposed date and the aggregate principal amount of the prepayment, and if such notice is given such Borrower shall, prepay the outstanding principal amounts of Loans made to such Borrower as part of the same Borrowing, in whole or ratably in part, together with (i) accrued interest to the date of such prepayment on the principal amount prepaid and (ii) in the case of Eurodollar Rate Loans, any amount payable to the Lenders pursuant to Section 5.04(b); provided, however, that each partial prepayment shall be in an aggregate principal amount of not less than $1,000,000 or an integral multiple of $1,000,000 in excess thereof. (b) On the date of any termination or reduction of the Commitments pursuant to Section 2.03, the Borrowers shall pay or prepay so much of the principal amount outstanding hereunder as shall be necessary in order that the aggregate principal amount outstanding hereunder (after giving effect to all Extensions of Credit to be made on such date and the application of the proceeds thereof) will not exceed the Commitments (and, with respect to each Borrower, such Borrower's Availability Sublimit) following such termination or reduction, together with (i) accrued interest to the date of such prepayment on the principal amount prepaid and (ii) in the case of prepayments of Eurodollar Rate Loans, any amount payable to the Lenders pursuant to Section 5.04(b). In connection with any partial reduction of the Commitments pursuant to Section 2.03(b), the Borrowers shall designate, in the written notice delivered to the Administrative Agent pursuant to Section 2.03(b), which outstanding Borrowings will be prepaid pursuant to this subsection (b) on the date of such reduction; provided, that if the Borrowers fail to provide such designation, the prepayments required by this subsection (b) shall be applied (A) on a pro rata basis to the outstanding Borrowings of each Borrower, and (B) to outstanding ABR Loans up to the full amount thereof before they are applied to outstanding Eurodollar Rate Loans (in the order of the remaining duration of their respective Interest Periods (the Eurodollar Rate Loans with the shortest remaining Interest Period to be prepaid first)). SECTION 5.04. YIELD PROTECTION. (a) Increased Costs. If, due to either (i) the introduction of or any change in or in the interpretation of any law or regulation after the date hereof, or (ii) the compliance with any guideline or request from any central bank or other governmental authority (whether or not having the force of law) issued or made after the date hereof, there shall be reasonably incurred any increase in (A) the cost to any Lender of agreeing to make or making, funding or maintaining Eurodollar Rate Loans, or of participating in the issuance, maintenance or funding of any Letter of Credit, or (B) the cost to any Issuing Bank of issuing or maintaining any Letter of Credit, then the Borrowers shall from time to time, promptly after receipt of written demand by such Lender or Issuing Bank, as the case may be (with a copy of such demand to the 35 Administrative Agent), pay to the Administrative Agent for the account of such Lender or Issuing Bank, as the case may be, additional amounts sufficient to compensate such Lender or Issuing Bank, as the case may be, for such increased cost. A certificate as to the amount of such increased cost and giving a reasonable explanation and calculation thereof shall be submitted to the Borrowers and the Administrative Agent by such Lender or such Issuing Bank, as the case may be, shall constitute such demand and shall be conclusive and binding for all purposes, absent manifest error. (b) Breakage. If, due to any prepayment pursuant to Section 5.03, an acceleration of maturity of the Loans pursuant to Section 9.02, or any other reason, any Lender receives payments of principal of any Eurodollar Rate Loan made to any Borrower other than on the last day of the Interest Period relating to such Loan, or if any Borrower shall Convert any Eurodollar Rate Loans on any day other than the last day of the Interest Period therefor, such Borrower shall, promptly after demand by such Lender (with a copy of such demand to the Administrative Agent), pay to the Administrative Agent for the account of such Lender any amounts required to compensate such Lender for additional losses, costs, or expenses (including anticipated lost profits) that such Lender may reasonably incur as a result of such payment or Conversion, including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Lender to fund or maintain such Loan. For purposes of this subsection (b) and Section 3.04(e), a certificate setting forth the amount of such additional losses, costs, or expenses and giving a reasonable explanation and calculation thereof shall be submitted to the applicable Borrower and the Administrative Agent by such Lender, shall constitute such demand and shall be conclusive and binding for all purposes, absent manifest error. (c) Capital. If any Lender or Issuing Bank determines that (i) the introduction of or any change in or in the interpretation of any law or regulation after the date hereof or (ii) compliance with any law or regulation or any guideline or request from any central bank or other governmental authority (whether or not having the force of law) issued or made after the date hereof, affects or would affect the amount of capital required or expected to be maintained by such Lender or Issuing Bank, whether directly, or indirectly as a result of commitments of any corporation controlling such Lender or Issuing Bank (but without duplication), and the amount of such capital is increased by or based upon (A) the existence of such Lender's or Issuing Bank's commitment to lend or issue or participate in any Letter of Credit hereunder, (B) the participation in or issuance or maintenance of any Letter of Credit or Loan or (C) other similar such commitments, then, promptly after demand by such Lender or Issuing Bank, the Borrowers shall pay to the Administrative Agent for the account of such Lender or Issuing Bank from time to time as specified by such Lender or Issuing Bank additional amounts sufficient to compensate such Lender or Issuing Bank in the light of such circumstances, to the extent that such Lender or Issuing Bank reasonably determines such increase in capital to be allocable to the transactions contemplated hereby. A certificate as to such amounts and giving a reasonable explanation and calculation thereof (to the extent permitted by law) shall be submitted to the Borrowers and the Administrative Agent by such Lender or Issuing Bank and shall be conclusive and binding for all purposes, absent manifest error. (d) Notices, Etc. Each Lender hereby agrees to use its best efforts to notify the Borrowers of the occurrence of any event referred to in subsection (a), (b) or (c) of this Section 5.04 promptly after becoming aware of the 36 occurrence thereof. Each Borrower shall pay the Administrative Agent, for the account of such Lender, the amount shown as due by such Borrower on any certificate delivered pursuant to this Section 5.04 within ten (10) Business Days after its receipt of the same. The failure of any Lender to provide such notice or to make demand for payment under said subsection shall not constitute a waiver of such Lender's rights hereunder; provided that, notwithstanding any provision to the contrary contained in this Section 5.04, a Borrower shall not be required to reimburse any Lender for any amounts or costs incurred under subsection (a), (b) or (c) above, more than 270 days prior to the date that such Lender notifies such Borrower in writing thereof, in each case unless, and to the extent that, any such amounts or costs so incurred shall relate to the retroactive application of any event notified to such Borrower which entitles such Lender to such compensation. If any Lender shall subsequently determine that any amount demanded and collected under this Section 5.04 was done so in error, such Lender will promptly return such amount to the applicable Borrower. (e) Survival of Obligations. Subject to subsection (d) above, the Borrowers' obligations under this Section 5.04 shall survive the repayment of all other amounts owing to the Lenders, the Administrative Agent and the Issuing Banks under the Loan Documents and the termination of the Commitments. SECTION 5.05. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of set-off, or otherwise) on account of the Loans owing to it (other than pursuant to Section 5.04 or 12.07) in excess of its ratable share of payments obtained by all the Lenders on account of the Loans of such Lenders, such Lender shall forthwith purchase from the other Lenders such participation in the Loans owing to them as shall be necessary to cause such purchasing Lender to share the excess payment ratably with each of them; provided, however, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender, such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lender the purchase price to the extent of such recovery together with an amount equal to such Lender's ratable share (according to the proportion of (i) the amount of such Lender's required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered. Each Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 5.05 may, to the fullest extent permitted by law, exercise all its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation. Notwithstanding the foregoing, if any Lender shall obtain any such excess payment involuntarily, such Lender may, in lieu of purchasing participations from the other Lenders in accordance with this Section 5.05, on the date of receipt of such excess payment, return such excess payment to the Administrative Agent for distribution in accordance with Section 5.01(a). SECTION 5.06. TAXES. (a) All payments by a Borrower hereunder and under the other Loan Documents shall be made in accordance with Section 5.01, free and clear of and without deduction for all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of each Lender, each Issuing Bank and the Administrative Agent, taxes imposed on its overall net or gross income, receipts, capital, net worth, privilege of transacting business or corporate franchise taxes imposed on 37 it by the jurisdiction under the laws of which such Lender, such Issuing Bank or the Administrative Agent (as the case may be) is organized or any political subdivision thereof and, in the case of each Lender, taxes imposed on its overall net or gross income, receipts, capital, net worth, privilege of transacting business or corporate franchise taxes imposed on it by the jurisdiction of such Lender's Applicable Lending Office or any political subdivision thereof (all such non-excluded taxes, levies, imposts, deductions, charges, withholdings and liabilities being hereinafter referred to as "TAXES"). If any Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable by such Borrower hereunder or under any other Loan Document to any Lender, any Issuing Bank or the Administrative Agent, (i) the sum payable shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 5.06) such Lender, such Issuing Bank or the Administrative Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, and (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law. (b) In addition, each Borrower agrees to pay any present or future stamp or documentary taxes or any other similar taxes or charges that arise from any payment made by such Borrower hereunder or under any other Loan Document to which it is a party or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Loan Document (hereinafter referred to as "OTHER TAXES"). (c) The Borrowers will indemnify each Lender, each Issuing Bank and the Administrative Agent for the full amount of Taxes and Other Taxes (including any Taxes and any Other Taxes imposed by any jurisdiction on amounts payable under this Section 5.06) paid by such Lender, such Issuing Bank or the Administrative Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within 30 days from the date such Lender, such Issuing Bank or the Administrative Agent (as the case may be) makes written demand therefor. Nothing herein shall preclude the right of any Borrower to contest any such Taxes or Other Taxes so paid, and each Lender, each Issuing Bank and the Administrative Agent (as the case may be) will, following notice from, and at the expense of, such Borrower, reasonably cooperate with such Borrower to preserve such Borrower's rights to contest such Taxes or Other Taxes. (d) Within 30 days after the date of any payment of Taxes, the applicable Borrower will furnish to the Administrative Agent, at its address referred to in Section 12.02, the original or a certified copy of a receipt evidencing payment thereof. (e) Each Bank represents and warrants that either (i) it is organized under the laws of a jurisdiction within the United States or (ii) it has delivered to the Borrowers or the Administrative Agent duly completed copies of such form or forms prescribed by the United States Internal Revenue Service indicating that such Bank is entitled to receive payments without deduction or withholding of any United States federal income taxes, as permitted by the Code or any tax treaty to which the United States is a party. Each other Lender agrees that, on or prior to the date upon which it shall become a party hereto, and upon the reasonable request from time to time of the Borrowers or the Administrative Agent, such Lender will deliver to the Borrowers and the Administrative Agent 38 (to the extent that it is not prohibited by law from doing so) either (A) a statement that it is organized under the laws of a jurisdiction within the United States or (B) duly completed copies of such form or forms as may from time to time be prescribed by the United States Internal Revenue Service, indicating that such Lender is entitled to receive payments without deduction or withholding of any United States federal income taxes, as permitted by the Internal Revenue Code. Each Bank that has delivered, and each other Lender that hereafter delivers, to the Borrowers and the Administrative Agent the form or forms referred to in the two preceding sentences further undertakes to deliver to the Borrowers and the Administrative Agent, to the extent that it is not prohibited by law from doing so, further copies of such form or forms, or successor applicable form or forms, as the case may be, as and when any previous form filed by it hereunder shall expire or shall become incomplete or inaccurate in any respect. Each Lender represents and warrants that each such form supplied by it to the Administrative Agent and the Borrowers pursuant to this subsection (e), and not superseded by another form supplied by it, is or will be, as the case may be, complete and accurate, and such Lender acknowledges and agrees that nothing contained herein shall in any way limit, waive, or otherwise reduce any claim that the Administrative Agent or the Borrowers may have against such Lender in the event that any such form shall not be complete and accurate. (f) Any Lender claiming any additional amounts payable pursuant to this Section 5.06 shall use its best efforts (consistent with its internal policy and legal and regulatory restrictions) to change the jurisdiction of its Applicable Lending Office if the making of such a change would avoid the need for, or reduce the amount of, any such additional amounts that may thereafter accrue and would not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender. (g) Without prejudice to the survival of any other agreement of the Borrowers hereunder, the agreements and obligations of the Borrowers contained in this Section 5.06 shall survive the repayment of all other amounts owing to the Lenders, the Administrative Agent and the Issuing Banks under the Loan Documents and the termination of the Commitments. If and to the extent that the obligations of the Borrowers under this Section 5.06 are unenforceable for any reason, the Borrowers agree to make the maximum contribution to the payment and satisfaction thereof which is permissible under applicable law. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.01. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT. The obligation of each Lender or Issuing Bank, as the case may be, to make its initial Extension of Credit is subject to the fulfillment of the following conditions precedent: (a) The Administrative Agent (or its counsel) shall have received from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement. 39 (b) The Administrative Agent shall have received (i) Issuing Bank Agreements, duly executed by each of the Borrowers and Union Bank, in form and substance satisfactory to the Administrative Agent, (ii) the Fee Letter, duly executed by the Borrowers, in form and substance satisfactory to the Administrative Agent, and (iii) the Promissory Notes (if requested by any Lender pursuant to Section 3.01(d)), duly executed by the applicable Borrower. (c) The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent, the Issuing Banks and the Lenders and dated the Closing Date) of (i) Thelen Reid & Priest LLP, New York counsel for the Obligors, substantially in the form of Exhibit C, and (ii) Vincent Nitido, Jr., Esq., General Counsel for the Guarantor and counsel for the Borrowers, substantially in the form of Exhibit D. The Obligors hereby request such counsel to deliver such opinions. (d) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Obligors, the authorization of the Transactions and any other legal matters relating to the Obligors, the Loan Documents or the Transactions, all in form and substance satisfactory to the Administrative Agent and its counsel. (e) The representations and warranties of the Obligors set forth in this Agreement and the other Loan Documents shall be true and correct, no Default or Event of Default shall have occurred and be continuing, and the Administrative Agent shall have received a certificate, dated the Closing Date and signed by the President, a Vice President or a Senior Financial Officer of each Obligor, confirming the same as of the Closing Date. (f) The Administrative Agent shall have received a certificate, dated the Closing Date and signed by the President, a Vice President or a Senior Financial Officer of each Obligor, confirming compliance with the conditions set forth in this Section 6.01. (g) The Administrative Agent and the Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations, including without limitation the Patriot Act, with respect to the Obligors. (h) The Administrative Agent shall have received all fees and other amounts due and payable on or prior to the Closing Date, including all up-front fees and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses required to be reimbursed or paid by the Borrowers hereunder or under any other Loan Document. (i) All requisite Governmental Authorities and third parties, if any, shall have approved or consented to this Agreement, the other Loan Documents and the Transactions to the extent required and material (and the Administrative Agent shall have received certified copies of all such approvals and consents, which shall be in form and substance satisfactory to the Administrative Agent and the Lenders), 40 no stay of any applicable regulatory approval shall have been issued and there shall be no litigation, governmental, administrative or judicial action, actual or, to the knowledge of the Obligors, threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions on this Agreement, the other Loan Documents or the Transactions. (j) The Administrative Agent shall have received true, correct and complete copies, certified as to authenticity by the applicable Borrower, of the Note Purchase Agreement to which such Borrower is a party. (k) The Administrative Agent shall have received such other approvals, opinions and documents as any Lender, through the Administrative Agent, may reasonably request. SECTION 6.02. CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. The obligation of each Lender or Issuing Bank, as the case may be, to make an Extension of Credit (including the initial Extension of Credit, but excluding Conversions) to or for the account of any Borrower shall be subject to the further conditions precedent that, on the date of such Extension of Credit and after giving effect thereto, the following statements shall be true (and each of the giving of the applicable notice or request with respect thereto and the making of such Extension of Credit shall constitute a representation and warranty by such Borrower that, on the date of such Extension of Credit, such statements are true): (a) the representations and warranties of such Borrower and the Guarantor contained in this Agreement and the other Loan Documents are true and correct on and as of the date of such Extension of Credit, before and after giving effect to such Extension of Credit and to the application of the proceeds thereof, as though made on and as of such date (except for any such representations and warranties that expressly relate to an earlier date, in which case such representations and warranties were true and correct as of such earlier date); and (b) no Default or Event of Default with respect to such Borrower or the Guarantor has occurred and is continuing, or would result from such Extension of Credit or the application of the proceeds thereof. SECTION 6.03. DETERMINATIONS UNDER SECTION 6.01. For purposes of determining compliance with the conditions specified in Section 6.01, each Lender 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 the Lenders unless an officer of the Administrative Agent responsible for the transactions contemplated by this Agreement shall have received written notice from such Lender prior to the Closing Date specifying its objection thereto. SECTION 6.04. RELIANCE ON CERTIFICATES. The Lenders, the Issuing Banks and the Administrative Agent shall be entitled to rely conclusively upon the certificates delivered from time to time by officers of an Obligor as to the names, incumbency, authority and signatures of the respective individuals named therein until such time as the Administrative Agent may receive a replacement 41 certificate, in form acceptable to the Administrative Agent, from an officer of such Obligor identified to the Administrative Agent as having authority to deliver such certificate, setting forth the names and true signatures of the officers and other representatives of such Obligor thereafter authorized to act on behalf of such Obligor. ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 7.01. REPRESENTATIONS AND WARRANTIES OF THE OBLIGORS. To induce the Administrative Agent, the Issuing Banks and the Lenders to enter into this Agreement and to make Extensions of Credit, each Obligor hereby represents and warrants to the Administrative Agent, each Issuing Bank and each Lender that: (a) Organization; Power and Authority. Such Obligor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Such Obligor has the corporate power and authority to own or hold under lease the Properties it purports to own or hold under lease, or proposes to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver the Loan Documents to which it is a party and to perform the provisions thereof. (b) Authorization, Execution and Delivery. Each Loan Document to which such Obligor is a party has been duly authorized by all necessary corporate action on the part of such Obligor, and upon execution and delivery thereof each such Loan Document will constitute a legal, valid and binding obligation of such Obligor enforceable against such Obligor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Each Loan Document to which such Obligor is a party has been duly executed and delivered by such Obligor. (c) Disclosure; No Material Adverse Change; Etc. Such Obligor has disclosed to the Administrative Agent and the Lenders all agreements, instruments and corporate or other restrictions to which it or any of its Subsidiaries is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. Neither the Information Memorandum, the Disclosure Documents nor any of the other reports, financial statements, certificates or other information furnished by or on behalf of such Obligor to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder (as modified or supplemented by, and taken together with, other information so furnished) contains any material misstatement of a fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; 42 provided that, with respect to forward looking statements, such Obligor represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time and notes that there can be no assurance that such expectations, beliefs or projections will be achieved or accomplished and that such projections are subject to an increasing degree of uncertainty as they relate to later periods of time. Except as disclosed in the Information Memorandum, the Disclosure Documents or in one of the documents, certificates or other writings identified therein, since December 31, 2004, there has been no change in the financial condition, operations, business, Properties or prospects of any Obligor or any Subsidiary of any Obligor except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to such Obligor that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Information Memorandum, the Disclosure Documents or the other documents, certificates and other writings delivered to the Administrative Agent and the Lenders prior to the Closing Date by or on behalf of the Obligors specifically for use in connection with the transactions contemplated hereby. (d) Financial Condition. The most recent financial statements delivered by such Obligor pursuant to Section 8.01(a)(i) or (ii) (including, without limitations, the financial statements of the Obligors for the fiscal year ended December 31, 2004) present fairly, in all material respects, the financial position and results of operations and cash flows of such Obligor and its Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements delivered pursuant to Section 8.01(a)(i). Neither such Obligor nor any of its Subsidiaries had, at the date of the most recent balance sheet referred to above, any Guaranty Obligation, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitment, including any interest rate or foreign currency swap or exchange transaction, which, in any case, was material to such Obligor and its Subsidiaries, taken as a whole, and which was not reflected in the foregoing statements or in the notes thereto. During the period from December 31, 2004 to and including the date hereof there has been no Disposition by such Obligor or any of its Subsidiaries of any material part of its business or Property. (e) Organization and Ownership of Shares of Subsidiaries. (i) As of the Closing Date, Schedule 7.01(e) contains (except as noted therein) complete and correct lists of (i) such Obligor's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by such Obligor and each other Subsidiary, (ii) each Obligor's directors and senior officers, and (iii) the Obligors' Affiliates, other than Subsidiaries. (ii) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 7.01(e) as being owned by an Obligor and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by such Obligor or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 7.01(e)). (iii) Each Subsidiary identified in Schedule 7.01(e) is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, 43 and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the Properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. (iv) No Subsidiary of any Borrower is a party to any agreement, or otherwise subject to any legal restriction, restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to such Borrower or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary, other than (A) this Agreement and the other Loan Documents, (B) the agreements listed on Schedule 7.01(e), (C) customary limitations imposed by corporate law statutes and (D) any covenant contained in an agreement evidencing Indebtedness permitted to be incurred by such Subsidiary pursuant to Section 8.02(e) that restricts the payment of a dividend or distribution upon the occurrence and during the continuance of a default thereunder. (f) Compliance with Laws, Other Instruments, etc. The execution, delivery and performance by such Obligor of each Loan Document to which it is a party will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any Property of such Obligor or any of its Subsidiaries under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which such Obligor or any such Subsidiary is bound or by which such Obligor or any such Subsidiary or any of their respective Properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Obligor or any of its Subsidiaries or (iii) violate any provision of any Governmental Rule applicable to such Obligor or any of its Subsidiaries. (g) Governmental Authorizations, etc. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by such Obligor of any Loan Document to which it is a party, except for the ACC Order, which ACC Order has been obtained and is in full force and effect. (h) Litigation; Observance of Agreements, Statutes and Orders. (i) Except as disclosed in Schedule 7.01(h), there are no actions, suits or proceedings pending or, to the knowledge of such Obligor, threatened against or affecting such Obligor or any of its Subsidiaries or any Property of such Obligor or any of its Subsidiaries in any court or before any arbitrator of any kind or before or by any Governmental Authority (A) that involve any of the Loan Documents or the Transactions or (B) that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 44 (ii) Neither such Obligor nor any of its Subsidiaries is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (i) Taxes. Such Obligor and each of its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their Properties, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which such Obligor or such Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. Such Obligor knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of such Obligor and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. (j) Title to Property; Leases. Such Obligor and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all Material respects. (k) Licenses, Permits, etc. (i) Such Obligor and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others; (ii) to the best knowledge of such Obligor, no product of such Obligor infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and (iii) to the best knowledge of such Obligor, there is no Material violation by any Person of any right of such Obligor or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by such Obligor or such Subsidiary. (l) Compliance with ERISA. (i) Such Obligor and each of its ERISA Affiliates have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and 45 could not reasonably be expected to result in a Material Adverse Effect. Neither such Obligor nor any of its ERISA Affiliates has incurred any liability pursuant to Title I or IV of ERISA (other than claims for benefits in the ordinary course or PBGC premiums required by Title IV of ERISA) or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by such Obligor or any of its ERISA Affiliates, or in the imposition of any Lien on any of the rights or Properties of such Obligor or any of its ERISA Affiliates, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (ii) The present value of the aggregate benefit liabilities under each of such Obligor's Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by an amount, in the case of any single Plan or in the aggregate for all Plans, that has resulted or could reasonably be expected to result in a Material Adverse Effect. The term "benefit liabilities" has the meaning specified in section 4001 of ERISA and the terms "current value" and "present value" have the meaning specified in section 3 of ERISA. (iii) Such Obligor and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate have resulted or could reasonably be expected to result in a Material Adverse Effect. (iv) The expected postretirement benefit obligations (determined as of the last day of such Obligor's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of such Obligor and its Subsidiaries could not reasonably be expected to result in a Material Adverse Effect. (m) Use of Proceeds; Margin Regulations. Each Borrower will apply the proceeds of all Loans made to such Borrower and utilize Letters of Credit issued hereunder for general corporate purposes. No part of the proceeds of any Loan made to such Borrower and no Letter of Credit issued at the request of such Borrower will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U, or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve such Borrower in a violation of Regulation X of the Board or to involve any broker or dealer in a violation of Regulation T of the Board. As used in this Section 7.01(m), the terms "margin stock" and "purpose of buying or carrying" shall have the meanings assigned to them in Regulation U. 46 (n) Existing Indebtedness. (i) Except as described therein, Schedule 7.01(n) sets forth a complete and correct list of all outstanding Indebtedness of such Obligor and each of its Subsidiaries as of the Closing Date. Neither such Obligor nor any such Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of such Obligor or such Subsidiary and no event or condition exists with respect to any Indebtedness of such Obligor or any such Subsidiary that would permit (or that with the giving of notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. (ii) Neither such Obligor nor any of its Subsidiaries has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its Property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 8.02(c). (o) Foreign Assets Control Regulations, etc. None of the Transactions 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. (p) Status under Certain Statutes. Neither such Obligor nor any of its Subsidiaries is subject to regulation under the Investment Company Act of 1940, as amended, or the Interstate Commerce Act, as amended. Such Obligor and its Subsidiaries are exempt from regulation under PUHCA, except as set forth in Section 9(a)(2) thereof. (q) Anti-Terrorism Order. Neither such Obligor nor any of its Subsidiaries is a Sanctioned Person. To the best knowledge of such Obligor, neither such Obligor nor any of its Subsidiaries has any legally binding contracts or agreements with any Sanctioned Person. (r) Labor Matters. There are no strikes or other labor disputes against such Obligor or any of its Subsidiaries pending or, to the knowledge of such Obligor, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payments made to employees of such Obligor or any of its Subsidiaries have not been in violation of the Fair Labor Standards Act or any other applicable requirement of law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from such Obligor or any of its Subsidiaries on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of such Obligor or the relevant Subsidiary. (s) Environmental Matters. Neither such Obligor nor any of its Subsidiaries has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against such Obligor or any of its Subsidiaries or any of their respective real Properties now or formerly owned, leased or operated by any of them or other Properties, alleging any damage to the environment or violation of any Environmental Laws, except, in 47 each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 7.01(s): (i) neither such Obligor nor any of its Subsidiaries has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real Properties now or formerly owned, leased or operated by any of them, or in any way related to its Properties or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect; (ii) neither such Obligor nor any of its Subsidiaries has stored any Hazardous Materials on real Properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and (iii) all buildings on all real Properties now owned, leased or operated by such Obligor or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect. (t) Solvency. Each Obligor is, and after giving effect to the incurrence of all Indebtedness and obligations being incurred in connection herewith and the Transactions will be, Solvent. ARTICLE VIII COVENANTS OF THE OBLIGORS SECTION 8.01. AFFIRMATIVE COVENANTS. Each Obligor covenants and agrees that so long as any Loan or any other amount payable hereunder or under any Promissory Note shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment: (a) Financial and Business Information. Such Obligor shall deliver to the Administrative Agent, with a copy for each Lender (and the Administrative Agent will forward such copies to the Lenders): (i) Quarterly Statements - within 60 days after the end of each quarterly fiscal period in each fiscal year of such Obligor (other than the last quarterly fiscal period of each such fiscal year), copies of, (A) a consolidated balance sheet of such Obligor and its Subsidiaries as at the end of such quarter, (B) consolidated statements of income of such Obligor and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and 48 (C) consolidated statements of cash flow for the period from the beginning of such fiscal year to the end of such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer of such Obligor as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of such Obligor's Quarterly Report on Form 10-Q, if any, prepared in compliance with the requirements therefor and filed with the SEC shall be deemed to satisfy the requirements of this Section 8.01(a)(i); (ii) Annual Statements - within 105 days after the end of each fiscal year of such Obligor, copies of, (A) a consolidated balance sheet of such Obligor and its Subsidiaries, as at the end of such year, and (B) consolidated statements of income, changes in shareholders' equity and cash flows of such Obligor and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied (1) by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, and (2) a certificate of such accountants stating that they have reviewed this Agreement and stating further whether, in making their audit, they have become aware of any condition or event that then constitutes a Default or an Event of Default resulting from a breach of the provisions of any of Sections 8.02(d)(iii), 8.02(e), 8.03(a) and 8.03(b) hereof, and, if they are aware that any such condition or event then exists, specifying the nature and period of the existence thereof (it being understood that such accountants shall not be liable, directly or indirectly, for any failure to obtain knowledge of any Default or Event of Default), provided that the delivery within the time period specified above of such Obligor's Annual Report on Form 10-K (if any) for such fiscal year (together with such Obligor's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared 49 in accordance with the requirements therefor and filed with the SEC, together with the accountant's certificate described in clause (2) above, shall be deemed to satisfy the requirements of this Section 8.01(a)(ii); (iii) SEC and Other Reports - promptly upon their becoming available, one copy of (A) each financial statement, report, notice or proxy statement sent by such Obligor or any of its Subsidiaries to public securities holders generally, and (B) each regular or periodic report, each registration statement (without exhibits except as expressly requested by the Administrative Agent or a Lender), and each prospectus and all amendments thereto filed by such Obligor or any of its Subsidiaries with the SEC and of all press releases and other statements made available generally by such Obligor or any of its Subsidiaries to the public concerning developments that are Material; (iv) Notice of Default or Event of Default - promptly, and in any event within five days after a Responsible Officer of such Obligor becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given any notice or taken any action with respect to a claimed default of the type referred to in Section 9.01(e), a written notice specifying the nature and period of existence thereof and what action the applicable Borrower or the Guarantor, as the case may be, is taking or proposes to take with respect thereto; (v) ERISA Matters - promptly, and in any event within five days after a Responsible Officer of such Obligor becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the applicable Borrower (or the Guarantor, as the case may be), or an ERISA Affiliate proposes to take with respect thereto: (A) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (B) (1) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, (2) the providing of notice by a plan administrator of the intent to terminate any Plan under section 4041 of ERISA, or (3) the receipt by such Obligor or any of its ERISA Affiliates of a notice, or the receipt by any Multiemployer Plan from such Obligor or any of its ERISA Affiliates of any notice, concerning the imposition of withdrawal liability under section 4201 or 4204 of ERISA or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; or (C) any event, transaction or condition that could result in the incurrence of any liability by such Obligor or any of its ERISA Affiliates pursuant to Title I or IV of ERISA (other than claims in the ordinary course or PBGC premiums required by Title IV of ERISA) or the penalty or excise tax provisions of the Code 50 relating to employee benefit plans, or in the imposition of any Lien on any of the rights or Properties of such Obligor or any of its ERISA Affiliates pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect; (vi) Notices from Governmental Authority - promptly, and in any event within 30 days of receipt thereof, copies of any notice to such Obligor or any of its Subsidiaries from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; (vii) ACC Communications - promptly, and in any event within 30 days of receipt thereof, copies of any Material communication to such Obligor or any of its Subsidiaries from the ACC or any Material filing by such Obligor or any of its Subsidiaries with the ACC relating to any breach of the ACC Settlement Agreement or any matter that could reasonably be expected to cause or constitute a Material Adverse Effect; (viii) Default and Litigation - promptly, and in any event within five days after a Responsible Officer of such Obligor becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the applicable Borrower or the Guarantor, as the case may be, proposes to take with respect thereto: (A) any default or event of default under any Contractual Obligation (other than under the Loan Documents) of such Obligor or any of its Subsidiaries that, if not cured or waived, could reasonably be expected to have a Material Adverse Effect; (B) any litigation, investigation or proceeding which may exist at any time between such Obligor or any of its Subsidiaries and any Governmental Authority that, if adversely determined, could reasonably be expected to have a Material Adverse Effect; or (C) any litigation or proceeding affecting such Obligor or any of its Subsidiaries in which the amount involved is greater than $4,000,000 and not covered by insurance or in which injunctive or similar relief is sought; and (ix) Requested Information - with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition or Properties of such Obligor or any of its Subsidiaries or relating to the ability of such Obligor to perform its obligations under the Loan Documents to which it is a party as from time to time may be reasonably requested by the Administrative Agent or any Lender. (b) Officer's Certificate. Each set of financial statements delivered to the Administrative Agent pursuant to Section 8.01(a)(i) or Section 8.01(a)(ii) shall be accompanied by a certificate of a Senior Financial Officer of the Obligor delivering such financial statements setting forth: 51 (i) Covenant Compliance - if such Obligor is a Borrower, the information (including detailed calculations) required in order to establish whether such Borrower was in compliance with the requirements of Sections 8.03(a) and 8.03(b) during the quarterly or annual period covered by the statements then being furnished; and (ii) Event of Default - a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of such Obligor and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of such Obligor or any of its Subsidiaries to comply with any Environmental Law), specifying the nature and period of existence thereof and what action such Obligor shall have taken or proposes to take with respect thereto. (c) Books and Records; Inspection. Such Obligor will, and will cause each of its Subsidiaries to, keep proper books of record and account in which entries are made of all dealings and transactions in relation to its business and activities, all in accordance with customary and prudent business practices. Such Obligor shall permit the representatives of the Administrative Agent and each Lender: (i) No Default - if no Default or Event of Default with respect to such Obligor then exists, at the expense of the Administrative Agent or such Lender (as the case may be) and upon reasonable prior notice to such Obligor, to visit the principal executive office of such Obligor, to discuss the affairs, finances and accounts of such Obligor and its Subsidiaries with such Obligor's officers, and (with the consent of such Obligor, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of such Obligor, which consent will not be unreasonably withheld) to visit the other offices and Properties of such Obligor and its Subsidiaries, all at such reasonable times and as often as may be reasonably requested in writing; and (ii) Default - if a Default or Event of Default with respect to such Obligor then exists, at the expense of such Obligor, to visit and inspect any of the offices or Properties of such Obligor or any of its Subsidiaries, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision such Obligor authorizes said accountants to discuss the affairs, finances and accounts of such Obligor and its Subsidiaries), all at such times and as often as may be requested. (d) Compliance with Law. Such Obligor shall, and shall cause each of its Subsidiaries to, comply with all Governmental Rules to which each of them is subject, including, without limitation, ERISA and Environmental Laws, and will obtain and maintain in effect all Governmental Approvals necessary to the 52 ownership of their respective Properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such Governmental Rules or failures to obtain or maintain in effect such Governmental Approvals could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (e) Insurance. Such Obligor shall, and shall cause each of its Subsidiaries to, maintain, with financially sound and reputable insurers, or through its own program of self-insurance, insurance with respect to their respective Properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. (f) Maintenance of Properties. Such Obligor shall, and shall cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective Properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section 8.01(f) shall not prevent such Obligor or any such Subsidiary from discontinuing the operation and the maintenance of any of its Properties if such discontinuance is desirable in the conduct of its business and such Obligor has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. (g) Payment of Taxes, Obligations and Claims. Such Obligor shall, and shall cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and pay and discharge (i) all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their Properties, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, and (ii) all claims and other obligations of whatever nature for which sums have become due and payable that have or might become a Lien on Properties of such Obligor or any such Subsidiary, provided that neither such Obligor nor any such Subsidiary need pay any such tax, assessment. claims or obligations if (A) the amount, applicability or validity thereof is contested by such Obligor or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and such Obligor or such Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of such Obligor or such Subsidiary or (B) the nonpayment of all such taxes, assessments, claims and obligations in the aggregate could not reasonably be expected to have a Material Adverse Effect. (h) Legal Existence, etc. Such Obligor shall at all times preserve and keep in full force and effect its legal existence. Subject to Section 8.02(b), such Obligor shall at all times preserve and keep in full force and effect the legal existence of each of its Subsidiaries (unless merged into such Obligor or a Subsidiary) and all rights and franchises of such Obligor and its Subsidiaries unless, in the good faith judgment of such Obligor, the termination of or failure to preserve and keep in full force and effect such legal existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect. 53 (i) Corporate Separateness. The Guarantor shall at all times maintain its separate existence and, specifically, shall conduct its affairs in accordance with the following: (i) the Guarantor shall: (A) maintain and prepare separate financial reports and financial statements in accordance with GAAP, showing its assets and liabilities separate and apart from those of any other Person other than its Subsidiaries, and will not have its assets listed on the financial statement of any other Person (provided, that the Guarantor's assets may be included in a consolidated financial statement of a Person of which the Guarantor is a Subsidiary, if inclusion on such consolidated financial statement is required to comply with the requirements of GAAP); (B) maintain its books, records and bank accounts separate from those of its Affiliates and any other Person other than its Subsidiaries; and (C) not permit any of its Affiliates independent access to its bank accounts; (ii) the Guarantor shall not commingle or pool any of its funds or other assets with those of any of its Affiliates or any other Person other than its Subsidiaries, and it shall hold all of its assets in its own name; (iii) the Guarantor shall conduct its own business in its own name and shall not operate, or purport to operate, collectively as a single or consolidated business entity with respect to any Person other than its Subsidiaries; (iv) the Guarantor shall, insofar as is consistent with commercial and business circumstances affecting its business and financial condition, remain Solvent and pay its own debts, liabilities and expenses (including overhead expenses, if any) only out of its own assets as the same shall become due; (v) the Guarantor has done, or caused to be done, and shall do, all things necessary to observe all corporate formalities and other organizational formalities of the jurisdiction in which it is organized, and preserve its existence; (vi) the Guarantor shall, to the extent it utilizes stationary, invoices and checks, maintain and utilize separate stationery, invoices and checks bearing its own name; (vii) the Guarantor shall, at all times, hold itself out to the public as a legal entity separate and distinct from any other Person other than its Subsidiaries and shall correct any known misunderstanding regarding its separate identity; (viii) the Guarantor shall not identify itself as a division of any other Person; (ix) the Guarantor shall maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any of its Affiliates or any other Person other than its Subsidiaries; (x) the Guarantor shall not use its separate existence to abuse creditors or to perpetrate a fraud, injury, or injustice on creditors in violation of applicable law; 54 (xi) the Guarantor shall not, in connection with the Loan Documents, act with an intent to hinder, delay, or defraud any of its creditors in violation of applicable law; and (xii) the Guarantor shall not pledge its assets for the benefit of any Person, except as permitted by the Loan Documents. (j) Maintain Ownership of Subsidiaries. The Guarantor shall maintain at all times, directly or indirectly, legal and beneficial ownership of all of the outstanding capital stock of each Borrower, free and clear of any Liens; provided that the foregoing shall not prohibit any merger, consolidation, sale or transfer permitted under Section 8.02(b). SECTION 8.02. NEGATIVE COVENANTS. Each Obligor covenants and agrees that so long as any Loan or any other amount payable hereunder or under any Promissory Note shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment: (a) Transactions with Affiliates. Such Obligor shall not, and shall not permit any of its Subsidiaries to, enter into directly or indirectly any transaction or Material group of related transactions (including, without limitation, the purchase, lease, sale or exchange of Properties of any kind or the rendering of any service) with any of its Affiliates (other than a Borrower or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of such Obligor's or such Subsidiary's business and upon fair and reasonable terms no less favorable to such Obligor or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate; provided that the foregoing shall not prohibit (i) shared corporate or administrative services and staffing with Affiliates, including, without limitation, accounting, legal, human resources and treasury operations, provided on customary terms for similarly situated companies and otherwise as set forth above or on a fully allocated cost basis and (ii) transactions conducted in a manner required by applicable law, rule or regulation. (b) Merger, Consolidation, etc. (i) Such Obligor shall not consolidate with or merge with any other Person or convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any Person, and the Guarantor shall not sell or otherwise transfer any shares of the stock (or any options or warrants to purchase stock or other Securities exchangeable for or convertible into stock) of any Borrower to any Person unless: (A) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of such Obligor as an entirety or the transferee of such shares of stock, as the case may be (any such Person, in relation to any such transaction involving a Borrower, being referred to herein as a "BORROWER SUCCESSOR", and any such Person, in relation to any such transaction involving the Guarantor, being referred to herein as a "GUARANTOR SUCCESSOR"), shall have a credit rating in respect of its long-term debt from S&P of "BBB" or higher or from Moody's of "Baa2" or higher; 55 (B) any Borrower Successor shall be primarily engaged in the Utility Business; (C) any Borrower Successor or Guarantor Successor shall be a Solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia); (D) if any Borrower Successor or Guarantor Successor is not such Obligor, such Borrower Successor or Guarantor Successor, as the case may be, (1) shall have executed and delivered to the Administrative Agent its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the other Loan Documents to which it is a party and (2) shall have caused to be delivered to the Administrative Agent an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Lenders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and (E) immediately after giving effect to such transaction and, if any Borrower Successor or Guarantor Successor is not such Obligor, the effectiveness of all agreements and instruments effecting the assumption required pursuant to clause (D) above, no Default or Event of Default shall have occurred and be continuing; provided, however, that (1) this Section 8.02(b)(i) shall not apply to the consolidation or merger of a Wholly-Owned Subsidiary of a Borrower into such Borrower; and (2) notwithstanding the foregoing, any Borrower may at any time convey, transfer or lease all or substantially all of its assets in a single transaction or series of transactions to any other Person, and the Guarantor may at any time sell or otherwise transfer all or a majority of the voting capital stock of any Borrower to any other Person, in each case so long as (x) such Borrower or the Guarantor (as the case may be) shall have received consideration in respect thereof in an amount not less than the Fair Market Value of such assets or capital stock, as the case may (as determined in good faith by the board of directors of UES), and (y) if such other Person is not a Wholly-Owned Subsidiary, the requirements set forth in Section 2.03(c) in connection with such transaction are satisfied (provided, however, that this clause (2) shall not apply to any such transaction if such Borrower is the only borrower under this Agreement at such time, it being understood and agreed that in such circumstance both a Guarantor Successor and a Borrower Successor shall have assumed all obligations of the Guarantor and such Borrower, respectively, under this Agreement and the other Loan Documents in accordance with clause (D) above and the other conditions set forth in clauses (A) through (E) above shall be satisfied). (ii) No such conveyance, transfer or lease of substantially all of the assets of any Borrower shall have the effect of releasing such Borrower or any successor Person that shall theretofore have become such in the manner prescribed in this Section 8.02(b) from its liability under this Agreement or the other Loan Documents, or the Guarantor from its obligations 56 hereunder or under the Guaranty, except that the Guarantor shall be released from its obligations hereunder and under the Guaranty if, in the case of any such transaction that is permitted by Section 8.02(b)(i), the Guarantor Successor shall have (A) executed and delivered to the Administrative Agent its assumption of the due and punctual performance and observance of the obligations of the Guarantor under this Agreement and under the Guaranty, and (B) caused to be delivered to the Administrative Agent an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Administrative Agent, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof. (c) Liens. Such Obligor shall not, and shall not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien (other than Permitted Liens) securing Indebtedness for borrowed money on or with respect to any Property (including, without limitation, any document or instrument in respect of goods or accounts receivable) of such Obligor or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom or assign or otherwise convey any right to receive income or profits (unless it makes, or causes to be made, effective provision whereby the Obligations will be equally and ratably secured with any and all other Indebtedness thereby secured so long as such other Indebtedness shall be so secured, such security to be pursuant to an agreement reasonably satisfactory to the Administrative Agent and, in any such case, the Obligations shall have the benefit, to the fullest extent that, and with such priority as, the Lenders, the Administrative Agent and the Issuing Banks may be entitled under applicable law, of an equitable Lien on such Property). (d) Restricted Payments. Such Borrower shall not at any time declare or make, or incur any liability to declare or make, any Restricted Payment unless: (i) such Restricted Payment would not violate any Requirement of Law applicable to such Borrower; and (ii) immediately after giving effect to such action no Default or Event of Default with respect to such Borrower or the Guarantor would exist. (e) Incurrence of Indebtedness. (i) Such Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, or otherwise become directly or indirectly liable with respect to, any Indebtedness, unless on the date such Borrower or such Subsidiary becomes liable with respect to any such Indebtedness and immediately after giving effect thereto and the concurrent retirement of any other Indebtedness, no Default or Event of Default with respect to such Borrower or the Guarantor shall have occurred and be continuing. (ii) For the purposes of this Section 8.02(e): (A) any Person becoming a Subsidiary after the date hereof shall be deemed, at the time it becomes a Subsidiary, to have incurred all 57 of its then outstanding Indebtedness and pro forma effect shall be given to the earnings of such Person; and (B) upon the creation, incurrence or assumption of any Indebtedness, any other Indebtedness shall be deemed to be retired concurrently with such action if (1) such other Indebtedness is retired with the proceeds of such Indebtedness and (2) such other Indebtedness is retired within 60 days of such action. (f) Anti-Terrorism Order. Such Obligor shall not, and shall not permit any of its Subsidiaries to, enter into any legally binding contracts or agreements with any Sanctioned Person. (g) Change in Nature of Business. Such Obligor will not, and will not permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by such Obligor and its Subsidiaries on the date of execution of this Agreement and businesses reasonably related thereto. SECTION 8.03. FINANCIAL COVENANTS. Each Borrower covenants and agrees that so long as any Loan or any other amount payable hereunder or under any Promissory Note shall remain unpaid, any Letter of Credit shall remain outstanding or any Lender shall have any Commitment: (a) Consolidated Leverage Ratio. Such Borrower shall maintain at all times a ratio of such Borrower's Consolidated Long Term Debt to its Consolidated Total Capitalization of not greater than (i) in the case of UNS Gas, 0.67 to 1.00, and (ii) in the case of UNS Electric, 0.65 to 1.00. (b) Interest Coverage Ratio. Such Borrower shall not permit its Interest Coverage Ratio for the four-fiscal-quarter period ended on the last day of each fiscal quarter, commencing with the fiscal quarter ending June 30, 2005, to be less than 2.25 to 1.00. ARTICLE IX DEFAULTS SECTION 9.01. EVENTS OF DEFAULT. As to each Borrower, if any of the following events shall occur and be continuing, the Administrative Agent and the Lenders shall be entitled to exercise the remedies with respect to such Borrower set forth in Section 9.02: (a) Such Borrower shall fail to pay any principal of any Loan when due and payable in accordance with the terms hereof; or such Borrower shall fail to pay any interest on any Loan, any fees or any other amount payable hereunder or under any other Loan Document, within five days after any such interest, fees or other amount becomes due and payable in accordance with the terms hereof or thereof; or (b) Any representation or warranty made or deemed made by such Borrower or the Guarantor herein or in any other Loan Document or that is contained in any 58 certificate, document or financial or other statement furnished by such Borrower or the Guarantor at any time under or in connection with this Agreement or any other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made or furnished; or (c) Such Borrower or the Guarantor shall default in the observance or performance of any agreement contained in Section 8.01(a)(iv), 8.01(h), 8.01(j), 8.02 or 8.03; or (d) Such Borrower or the Guarantor shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document to which it is a party (other than those referred to in paragraphs (a), (b) and (c) of this Section) and such default is not remedied within 30 days after such Borrower or the Guarantor, as applicable, receives written notice of such default from the Administrative Agent (any such written notice to be identified as a "notice of default" and to refer specifically to this Section 9.01(d)) (which notice will be given at the request of any Lender); or (e) (i) any Subsidiary of the Guarantor is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $4,000,000 beyond any period of grace provided with respect thereto, or (ii) any Subsidiary of the Guarantor is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $4,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), any Subsidiary of the Guarantor has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least $4,000,000 (it being understood and agreed that any Default or Event of Default pursuant to this subsection (e) shall be deemed, for all purposes of this Agreement, to be a Default or an Event of Default (as the case may be) with respect to each Borrower and the Guarantor); or (f) (i) such Borrower or the Guarantor is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $4,000,000 beyond any period of grace provided with respect thereto, or (ii) such Borrower or the Guarantor is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $4,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared (or one or more Persons are entitled to declare such Indebtedness to be), due and payable before its stated maturity or before its regularly scheduled dates of payment, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Indebtedness to convert such Indebtedness into equity interests), (x) such Borrower or the Guarantor has become obligated to purchase or repay Indebtedness before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding 59 principal amount of at least $4,000,000, or (y) one or more Persons have the right to require such Borrower or the Guarantor to purchase or repay such Indebtedness; or (g) such Borrower, the Guarantor or any other Subsidiary of the Guarantor (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its Property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing (it being understood and agreed that any Default or Event of Default pursuant to this subsection (g) shall be deemed, for all purposes of this Agreement, to be a Default or an Event of Default (as the case may be) with respect to each Borrower and the Guarantor); or (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by such Borrower, the Guarantor or any other Subsidiary of the Guarantor, a custodian, receiver, trustee or other officer with similar powers with respect to such Borrower, the Guarantor or any other Subsidiary of the Guarantor or with respect to any substantial part of any of their Property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of such Borrower, the Guarantor or any other Subsidiary of the Guarantor, or any such petition shall be filed against such Borrower, the Guarantor or any other Subsidiary of the Guarantor and such petition shall not be dismissed within 60 days (it being understood and agreed that any Default or Event of Default pursuant to this subsection (h) shall be deemed, for all purposes of this Agreement, to be a Default or an Event of Default (as the case may be) with respect to each Borrower and the Guarantor); or (i) a final judgment or judgments for the payment of money aggregating in excess of $4,000,000 are rendered against such Borrower, any of its Subsidiaries or the Guarantor and such judgment or judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay (it being understood and agreed that any Default or Event of Default pursuant to this subsection (i) with respect to any Subsidiary of a Borrower shall be deemed, for all purposes of this Agreement, to be a Default or an Event of Default (as the case may be) with respect to such Borrower); or (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified such Borrower, the Guarantor or any of their respective ERISA Affiliates that a Plan may become a subject of any such proceedings, (iii) the providing of notice by a plan administrator of the intent to terminate any Plan under section 4041 of ERISA, (iv) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined on a termination basis as of the end of any 60 Plan year in accordance with Title IV of ERISA, shall exceed $30,000,000, (v) such Borrower, the Guarantor or any of their respective ERISA Affiliates shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA (other than claims for benefits in the ordinary course or PBGC premiums required under Title IV of ERISA) or the penalty or excise tax provisions of the Code relating to employee benefit plans, (vi) such Borrower, the Guarantor or any of their respective ERISA Affiliates withdraws from any Multiemployer Plan, or (vii) such Borrower, the Guarantor or any other Subsidiary of the Guarantor establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of such Borrower, the Guarantor or such other Subsidiary thereunder; and any such event or events described in clauses (i) through (vii) above, either individually or together with any other such event or events, has had or could reasonably be expected to have a Material Adverse Effect (it being understood and agreed that any Default or Event of Default pursuant to this subsection (j) with respect to any ERISA Affiliate of an Obligor shall be deemed, for all purposes of this Agreement, to be a Default or an Event of Default (as the case may be) with respect to such Obligor, and any Default or Event of Default pursuant to this subsection (j) with respect to the Guarantor or any Subsidiary (other than the Borrowers) of the Guarantor shall be deemed, for all purposes of this Agreement, to be a Default or an Event of Default (as the case may be) with respect to the Guarantor). As used in this Section 9.01(j), the terms "employee benefit plan" and "employee welfare benefit plan" shall have the respective meanings assigned to such terms in Section 3 of ERISA; or (k) the Guarantor shall fail to observe or perform any of its obligations contained in Article XI or shall renounce in writing its obligations with respect thereto; or (l) Any material provision of this Agreement or any other Loan Document to which such Borrower or the Guarantor is a party shall for any reason, except to the extent permitted by the express terms hereof or thereof, cease to be valid and binding on or enforceable against such Borrower or the Guarantor, or such Borrower or the Guarantor shall so assert in writing; or (m) Any Change of Control shall occur; or (n) Any Governmental Approval required to be made or obtained by such Borrower or the Guarantor in connection with the Transactions shall be rescinded, revoked, otherwise terminated, or amended or modified in any manner which is materially adverse to the interests of the Lenders, the Issuing Banks and the Administrative Agent. SECTION 9.02. REMEDIES. If any Event of Default has occurred and is continuing with respect to a Borrower or the Guarantor, then the Administrative Agent shall at the request, or may with the consent, of the Required Lenders, upon notice to such Borrower or, in the case of any Event of Default with respect to the Guarantor, to any or each Borrower (i) declare the Commitments and the obligation of each Lender to make Loans to such Borrower (other than Loans under Section 4.04(b)) or Convert Loans of such Borrower and of any Issuing Bank to issue a Letter of Credit at the request of such Borrower to be terminated, whereupon the same shall forthwith terminate, (ii) declare the principal amount of Loans made to such Borrower outstanding hereunder, all interest thereon and all other amounts payable by such Borrower under this Agreement and the other Loan Documents to be forthwith due and payable, 61 whereupon the principal amount of such Loans, all such interest and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by such Borrower, and/or (iii) require such Borrower to pay immediately to the Administrative Agent an amount equal to the aggregate LC Outstandings of all outstanding Letters of Credit issued at the request of such Borrower, to be held by the Administrative Agent (for its benefit and the benefit of the Issuing Banks and the Lenders) as cash collateral securing such LC Outstandings and such Borrower's reimbursement obligations with respect thereto; provided, however, upon the occurrence of any Event of Default specified in Section 9.01(g) or Section 9.01(h) with respect to any Borrower or the Guarantor (other than an Event of Default described in clause (i) of Section 9.01(g) or described in clause (vi) of Section 9.01(g) by virtue of the fact that such clause encompasses clause (i) of Section 9.01(g)), (A) the Commitments and the obligation of each Lender to make Loans to such Borrower (or, in the case of any such Event of Default with respect to the Guarantor, to any Borrower) and of any Issuing Bank to issue any Letter of Credit at the request of such Borrower (or, in the case of any such Event of Default with respect to the Guarantor, of any Borrower) shall automatically be terminated, (B) the principal amount of Loans made to such Borrower (or, in the case of any such Event of Default with respect to the Guarantor, to the Borrowers) outstanding hereunder, all interest thereon and all other amounts payable by such Borrower (or, in the case of any such Event of Default with respect to the Guarantor, by the Borrowers) under this Agreement and the other Loan Documents shall automatically become and be immediately due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by such Borrower(s), and (C) such Borrower (or, in the case of any such Event of Default with respect to the Guarantor, each Borrower) shall pay immediately to the Administrative Agent an amount equal to the aggregate LC Outstandings of all outstanding Letters of Credit issued at the request of such Borrower (or, in the case of any such Event of Default with respect to the Guarantor, of any Borrower), to be held by the Administrative Agent (for its benefit and the benefit of the Issuing Banks and the Lenders) as cash collateral securing such LC Outstandings and the applicable Borrower's reimbursement obligations with respect thereto. Notwithstanding anything to the contrary contained herein, no notice given or declaration made by the Administrative Agent pursuant to this Section 9.02 shall affect (1) the obligation of any Issuing Bank to make any payment under any Letter of Credit issued by such Issuing Bank in accordance with the terms of such Letter of Credit or (2) the participatory interest of each Lender in each such payment. ARTICLE X THE ADMINISTRATIVE AGENT SECTION 10.01. AUTHORIZATION AND ACTION. (a) Each of the Lenders and the Issuing Banks hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. 62 (b) Any Lender serving as Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such Lender and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Obligors or any of their Subsidiaries or other Affiliates thereof as if it were not the Administrative Agent hereunder. (c) The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (i) the Administrative Agent (in such capacity) shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or an Event of Default has occurred and is continuing, (ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.01), and (iii) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Obligors or any of their Subsidiaries or Affiliates that is communicated to or obtained by the Lender serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 12.01) or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Default or Event of Default unless and until written notice thereof is given to the Administrative Agent by an Obligor or a Lender (in which case the Administrative Agent shall promptly give a copy of such written notice to the Lenders and the Issuing Banks). The Administrative Agent shall not be responsible to any of the Lenders or Issuing Banks for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with any Loan Document, (B) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (D) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (E) the satisfaction of any condition set forth in Article VI or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. (d) The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for any Obligor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in good faith in accordance with the advice of any such counsel, accountants or experts. (e) The Administrative Agent may perform any and all its duties and exercise its rights and powers by or through one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may 63 perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding subsections of this Section 10.01 shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. (f) Subject to the appointment and acceptance of a successor Administrative Agent as provided in this subsection (f), the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Banks and the Obligors. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrowers, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent which shall be a Lender or an Affiliate of a Lender. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the Administrative Agent's resignation hereunder, the provisions of this Article and Section 12.04 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent. (g) Each Lender acknowledges that it has independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder. SECTION 10.02. INDEMNIFICATION. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Obligors), ratably according to the respective Percentages of the Lenders, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Administrative Agent in any way relating to or arising out of this Agreement or any other Loan Document (other than the Fee Letter) or any action taken or omitted by the Administrative Agent under this Agreement or any other Loan Document (other than the Fee Letter), provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful misconduct, as determined by the final and nonappealable judgment of a court of competent jurisdiction. Without limitation of the foregoing, each Lender agrees to reimburse the Administrative Agent promptly 64 upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Administrative Agent in connection with the preparation, execution, syndication, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement or any other Loan Document (other than the Fee Letter) to the extent that the Administrative Agent is entitled to reimbursement for such expenses pursuant to Section 12.04 but is not reimbursed for such expenses by the Obligors. ARTICLE XI GUARANTY SECTION 11.01. THE GUARANTY. The Guarantor hereby guarantees to each Lender, each Issuing Bank, the Administrative Agent and their respective successors and assigns the prompt payment in full of all unpaid principal of and interest on (including, without limitation, interest accruing after the maturity of the Loans and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to any Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other Obligations of each Borrower to the Administrative Agent, any Issuing Bank or any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any Letter of Credit, any other Loan Document or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, fees, indemnities, costs, expenses (including, without limitation, all reasonable fees, charges and disbursements of counsel to the Administrative Agent, any Issuing Bank or any Lender that are required to be paid by the Borrowers pursuant hereto) or otherwise, in each case strictly in accordance with the express terms hereof (such obligations of each Borrower being herein collectively called, in respect of such Borrower, the "GUARANTEED OBLIGATIONS"), and agrees to pay any and all expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by the Administrative Agent, the Issuing Banks or the Lenders in enforcing any rights under this Article XI. Without limiting the generality of the foregoing, the Guarantor's liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by a Borrower to the Administrative Agent, the Issuing Banks or the Lenders under this Agreement and the other Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving any Borrower. In addition, the Guarantor hereby further agrees, as an independent obligation, that, if a Borrower fails to pay in full when expressed to be due (whether at stated maturity, upon acceleration or optional prepayment or otherwise) any of the Guaranteed Obligations strictly in accordance with the express terms hereof, the Guarantor will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be paid in full when expressed to be due (whether at stated maturity, upon acceleration or optional prepayment or otherwise) in accordance with the terms of such extension or renewal. 65 SECTION 11.02. OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantor under Section 11.01 are irrevocable, absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of the obligations of a Borrower hereunder or under any other agreement or instrument referred to herein and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, it being the intent of this Section 11.02 that the obligations of the Guarantor hereunder shall be irrevocable, absolute and unconditional under any and all circumstances. Without limiting the generality of the foregoing, the occurrence of one or more of the following shall not preclude the exercise by the Lenders, the Issuing Banks or the Administrative Agent of any right, remedy or power hereunder or alter or impair the liability of the Guarantor hereunder, which shall remain irrevocable, absolute and unconditional as described above: (a) at any time or from time to time, without notice to the Guarantor, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, waived or renewed, or a Borrower shall be released from any of the Guaranteed Obligations, or any of the Guaranteed Obligations shall be subordinated in right of payment to any other liability of a Borrower; (b) any of the acts mentioned herein or any agreement or instrument referred to herein or otherwise in connection with the Guaranteed Obligations shall be done or omitted; (c) any of the Guaranteed Obligations shall be accelerated or otherwise become due prior to their stated maturity, or any of the Guaranteed Obligations shall be amended, supplemented, restated or otherwise modified in any respect, or any right hereunder or under any agreement or instrument referred to herein or otherwise in connection with the Guaranteed Obligations shall be waived, or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released, substituted or exchanged in whole or in part or otherwise dealt with; (d) a Borrower or any other guarantor or obligor in respect of any of the Guaranteed Obligations (i) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due, (ii) makes a general assignment, arrangement or composition with or for the benefit of its creditors, (iii) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, (iv) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets, (v) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets or (vi) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (i), (ii), (iii), (iv) or (v) above (any proceeding referred to in this paragraph is herein referred to as an "INSOLVENCY PROCEEDING"); (e) this Agreement or any agreement or instrument referred to herein shall be rejected (including pursuant to Section 365 of the United States Bankruptcy Code, as amended) by an administrator, provisional liquidator, conservator, 66 receiver, trustee, custodian or other similar official for a Borrower or for all or substantially all of a Borrower's assets in any Insolvency Proceeding; (f) the occurrence of any Default or Event of Default hereunder or the occurrence of any similar event (howsoever described) under any agreement or instrument referred to herein; (g) except as otherwise provided in Section 8.02(b)(ii), any consolidation or amalgamation of a Borrower with, any merger of a Borrower with or into, or any transfer by a Borrower of all or substantially all of such Borrower's assets to, another Person, any change in the legal or beneficial ownership of ownership interests issued by a Borrower, or any other change whatsoever in the objects, capital structure, constitution or business of a Borrower; (h) any delay, failure or inability of a Borrower or any other guarantor or obligor in respect of any of the Guaranteed Obligations to perform, willful or otherwise, any provision hereunder or any agreement or instrument referred to herein or otherwise in connection with the Guaranteed Obligations; (i) the failure or breach of any representation or warranty (whether written or oral) made by a Borrower or any other Person herein or in any agreement or instrument referred to herein or otherwise in connection with the Guaranteed Obligations; or any event or circumstance constituting fraud in the inducement or any other similar event or circumstance; (j) any action or failure to act by any Lender, any Issuing Bank or the Administrative Bank that adversely affects the Guarantor's right of subrogation arising by reason of any performance by the Guarantor of its obligations under this Article XI; (k) any suit or other action brought by, or any judgment in favor of, any beneficiaries or creditors of, a Borrower or any other Person for any reason whatsoever, including any suit or action in any way disaffirming, repudiating, rejecting or otherwise calling into question any issue, matter or thing in respect of this Agreement, the other Loan Documents or any agreement or instrument referred to herein or therein or otherwise in connection with the Guaranteed Obligations; (l) the existence of any claim, set-off, defense or other right which the Guarantor may have at any time against the Administrative Agent, any Issuing Bank, any Lender or any other Person, whether in connection with this Guaranty, the Transactions or any unrelated transaction; (m) any lack or limitation of status or of power, incapacity or disability of a Borrower or any other guarantor or obligor in respect of any of the Guaranteed Obligations; or (n) any change in the laws, rules or regulations of any jurisdiction, or any present or future action or order of any Governmental Authority, amending, varying or otherwise affecting the validity or enforceability of any of the Guaranteed Obligations or the obligations of any other guarantor or obligor in respect of any of the Guaranteed Obligations. 67 The Guarantor hereby expressly waives diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that the Lenders, the Issuing Banks or the Administrative Agent exhaust any right, power or remedy (including filing any proof of claim relating to the Guaranteed Obligations in any Insolvency Proceeding) or proceed against any Borrower under this Agreement, any other Loan Document or any agreement or instrument referred to herein or therein, or against any other Person under any other guarantee of, or security for, any of the Guaranteed Obligations, it being understood that this Article XI is a guarantee of payment and not just collection. SECTION 11.03. SUBROGATION. The Guarantor hereby agrees that until the payment and satisfaction in full of all Guaranteed Obligations it shall not exercise any right or remedy (including the filing of any proof of claim in any Insolvency Proceeding) against a Borrower or any other guarantor or obligor in respect of any of the Guaranteed Obligations or any security therefor arising by reason of any performance by the Guarantor of its obligations under this Article XI, whether by subrogation or otherwise. In the event that, prior to the payment and satisfaction in full of all Guaranteed Obligations, any amount is received by the Guarantor from a Borrower in respect of the performance by the Guarantor of its obligations under this Article XI, whether by subrogation or otherwise, the Guarantor will promptly following receipt thereof pay such amount to the Administrative Agent for application to any Guaranteed Obligations then owing, whether matured or unmatured. SECTION 11.04. REINSTATEMENT. The obligations of the Guarantor under this Article XI shall be automatically reinstated if and to the fullest extent that for any reason any payment by or on behalf of a Borrower in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any Insolvency Proceeding or otherwise, all as though such payment had not been made, and the Guarantor agrees that it will indemnify each Lender, each Issuing Bank and the Administrative Agent on demand for all reasonable costs and expenses (including the reasonable fees and disbursements of counsel) incurred by such Lender, such Issuing Bank and the Administrative Agent in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. SECTION 11.05. REMEDIES UNAFFECTED. The Guarantor agrees that, as between the Guarantor and the Lenders, the Issuing Banks and the Administrative Agent, the Guaranteed Obligations may be declared to be forthwith due and payable as provided herein (and shall be deemed to have become automatically due and payable in the circumstances provided in the proviso contained in Section 9.02) for purposes of Section 11.01, notwithstanding any stay (including under the United States Bankruptcy Code, as amended), injunction or other prohibition preventing the same as against a Borrower, and that, in such event, the Guaranteed Obligations (whether or not due and payable by the Borrowers) shall forthwith become due and payable by the Guarantor for purposes of Section 11.01. SECTION 11.06. CONTINUING GUARANTEE; LIABILITY IN RESPECT OF SUCCESSOR. (a) The guarantee in this Article XI is a continuing guarantee, and shall apply to all Guaranteed Obligations whenever arising. 68 (b) In the event that a Borrower shall consolidate or amalgamate with, or merge with or into, or transfer all or substantially all its assets to, another Person, except as otherwise provided in Section 8.02(b)(ii), the Guarantor will continue to be obligated hereunder in respect of the Guaranteed Obligations, whether or not the Guaranteed Obligations are assumed by such Person, and each reference herein to such Borrower shall thereafter instead be a reference to such Person. ARTICLE XII MISCELLANEOUS SECTION 12.01. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any other Loan Document, nor consent to any departure by any Obligor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all the Lenders, do any of the following: (i) waive, modify or eliminate any of the conditions specified in Article VI, (ii) increase the Commitments of the Lenders or subject the Lenders to any additional obligations, (iii) reduce the principal of, or interest on, any Loan, any Applicable Margin or any fees or other amounts payable hereunder (other than fees payable to the Administrative Agent pursuant to Section 2.02(c)), (iv) extend the Revolving Credit Termination Date or the Letter of Credit Expiration Date or postpone any date fixed for any payment of principal of, or interest on, any Loan or any fees or other amounts payable hereunder (other than fees payable to the Administrative Agent pursuant to Section 2.02(c)), (v) change the definition of "Required Lenders" contained in Section 1.01 or change any other provision that specifies the percentage of the Commitments or of the aggregate unpaid principal amount of the Loans or the number of Lenders which shall be required for the Lenders or any of them to take any action hereunder, (vi) amend any Loan Document in a manner intended to prefer one or more Lenders over any other Lenders, (vii) release the Guaranty, in whole or in part, except for any such release expressly permitted hereunder, or (viii) amend, waive or modify this Section 12.01; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Agreement or any other Loan Document; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by each Issuing Bank in addition to the Lenders required above to take such action, affect the rights or duties of any Issuing Bank under this Agreement or any other Loan Document. Any request from a Borrower for any amendment, waiver or consent under this Section 12.01 shall be addressed to the Administrative Agent. SECTION 12.02. NOTICES, ETC. All notices and other communications provided for hereunder and under the other Loan Documents shall be in writing (including telegraphic, facsimile, telex or cable communication) and mailed, telegraphed, telecopied, telexed, cabled or delivered, (i) if to any Borrower, at its address at One South Church Avenue, Suite 1820, Tucson, Arizona 85701, Attention: Chief Financial Officer (Telecopy No. (520) 884-3612); (ii) if to the Guarantor, at its address at One South Church Avenue, Suite 200, Tucson, Arizona 85701, Attention: Chief Financial Officer (Telecopy No. (520) 884-3612); (iii) if to any Bank, at its Domestic Lending Office specified opposite its name on Schedule 1.01; (iv) if to any Issuing Bank, at its address specified in the Issuing Bank 69 Agreement to which it is a party; (v) if to any Lender other than a Bank, at its Domestic Lending Office specified in the Lender Assignment pursuant to which it became a Lender; and (vi) if to the Administrative Agent, at its address at 445 South Figueroa Street, Los Angeles, California 90071, Attention: Robert Olson (Telecopy No. (213) 236-4096); or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective five days after being deposited in the mails, or when delivered to the telegraph company, telecopied, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Administrative Agent pursuant to Article II, III, or X shall not be effective until received by the Administrative Agent. SECTION 12.03. NO WAIVER OF REMEDIES. No failure on the part of any Lender, any Issuing Bank or the Administrative Agent to exercise, and no delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 12.04. COSTS, EXPENSES AND INDEMNIFICATION. (a) The Borrowers agree to pay, promptly after delivery to the Borrowers of a reasonably detailed statement therefor, all reasonable costs and expenses of the Administrative Agent in connection with the preparation, negotiation, syndication, execution and delivery of the Loan Documents and any proposed modification, amendment, waiver or consent relating to any Loan Document, including the reasonable fees and disbursements of counsel to the Administrative Agent with respect thereto and with respect to the administration of, and advising the Administrative Agent as to its rights and responsibilities under, this Agreement and the other Loan Documents. The Borrowers further agree to pay, promptly after delivery to the Borrowers of a reasonably detailed statement therefor, all costs and expenses of the Administrative Agent and each Lender (including the fees and disbursements of counsel to the Administrative Agent and counsel for each Lender) in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement, the other Loan Documents and the other documents to be delivered hereunder. (b) Each Borrower shall indemnify the Administrative Agent, each Issuing Bank, each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an "INDEMNIFIED PERSON") against, and hold each Indemnified Person harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnified Person (whether or not such Indemnified Person is named as a party to any proceeding or is otherwise subjected to judicial or legal process arising from any such proceeding), incurred by or asserted against any Indemnified Person arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any other agreement or instrument contemplated hereby or thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan, Letter of Credit or other Extension of Credit to such Borrower or the use or proposed use of the proceeds therefrom (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of 70 Credit if the documents presented in connection with such demand do not comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of any Hazardous Materials on or from any property owned or operated by such Borrower or any of its Affiliates, or any Environmental Liability related in any way to such Borrower or any of its Affiliates, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory; provided that such indemnity shall not, as to any Indemnified Person, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnified Person. (c) Each Borrower's obligations under this Section 12.04 shall survive the repayment of all amounts owing to the Lenders, the Issuing Banks and the Administrative Agent under the Loan Documents and the termination of the Commitments. If and to the extent that the obligations of a Borrower under this Section 12.04 are unenforceable for any reason, such Borrower agrees to make the maximum contribution to the payment and satisfaction thereof which is permissible under applicable law, which contribution shall in any event not exceed the amount that such Borrower would otherwise have been obligated to pay under this Section 12.04. SECTION 12.05. RIGHT OF SET-OFF. (a) Upon (i) the occurrence and during the continuance of any Event of Default with respect to a Borrower or the Guarantor and (ii) the making of the request or the granting of the consent specified by Section 9.02 to authorize the Administrative Agent to declare the principal amount outstanding hereunder as to a Borrower to be due and payable pursuant to the provisions of Section 9.02, each Lender and Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or Issuing Bank to or for the credit or the account of the applicable Borrower(s), against any and all of the obligations of such Borrower(s) to such Lender or Issuing Bank (as the case may be) existing under any Loan Document and any Promissory Notes of such Borrower held by such Lender or the applicable Issuing Bank Agreement to which such Issuing Bank is a party, as the case may be, irrespective of whether or not such Lender or Issuing Bank shall have made any demand under such Loan Document, such Promissory Notes or such Issuing Bank Agreement, as the case may be, and although such obligations may be unmatured. Each Lender and Issuing Bank agrees to notify promptly the applicable Borrower(s) after any such set-off and application made by such Lender or Issuing Bank, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Lender and Issuing Bank under this Section 12.05 are in addition to other rights and remedies (including other rights of set-off) which such Lender and Issuing Bank may have. (b) Each Borrower agrees that it shall have no right of off-set, deduction or counterclaim in respect of its obligations hereunder, and that the obligations of the Lenders hereunder are several and not joint. Nothing contained herein shall constitute a relinquishment or waiver of such Borrower's rights to any independent claim that such Borrower may have against the Administrative Agent or any Lender for the Administrative Agent's or such Lender's, as the case may be, gross negligence or willful misconduct, but no 71 Lender shall be liable for any such conduct on the part of the Administrative Agent or any other Lender, and the Administrative Agent shall be liable for any such conduct on the part of any Lender. SECTION 12.06. BINDING EFFECT. This Agreement shall become effective when it shall have been executed by the Obligors and the Administrative Agent and when the Administrative Agent shall have been notified by each Bank that such Bank has executed it and thereafter shall be binding upon and inure to the benefit of the Obligors, the Administrative Agent and each Lender and their respective successors and assigns, except that no Obligor shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders. SECTION 12.07. ASSIGNMENTS AND PARTICIPATION. (a) Each Lender may, with the consent of the Borrowers, the Administrative Agent and the Issuing Banks (such consent not to be unreasonably withheld or delayed and, in the case of the Borrowers, shall not be required if an Event of Default has occurred and is continuing), assign to one or more banks or other financial institutions all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including all or a portion of its Commitment, the Loans owing to it and any Promissory Notes held by it); provided, however, that (i) each such assignment shall be of a constant, and not a varying, percentage of all of the assigning Lender's rights and obligations under this Agreement, (ii) the amount of the Commitment of the assigning Lender being assigned pursuant to each such assignment (determined as of the date of the Lender Assignment with respect to such assignment) shall in no event be less than the lesser of the aggregate amount of such Lender's Commitment and $5,000,000, (iii) each such assignment shall be to an Eligible Assignee, and (iv) the parties to each such assignment shall execute and deliver to the Administrative Agent, for its acceptance and recording in the Register, a Lender Assignment, together with any Promissory Notes subject to such assignment and a processing and recordation fee (payable by the assigning Lender or such assignee) of $3,500; and provided further, however, that the consent of the Borrowers and the Administrative Agent shall not be required for any assignments by a Lender to any of its Affiliates or to any other Lender or any of its Affiliates. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Lender Assignment, which effective date shall be at least five Business Days after the execution thereof (or such earlier date acceptable to the Administrative Agent), (A) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Lender Assignment, have the rights and obligations of a Lender hereunder and (B) the Lender assignor thereunder shall, to the extent that rights and obligations hereunder have been assigned by it to an Eligible Assignee pursuant to such Lender Assignment, relinquish its rights and be released from its obligations under this Agreement (and, in the case of a Lender Assignment covering all or the remaining portion of an assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto); provided, however, that the limitation set forth in clause (iii) above shall not apply if an Event of Default shall have occurred and be continuing and the Administrative Agent shall have declared any Loans to be, or any Loans shall have automatically become, immediately due and payable hereunder. Notwithstanding anything to the contrary contained in this Agreement, any Lender may at any time assign all or any portion of the Loans owing to it to any Affiliate of such Lender. No such assignment, other than to an Eligible Assignee in accordance with this Section 12.07, shall release the assigning Lender from its obligations hereunder. 72 (b) By executing and delivering a Lender Assignment, the Lender assignor thereunder and the assignee thereunder confirm to and agree with each other and the other parties hereto as follows: (i) other than as provided in such Lender Assignment, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with any Loan Document or the execution, legality, validity, enforceability, genuineness, sufficiency or value of any Loan Document or any other instrument or document furnished pursuant thereto; (ii) such assigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of any Obligor or the performance or observance by any Obligor of any of its obligations under any Loan Document or any other instrument or document furnished pursuant thereto; (iii) such assignee confirms that it has received a copy of each Loan Document, together with copies of the financial statements referred to in Section 7.01(d) of this Agreement and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Lender Assignment; (iv) such assignee will, independently and without reliance upon the Administrative Agent, such assigning Lender 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 Loan Documents; (v) such assignee confirms that it is an Eligible Assignee (unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have declared any Loans to be immediately due and payable hereunder, in which case no such confirmation is necessary); (vi) such assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (vii) such assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender. (c) The Administrative Agent shall maintain at its address referred to in Section 12.02 a copy of each Lender Assignment delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time (the "REGISTER"). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Obligors, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrowers, any Issuing Bank or any Lender at any reasonable time and from time to time upon reasonable prior notice. (d) Upon its receipt of a Lender Assignment executed by an assigning Lender and an assignee representing that it is an Eligible Assignee (unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have declared any Loans to be immediately due and payable hereunder, in which case no such representation is necessary), together with any Promissory Notes subject to such assignment, the processing and recordation fee referred to in subsection (a) above and any written consent to such assignment required by subsection (a) above, the Administrative Agent shall, if such Lender Assignment has been completed and is in substantially the form of Exhibit E, (i) accept such Lender Assignment, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the Borrowers. New and/or replacement Promissory Notes payable to the assignee and the assigning Lender 73 (if the assigning Lender assigned less than all of its rights and obligations hereunder) shall be issued upon request pursuant to Section 3.01(d), and shall be dated the effective date of such Lender Assignment. (e) Each Lender may sell participations to one or more banks or other financial institutions (a "PARTICIPANT") in or to all or a portion of its rights and obligations under the Loan Documents (including all or a portion of its Commitment, the Loans owing to it and any Promissory Notes held by it); provided, however, that (i) such Lender's obligations under this Agreement (including its Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) such Lender shall remain the holder of any such Promissory Notes for all purposes of this Agreement, and (iv) the Obligors, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or any other Loan Document; provided, that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 12.01 that affects such Participant. Subject to subsection (f) below, the Obligors agree that each Participant shall be entitled to the benefits of Sections 5.04 and 5.06 (and subject to the related obligations under such Sections) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to subsection (a) above. To the extent permitted by law, each Participant shall also be entitled to the benefits of Section 12.05(a) as though it were a Lender, provided such Participant agrees to be subject to Section 5.05 as though it were a Lender. (f) A Participant shall not be entitled to receive any greater payment under Section 5.04 or 5.06 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 5.06 unless the Borrowers are notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 5.06 as though it were a Lender. (g) Any Lender may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 12.07, disclose to the assignee or Participant or proposed assignee or Participant, any information relating to the Obligors furnished to such Lender by or on behalf of any Obligor; provided that prior to any such disclosure, the assignee or Participant or proposed assignee or Participant shall agree, in accordance with the terms of Section 12.08, to preserve the confidentiality of any Confidential Information received by it from such Lender. (h) If any Lender (or any Participant to which such Lender has sold a participation) shall make any demand for payment under Section 5.04(a) or (c), then within 30 days after any such demand (if, but only if, such demanded payment has been made by the Borrowers), the Borrowers may, with the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and provided that no Default or Event of Default shall then have occurred and be 74 continuing, demand that such Lender assign, at the sole cost and expense of the Borrowers, in accordance with this Section 12.07 to one or more Eligible Assignees designated by the Borrowers, all (but not less than all) of such Lender's Commitment and the Loans owing to it within the period ending on the later to occur of (x) the last day of the 30-day period described above and (y) the last day of the longest of the then current Interest Periods for such Loans. If any such Eligible Assignee designated by the Borrowers shall fail to consummate such assignment on terms acceptable to such Lender, or if the Borrowers shall fail to designate any such Eligible Assignees for all or part of such Lender's Commitment or Loans, then such demand by the Borrowers shall become ineffective; it being understood for purposes of this subsection (h) that such assignment shall be conclusively deemed to be on terms acceptable to such Lender, and such Lender shall be compelled to consummate such assignment to an Eligible Assignee designated by the Borrowers, if such Eligible Assignee (1) shall agree to such assignment by entering into a Lender Assignment with such Lender and (2) shall offer compensation to such Lender in an amount equal to all amounts then owing by the Borrowers to such Lender hereunder and under any Promissory Notes made by the Borrowers to such Lender, whether for principal, interest, fees, costs or expenses (other than the demanded payment referred to above, and payable by the Borrowers as a condition to the Borrowers' right to demand such assignment) or otherwise (including, without limitation, to the extent not paid by the Borrowers, any payments required pursuant to Section 5.04(b)). Notwithstanding anything set forth above in this subsection (h) to the contrary, the Borrowers shall not be entitled to compel the assignment by any Lender demanding payment under Section 5.04(a) of its Commitment and Loans if, prior to or promptly following any such demand by the Borrowers, such Lender shall have changed or shall change, as the case may be, its Applicable Lending Office for its Eurodollar Rate Loans so as to eliminate the further incurrence of such increased cost. In furtherance of the foregoing, any such Lender demanding payment or giving notice as provided above agrees to use reasonable efforts to so change its Applicable Lending Office if, to do so, would not result in the incurrence by such Lender of additional costs or expenses which it deems material or, in the sole judgment of such Lender, be inadvisable for regulatory, competitive or internal management reasons. (i) Anything in this Section 12.07 to the contrary notwithstanding, any Lender may assign and pledge all or any portion of its Commitment and the Loans owing to it to any Federal Reserve Bank (and its transferees) as collateral security pursuant to Regulation A of the Board and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (j) Notwithstanding anything to the contrary contained herein, any Lender (a "GRANTING LENDER") may grant to a special purpose funding vehicle (an "SPC"), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrowers, the option to fund all or any part of any Loan that such Granting Lender would otherwise be obligated to fund pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan, and (ii) nothing herein shall excuse any Granting Lender from its obligations hereunder. The funding of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were funded by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Granting Lender provides such indemnity or makes such payment. In furtherance of the foregoing, each Lender 75 hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition, notwithstanding anything to the contrary contained in this subsection (j), any SPC may, with prior notice to, but without the prior written consent of, the Borrowers and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrowers and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans. This subsection (j) may not be amended without the prior written consent of each Granting Lender, all or any part of whose Loans are being funded by an SPC at the time of such amendment. Notwithstanding the foregoing provisions of this subsection, (1) an SPC shall not be deemed to be a Lender or a Participant and shall have no rights under this Agreement except as provided in this subsection (j), and in particular, but not by way of limitation, shall have no rights to compensation for increased costs pursuant to Article III or Section 5.04 or 5.06, (2) the Granting Lender's obligations under this Agreement (including its Commitment to the Borrowers hereunder) shall remain unchanged, (3) the Granting Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (4) the Granting Lender shall remain the holder of any Promissory Notes for all purposes of this Agreement, (5) the Obligors, the Administrative Agent, the Issuing Banks and the other Lenders shall continue to deal solely and directly with the Granting Lender in connection with such Granting Lender's rights and obligations under this Agreement, and (6) the Granting Lender shall indemnify and hold the Borrowers harmless from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be incurred or shall arise as a result of any grant to an SPC contemplated hereunder. SECTION 12.08. CONFIDENTIALITY. In connection with the negotiation and administration of this Agreement and the other Loan Documents, each Obligor has furnished and will from time to time furnish to the Administrative Agent, the Issuing Banks and the Lenders (each, a "RECIPIENT") written information which is identified to the Recipient when delivered as confidential (such information, other than any such information which (a) was publicly available, or otherwise known to the Recipient, at the time of disclosure, (b) subsequently becomes publicly available other than through any act or omission by the Recipient or (c) otherwise subsequently becomes known to the Recipient other than through a Person whom the Recipient knows to be acting in violation of his or its obligations to any Obligor, being hereinafter referred to as "CONFIDENTIAL INFORMATION"). The Recipient will not knowingly disclose any such Confidential Information to any third party (other than to those persons who have a confidential relationship with the Recipient), and will take all reasonable steps to restrict access to such information in a manner designed to maintain the confidential nature of such information, in each case until such time as the same ceases to be Confidential Information or as any Obligor may otherwise instruct. It is understood, however, that the foregoing will not restrict the Recipient's ability to freely exchange such Confidential Information with its Affiliates or with prospective participants in or assignees of the Recipient's position herein, but the Recipient's ability to so exchange Confidential Information shall be conditioned upon any such Affiliate's or prospective participant's or assignee's (as the case may be) entering into an agreement as 76 to confidentiality similar to this Section 12.08. It is further understood that the foregoing will not prohibit the disclosure of any or all Confidential Information if and to the extent that such disclosure may be required (i) by a regulatory agency or otherwise in connection with an examination of the Recipient's records by appropriate authorities, (ii) pursuant to court order, subpoena or other legal process, (iii) otherwise as required by law, or (iv) in order to protect such Recipient's interests or its rights or remedies hereunder or under the other Loan Documents; in the event of any required disclosure under clause (ii), (iii) or (iv), above, the Recipient agrees to use reasonable efforts to inform the Obligors as promptly as practicable to the extent not prohibited by law. SECTION 12.09. WAIVER OF JURY TRIAL. THE BORROWERS, THE GUARANTOR, THE ADMINISTRATIVE AGENT, THE ISSUING BANKS AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR THEREUNDER. SECTION 12.10. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and the Promissory Notes shall be governed by, and construed in accordance with, the laws of the State of New York. The Borrowers, the Guarantor, the Lenders, the Issuing Banks and the Administrative Agent each (i) irrevocably submits to the non-exclusive jurisdiction of any New York State court or Federal court sitting in New York City in any action arising out of any Loan Document, (ii) agrees that all claims in such action may be decided in such court, (iii) waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum and (iv) consents to the service of process by mail. A final judgment in any such action shall be conclusive and may be enforced in other jurisdictions. Nothing herein shall affect the right of any party to serve legal process in any manner permitted by law or affect its right to bring any action in any other court. SECTION 12.11. RELATION OF THE PARTIES; NO BENEFICIARY. No term, provision or requirement, whether express or implied, of any Loan Document, or actions taken or to be taken by any party thereunder, shall be construed to create a partnership, association, or joint venture between such parties or any of them. No term or provision of the Loan Documents shall be construed to confer a benefit upon, or grant a right or privilege to, any Person other than the parties hereto. The Obligors hereby acknowledge that none of the Administrative Agent, the Issuing Banks nor the Lenders has any fiduciary relationship with or fiduciary duty to any Obligor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Administrative Agent, the Issuing Banks and the Lenders, on the one hand, and the Obligors, on the other hand, in connection herewith or therewith is solely, with respect to the Borrowers, that of creditor and debtor and, with respect to the Guarantor, that of beneficiary and guarantor. SECTION 12.12. EXECUTION IN COUNTERPARTS. This Agreement 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 Agreement. 77 SECTION 12.13. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made herein and in the certificates pursuant hereto shall be considered to have been relied upon by the Administrative Agent, the Issuing Banks and the Lenders and shall survive the making by the Lenders of the Extensions of Credit and the execution and delivery to the Lenders of any Promissory Notes evidencing the Extensions of Credit and shall continue in full force and effect so long as any Promissory Note or any amount due hereunder or under any other Loan Document is outstanding and unpaid, any Letter of Credit is outstanding, or any Commitment of any Lender has not been terminated. SECTION 12.14. PATRIOT ACT NOTICE. Each Lender and the Administrative Agent (for itself and not on behalf of any other party) hereby notifies the Obligors that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the "PATRIOT ACT"), it is required to obtain, verify and record information that identifies each Obligor, which information includes the name and address of each Obligor and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Obligor in accordance with the Patriot Act. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] S-1 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. UNS ELECTRIC, INC., as a Borrower By /s/ Kevin P. Larson ------------------------------------- Name: Kevin P. Larson Title: Vice President UNS GAS, INC., as a Borrower By /s/ Kevin P. Larson ------------------------------------- Name: Kevin P. Larson Title: Vice President UNISOURCE ENERGY SERVICES, INC., as Guarantor By /s/ Kevin P. Larson ------------------------------------- Name: Kevin P. Larson Title: Vice President UNION BANK OF CALIFORNIA, N.A., as Administrative Agent By /s/ Kevin M. Zitar ------------------------------------- Name: Kevin M. Zitar Title: Vice President Signature Page to UNS Electric, Inc. and UNS Gas, Inc. Credit Agreement S-2 COMMITMENT BANK - ---------- ---- $15,000,000.00 UNION BANK OF CALIFORNIA, N.A. By /s/ Kevin M. Zitar ------------------------------------- Name: Kevin M. Zitar Title: Vice President Signature Page to UNS Electric, Inc. and UNS Gas, Inc. Credit Agreement S-3 COMMITMENT BANK - ---------- ---- $15,000,000.00 WELLS FARGO BANK, NATIONAL ASSOCIATION By /s/ Clyde H. Gossert ------------------------------------- Name: Clyde H. Gossert Title: Vice President Signature Page to UNS Electric, Inc. and UNS Gas, Inc. Credit Agreement S-4 COMMITMENT BANK $5,000,000.00 ALLIED IRISH BANKS, P.L.C. By /s/ Vaughn Buck ------------------------------------- Name: Vaughn Buck Title: Senior Vice President By /s/ Aidan Lanigan ------------------------------------- Name: Aidan Lanigan Title: Vice President Signature Page to UNS Electric, Inc. and UNS Gas, Inc. Credit Agreement S-5 COMMITMENT BANK - ---------- ---- $5,000,000.00 THE BANK OF NEW YORK By /s/ Peter Keller ------------------------------------- Name: Peter Keller Title: Managing Director Energy East Division Signature Page to UNS Electric, Inc. and UNS Gas, Inc. Credit Agreement -----END PRIVACY-ENHANCED MESSAGE-----