CREDIT AGREEMENT Dated as of March 26, 2009 among

Exhibit 4(a)

[ EXECUTION COPY ]

CREDIT AGREEMENT

Dated as of March 26, 2009

among

UNISOURCE ENERGY DEVELOPMENT COMPANY,
as the Company

and

THE BANKS NAMED HEREIN
AND FROM TIME TO TIME PARTIES HERETO,
as the Banks

and

UNION BANK, N.A.,
as Agent

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CREDIT AGREEMENT, dated as of March 26, 2009, entered into by and among UNISOURCE ENERGY DEVELOPMENT COMPANY, an Arizona corporation (the “ Company ”), the Banks named on Schedule I hereto (each, together with its successors and assigns, individually, a “ Bank ” and collectively, the “ Banks ”), and UNION BANK, N.A., as administrative agent for the Banks (in such capacity, the “ Agent ”).

W I T N E S S E T H :

WHEREAS, the Company has requested that the Banks make term loans to the Company for the purposes described herein; and

WHEREAS, the Banks are willing to make such term loans to the Company on the terms and subject to the conditions contained herein.

NOW, THEREFORE, the parties hereto agree as follows:

SECTION 1.

CERTAIN DEFINITIONS, CONSTRUCTION
AND ACCOUNTING PRINCIPLES

SECTION 1.01 Certain Definitions . As used herein, the following terms shall have the following respective meanings (all terms defined in this Section 1.01 and in other provisions of this Agreement used in the singular to have the same meanings when used in the plural and vice versa):

“ Additional Costs ” shall have the meaning ascribed thereto in Section 6.01(a) hereof.

“ Additional Project Document ” shall mean each contract, agreement, letter agreement or other instrument to which the Company becomes a party after the date hereof that exceeds $2,000,000 per annum in value (“ value ” being defined as the greater of (i) amounts payable by the Company thereunder in any calendar year or (ii) the value of the goods and services (including, without limitation, any cash) received by the Company thereunder in any calendar year (as reasonably determined by the Company)), other than any document included in the definition of Project Documents (other than “ Additional Project Document ”) and any Financing Documents.

“ Adjusted LIBOR Rate ” shall mean, with respect to any Eurodollar Rate Loan for any Interest Period, an interest rate per annum equal to (a) the LIBOR Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“ Affiliate ” shall mean any Person that, directly or indirectly, controls or is controlled by or under common control with the Company. For the purposes of this definition, the concept of “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), when used with respect to any specified Person, shall signify the possession of the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities or partnership or other ownership interests, by contract or otherwise; provided that, in any event, any Person (including the family members of such Person) which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other governing body of a corporation or 10% or more of the partnership or other ownership interests of any other Person is deemed to control such corporation or other Person; provided further that no Secured Party shall be deemed to be an Affiliate of the Company.

“ Agent ” shall have the meaning ascribed thereto in the preamble to this Agreement.

“ Agreement ” shall mean this Credit Agreement, together with all schedules and exhibits hereto.

“ Alternate Base Rate ” shall mean, for any day, a rate per annum equal to the greatest of (a) the Reference Rate in effect on such day, (b) the Federal Funds Rate in effect on such day plus ¹ / 2 of 1.0%, and (c) the Adjusted LIBOR Rate for an Interest Period of one month beginning on such day (or, if such day is not a Business Day, the immediately preceding Business Day) plus 1.0%. Any change in the Alternate Base Rate due to a change in the Reference Rate, the Federal Funds Rate or the Adjusted LIBOR Rate shall be effective from and including the effective date of such change in the Reference Rate, the Federal Funds Rate or the Adjusted LIBOR Rate, respectively.

“ Alternate Base Rate Loan ” shall mean a Loan which bears interest as provided in Section 4.05(a) hereof.

“ Applicable Lending Office ” shall mean, for each Bank and for each Type of Loan, the lending office of such Bank (or of an affiliate of such Bank) designated for such Type of Loan on the signature pages hereof or such other office of such Bank (or of an affiliate of such Bank) as such Bank may from time to time specify to the Agent and the Company as the office by which its Loans of such Type are to be made and maintained.

“ Applicable Margin ” shall mean, with respect to any Loan:

(a) for any Alternate Base Rate Loan for any day, 2.0% per annum ; and

(b) for any Eurodollar Rate Loan for any day, 3.0% per annum .

Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default (including, without limitation, the failure to pay the principal amount of any Loan or any other amount payable hereunder when due), each of the foregoing Applicable Margins shall be increased by the Post-Default Margin.

“ Authorized Officer ” shall mean, with respect to any Loan Party, the President, Vice President, Secretary, Assistant Secretary, Treasurer, Assistant Treasurer or other duly authorized representative of such Loan Party whose names appear on a certificate of incumbency delivered concurrently with the execution of this Agreement, and as such certificate of incumbency may be amended or replaced from time to time.

“ Bank ” shall have the meaning ascribed thereto in the preamble to this Agreement.

“ Base Case Projections ” shall mean the historical financial information and the financial projections for the Project delivered by the Company to the Agent prior to the Closing Date.

“ Borrowing ” shall mean a borrowing consisting of Loans of the same Type made on the same date by the Banks.

“ Business Day ” shall mean any day on which commercial banks are not authorized or required to close in New York, New York or Los Angeles, California and, if such day relates to a Borrowing of, a payment or prepayment of principal of or interest on, or a Conversion of or into, or an Interest Period for, a Eurodollar Rate Loan or a notice by the Company with respect to any such Borrowing, payment, prepayment, Conversion or Interest Period, which day is also a day on which dealings in Dollar deposits are carried out in the London interbank market.

“ Capital Expenditures ” shall mean, without duplication, with respect to any Person for any Period, any expenditure in respect of the purchase or other acquisition of any asset which would be classified as a fixed or capital asset in accordance with GAAP (excluding normal replacements and maintenance that are properly charged to current operations). For purposes of this definition, the purchase price of equipment that is purchased simultaneously with the trade-in of existing equipment or with insurance proceeds shall be included in Capital Expenditures only to the extent of the gross amount by which such purchase price exceeds the credit granted by the seller of such equipment for the equipment being traded in at such time or the amount of such insurance proceeds, as the case may be.

“ 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, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“ Capital Lease ” means any lease of real or personal Property which is required to be capitalized under GAAP or which is treated as an operating lease under regulations applicable to the Company but which otherwise would be required to be capitalized under GAAP.

“ Cash Available for Debt Service ” shall mean, for any Period, (a) Project Revenues for such Period less (b) Operation and Maintenance Expenses for such Period.

“ Closing Date ” shall mean the date on which all of the conditions set forth in Section 7.01 hereof shall have been satisfied or waived by the Banks.

“ Closing Distribution ” shall mean an amount not greater than $30,000,000.

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

“ Collateral ” shall mean, collectively, the “ Collateral ” (as defined in the Security Agreement), the “ Property ” (as defined in the Mortgage) and the Prepayment Account Collateral.

“ Commitment ” shall mean, with respect to each Bank, the amount identified opposite such Bank’s name on Schedule I attached hereto.

“ Company ” shall have the meaning ascribed thereto in the preamble to this Agreement.

“ Consent and Agreement ” shall mean each Consent and Agreement, substantially in the form of Exhibit B to this Agreement or such other form as shall be reasonably acceptable to the Agent, executed in connection with a Project Document for the benefit of the Agent and the other Secured Parties.

“ Convert ”, “ Conversion ” and “ Converted ” each shall refer to a conversion of Loans of one Type into Loans of another Type pursuant to Section 3.03 hereof.

“ Debt ” of any Person shall mean, 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 Debt of others secured by (or for which the holder of such Debt 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 Debt 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 Debt of any Person shall include the Debt 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 Debt provide that such Person is not liable therefor.

“ Default ” shall mean an Event of Default or an event that with the giving of notice or lapse of time or both as specified in Section 10 hereof would become an Event of Default.

“ Dollars ” and “ $ ” shall mean lawful money of the United States of America.

“ 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 liability under indemnities), of the Company 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 ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ ERISA Affiliate ” shall mean any trade or business (whether or not incorporated) that, together with the Company, 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 Company 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 Company 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 Company 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 Company or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from the Company 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 Rate Loan ” shall mean a Loan which bears interest as provided in Section 4.05(b) hereof.

“ Event of Default ” shall have the meaning ascribed thereto in Section 10 hereof.

“ EWG ” shall mean an “exempt wholesale generator” as such term is defined in PUHCA.

“ Excess Cash Flow ” shall mean, for any Period, the excess (if any) of (a) all cash received by the Company during such Period from (i) the sale of electricity (including, without limitation, energy, capacity and ancillary services), (ii) interest accrued on, and other income derived from, all accounts, wherever maintained, of the Company, to the extent that such interest has been credited thereto, (iii) the proceeds of any business interruption insurance, and (iv) all other revenues and income, however earned, of the Company during such Period (including, without limitation, all amounts paid to the Company by UNS Electric pursuant to the Power Sales Agreement during such Period) (collectively, the “ Project Revenues ”) over (b) the sum, without duplication, of (i) the direct operating and maintenance costs of the Plant paid or payable by the Company during such Period (to the extent the Company has not been reimbursed for such costs by UNS Electric pursuant to the Power Sales Agreement or

otherwise), (ii) property taxes paid or payable by the Company during such Period, (iii) sales and excise taxes paid or payable by the Company during such Period, (iv) income tax liabilities paid or payable by the Company during such Period pursuant to the UNS Tax Sharing Agreement, (v) amounts paid or payable by the Company during such Period to any of its Affiliates in connection with corporate services provided to the Company by such Affiliates, (vi) all reasonable and necessary Capital Expenditures made by the Company during such Period (to the extent that (A) the Company has not been reimbursed for such expenditures by UNS Electric pursuant to the Power Sales Agreement or otherwise and (B) such Capital Expenditures were not funded, directly or indirectly, by the Guarantor), (vii) all amounts paid or payable by the Company during such Period pursuant to Section 4.05 hereof in respect of interest on outstanding Loans, (viii) all amounts, if any, paid or payable by the Company during such Period under all Interest Rate Protection Agreements, less amounts received by the Company during such Period under any Interest Rate Protection Agreements, and (ix) all amounts paid by the Company during such Period pursuant to Section 4.02(a) hereof in respect of principal of, and interest on, outstanding Loans.

“ Federal Funds Rate ” shall mean, 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 Agent from three Federal funds brokers of recognized standing selected by it.

“ Federal Power Act ” shall mean the Federal Power Act, 16 U.S.C. § 824 et seq. , as amended, and the regulations and orders of FERC thereunder.

“ Fee Letter ” shall mean that certain letter agreement, dated the date hereof, between the Company and the Agent.

“ FERC ” shall mean the Federal Energy Regulatory Commission or any successor Governmental Authority.

“ FERC Order ” shall mean the order of the FERC dated October 31, 2007 issued in Docket Nos. ER07-1232-000 and ER07-1232-001.

“ Financing Documents ” shall mean, collectively, this Agreement, each Note, the Security Documents, the Fee Letter, the Parent Guaranty and any Interest Rate Protection Agreement between the Company and any Bank (or any Affiliate of a Bank).

“ Fiscal Year ” shall mean each period of twelve consecutive calendar months ending on December 31.

“ GAAP ” shall mean generally accepted accounting principles in the United States of America.

“ Government Approvals ” shall mean any authorizations, consents, approvals, waivers, exemptions, variances, franchises, permissions, permits and licenses of, notices to, and filings and declarations with, any Governmental Authority relating to (i) the ownership, operation or maintenance of the Project, or any part thereof, (ii) the ownership or leasing of or other contractual right with respect to the Project, or any part thereof, (iii) the purchase and sale of electricity produced by the Project, (iv) the purchase and use of fuel in connection with the operation of the Project, or (v) the execution, delivery or performance of any document relating to any of the foregoing (including, without limitation, any Project Document or Financing Document).

“ Governmental Authority ” shall mean any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“ Ground Lease ” shall mean that certain Ground Lease, dated as of March 26, 2009, between the Company and UNS Electric.

“ Guarantee ” of or by any Person (the “ guarantor ”) shall mean any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt 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 Debt 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 Debt 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 Debt or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Debt or obligation; provided , that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business.

“ Guarantor ” shall mean UniSource Energy Corporation, an Arizona corporation.

“ Guarantor Material Adverse Effect ” shall have the meaning assigned to the term “Material Adverse Effect” in the UniSource Credit Agreement (as in effect on the date hereof).

“ 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 as hazardous pursuant to any Environmental Law.

“ Interconnection Agreement ” shall mean the Standard Large Generator Interconnection Agreement, dated April 4, 2008, by and between the Company and UNS Electric.

“ Interest Coverage Ratio ” shall mean, as of the last day of any fiscal quarter of the Company, the ratio of (i) Cash Available for Debt Service for the Period of four (4) consecutive fiscal quarters ending thereon to (ii) Interest Expense for such Period; provided , however , that, for purposes of calculating the Interest Coverage Ratio as of the last day of each of the first three (3) fiscal quarters of the Company that end after the Closing Date, (a) the Cash Available for Debt Service for the numerator of the Interest Coverage Ratio shall be (i) for the Period of four consecutive fiscal quarters ending on June 30, 2009, an amount equal to the Cash Available for Debt Service for the fiscal quarter ending on June 30, 2009 multiplied by four (4), (ii) for the Period of four consecutive fiscal quarters ending on September 30, 2009, an amount equal to the Cash Available for Debt Service for the two consecutive fiscal quarters ending on September 30, 2009 multiplied by two (2), and (iii) for the Period of four consecutive fiscal quarters ending on December 31, 2009, an amount equal to the Cash Available for Debt Service for the three consecutive fiscal quarters ending on December 31, 2009 multiplied by four-thirds (4/3), and (b) the Interest Expense for the denominator of the Interest Coverage Ratio shall be (i) for the Period of four consecutive fiscal quarters ending on June 30, 2009, an amount equal to the Interest Expense for the fiscal quarter ending on June 30, 2009 multiplied by four (4), (ii) for the Period of four consecutive fiscal quarters ending on September 30, 2009, an amount equal to the Interest Expense for the two consecutive fiscal quarters ending on September 30, 2009 multiplied by two (2), and (iii) for the Period of four consecutive fiscal quarters ending on December 31, 2009, an amount equal to the Interest Expense for the three consecutive fiscal quarters ending on December 31, 2009 multiplied by four-thirds (4/3).

“ Interest Expense ” shall mean, for any Period, the sum of (a) the interest expense, both expensed and capitalized (including, without limitation, the interest component in respect of Capital Lease Obligations), with respect to any Debt of the Company and its Subsidiaries (including, without limitation, the Loans) during such Period, determined on a consolidated basis in accordance with GAAP, plus (b) the net amount payable by the Company and its Subsidiaries under all Interest Rate Protection Agreements in respect of such Period (or minus the net amount receivable by the Company and its Subsidiaries under all Interest Rate Protection Agreements in respect of such Period).

“ Interest Payment Date ” shall mean:

(a) as to any Alternate Base Rate Loan, each Quarterly Date occurring after such Alternate Base Rate Loan is made or Converted from a Eurodollar Rate Loan and the date on which such Alternate Base Rate Loan is Converted to a Eurodollar Rate Loan; and

(b) as to any Eurodollar Rate Loan, the last day of each Interest Period with respect thereto (and, if such Interest Period has a duration of more than three months, on each day that occurs during such Interest Period every three months from the first day of such Interest Period (or, if there is no numerically corresponding day in the applicable subsequent calendar month, then on the last day of such month)).

“ Interest Period ” shall mean, with respect to any Eurodollar Rate Loan:

(a) initially, the period commencing on, as the case may be, the Borrowing or Conversion date with respect to such Eurodollar Rate Loan and ending one, two, three or six months thereafter as specified by the Company in its Notice of Borrowing or its notice of Conversion as provided in Section 3.03 hereof; and

(b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurodollar Rate Loan and ending one, two, three or six months thereafter as specified by the Company by irrevocable notice to the Agent not less than three Business Days prior to the last day of the then current Interest Period with respect to such Eurodollar Rate Loans;

provided , however , that the foregoing provisions relating to Interest Periods are subject to the following:

(i) if any Interest Period would otherwise end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (unless such next succeeding Business Day would fall in a subsequent calendar month, in which event such Interest Period shall end on the next preceding Business Day);

(ii) any Interest Period in respect of any Loan that would otherwise extend beyond the Termination Date shall end on the Termination Date;

(iii) if any Interest Period commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month), such Interest Period shall end on the last Business Day of the appropriate subsequent calendar month; and

(iv) no more than four (4) Interest Periods shall be in effect at the same time.

“ Interest Rate Protection Agreement ” shall mean an interest rate swap, cap or collar agreement or similar arrangement between the Company and one or more financial institutions providing for the transfer or mitigation of interest rate risks either generally or under specific contingencies, in each case in form and substance reasonably satisfactory to the Agent.

“ Laws ” shall mean all statutes, laws, ordinances, regulations, orders, writs, injunctions, or decrees of the United States, any state or commonwealth, any municipality, any foreign country, any territory or possession, or any Governmental Authority.

“ LIBOR Rate ” shall mean, with respect to any Eurodollar Rate Loan for any Interest Period, the rate per annum determined by the Agent at approximately 11:00 a.m., London time, on the date that is two (2) 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 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 “LIBOR Rate” with respect to such Eurodollar Rate Loan 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 Agent in the London interbank market at approximately 12:00 noon, London time, on the date that is two (2) Business Days prior to the beginning of such Interest Period.

“ Lien ” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“ Loan ” shall mean a loan by a Bank to the Company pursuant to Section 3.01 hereof, and refers to an Alternate Base Rate Loan or a Eurodollar Rate Loan.

“ Loan Parties ” shall mean the Company and the Guarantor.

“ Majority Banks ” shall mean, at any time, Banks who at such time hold at least 51% of the outstanding principal amount of the Loans. Any determination of those Banks constituting the Majority Banks shall be made by the Agent and shall be conclusive and binding on all parties absent manifest error.

“ Material Adverse Effect ” shall mean a material adverse effect on (i) the properties, business, operations, financial condition or assets of the Company, (ii) the Project, (iii) the Company’s ability to perform its obligations under this Agreement, the Notes or any other Transaction Document to which it is a party, (iv) the validity or enforceability of this Agreement or any other Financing Document, or (v) the rights or remedies of the Agent and the other Secured Parties under this Agreement or any other Financing Document.

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

“ Mortgage ” shall mean the Leasehold Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of the date hereof, by the Company in favor of Pioneer Title Agency, Inc., as trustee, for the benefit of the Agent, as beneficiary, substantially in the form of Exhibit E to this Agreement.

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

“ Note ” shall have the meaning ascribed thereto in Section 4.08 hereof.

“ Notice of Borrowing ” shall have the meaning ascribed thereto in Section 5.01 hereof.

“ Obligations ” shall mean and include all loans, advances, debts, liabilities and obligations, howsoever arising, owed by the Company to the Agent, the Banks or any other Secured Party of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, pursuant to the terms of this Agreement or any of the other Financing Documents, including all accrued and unpaid interest, fees, charges, expenses, indemnity obligations, attorneys’ fees and accountants’ fees chargeable to the Company and payable by the Company hereunder or thereunder.

“ Operation and Maintenance Expenses ” shall mean, collectively, for any Period, clauses (b)(i) through (b)(vi), inclusive, of the definition of “ Excess Cash Flow ” contained in this Section 1.01.

“ Other Taxes ” shall have the meaning ascribed thereto in Section 5.04(b) hereof.

“ Parent Guaranty ” shall mean the Guaranty Agreement, dated as of the date hereof, by the Guarantor in favor of the Agent, substantially in the form of Exhibit F to this Agreement.

“ Participant ” shall have the meaning ascribed thereto in Section 14.01 hereof.

“ PBGC ” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“ Period ” shall mean, as the context requires, a fiscal year, fiscal quarter, calendar quarter, calendar month or specified number of fiscal quarters, calendar quarters or calendar months of the Company.

“ Permitted Exceptions ” shall mean those matters listed on Schedule B to the title insurance policy issued by the Title Insurer on the Closing Date and thereafter such other title exceptions as the Agent may have approved in writing.

“ Permitted Investments ” shall mean:

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

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

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

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

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

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

“ Permitted Liens ” shall mean:

(a) Liens in connection with workmen’s compensation, unemployment insurance or other social security or old age pension obligations;

(b) Liens for taxes, assessments or governmental charges which are not yet due or which are being contested in good faith by appropriate proceedings and which do not materially impair the value or marketability of the security granted pursuant to the Security Documents (unless by such contest the Liens of the Security Documents may be materially endangered or any material portion of the Project may become subject to a material risk of loss or forfeiture);

(c) legal or equitable encumbrances deemed to exist by reason of the existence of any litigation or other legal proceeding if the same is being contested in good faith by appropriate proceedings (excluding any attachment prior to judgment, judgment lien or attachment in aid of execution on a judgment and unless by such contest the Lien of the Security Documents may be materially endangered or any material portion of the Project may become subject to a material risk of loss or forfeiture);

(d) mechanic’s, workmen’s, materialmen’s, construction or other like Liens arising in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations which are not overdue for a period of more than thirty (30) days, for which a bond (satisfactory to the Agent) in the full amount thereof has been posted or adequate cash reserves set aside or which are being contested in good faith (unless by such contest the Liens of the Security Documents may be materially endangered or any material portion of the Project may become subject to a material risk of loss or forfeiture);

(e) the Permitted Exceptions;

(f) Liens created pursuant to the Security Documents;

(g) purchase money security interests in respect of Debt (including Capital Lease Obligations) in the aggregate not exceeding $2,000,000 at any time outstanding contemplated by Section 9.01(c) hereof;

(h) 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;

(i) ground leases, easements and joint use agreements in respect of real property on which facilities owned or leased by the Company are located (other than the Premises), and which in each case, do not interfere in any material respect with the business of the Company;

(j) any interest or title of a lessor or secured by a lessor’s interest under any lease permitted by any Financing Document and which in each case, do not interfere in any material respect with the business of the Company;

(k) Liens incurred by the licensing of trademarks by the Company to others in the ordinary course of business;

(l) leases or subleases granted to others (other than with respect to the Project), not interfering in any material respect with the business of the Company;

(m) easements, licenses, restrictions, exceptions, reservations or other outstanding interests in or against any property and/or rights-of-way of the Company 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 Company;

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

(o) 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 Company over public or private property, none of which materially impair the use of the property affected thereby;

(p) 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 Company or otherwise to control or regulate any property of the Company and which in each case, do not interfere in any material respect with the business of the Company;

(q) rights granted or created or burdens assumed by the Company 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 Company to maintain certain facilities or perform certain acts as a condition of the Company’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 Company;

(r) 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 Company with another party; and any lien securing indebtedness of any such common owner, neither payable by, nor assumed nor guaranteed by, the Company, 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 Company; and

(s) additional Liens so long as the aggregate principal amount of the obligations secured by such Liens does not exceed $2,000,000.

“ Person ” shall mean an individual, corporation, partnership, limited liability company, joint venture, trust or unincorporated organization, or a government or any agency or political subdivision thereof.

“ Plan ” shall mean 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 Company 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.

“ Plant ” shall mean the 90-megawatt, simple-cycle gas-fired electric generation station located on the Premises, known as the Black Mountain Generating Station.

“ Post-Default Margin ” shall mean 2.00% per annum .

“ Post-Default Rate ” shall mean, in respect of any principal of any Loan or any other amount payable by the Company under this Agreement or any other Financing Document which is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum commencing on the due date thereof until such amount is paid in full equal to the Alternate Base Rate in effect from time to time plus the Applicable Margin ( provided that, if such amount in default is principal of a Eurodollar Rate Loan and the due date is a day other than the last day of the Interest Period therefor, the “Post-Default Rate” for such principal shall be, for the period commencing on the due date and ending on the last day of the Interest Period therefor, the interest rate for such Loan as provided in Section 4.05 hereof and, thereafter, the rate provided for in this definition).

“ Power Sales Agreement ” shall mean the Power Purchase and Sale Agreement dated as of March 3, 2008 between UNS Electric and the Company.

“ Premises ” shall have the meaning ascribed thereto in the Mortgage.

“ Prepayment Account ” shall have the meaning ascribed thereto in Section 4.02(e) hereof.

“ Prepayment Account Collateral ” shall have the meaning ascribed thereto in Section 4.02(e) hereof.

“ Principal Office ” shall mean the principal office of Union Bank, presently located at 445 South Figueroa Street, Los Angeles, California 90071.

“ Process Agent ” shall have the meaning ascribed thereto in Section 15.11 hereof.

“ Project ” shall mean, collectively, the Plant and the Premises.

“ Project Documents ” shall mean, collectively, (a) the Power Sales Agreement, (b) the Ground Lease, (c) the Interconnection Agreement and (d) each Additional Project Document, if any.

“ Project Revenues ” shall have the meaning ascribed thereto in the definition of “ Excess Cash Flow ” contained in this Section 1.01.

“ Property ” shall mean any interest in any kind of property or asset, whether real, personal or mixed, moveable or immoveable, tangible or intangible, including without limitation cash, securities, accounts and contract rights.

“ Proportionate Share ” shall mean, with respect to each Bank, the ratio of (i) such Bank’s Commitment to (ii) the Total Commitments (or, in the event that the Commitments have terminated, the ratio of (A) the aggregate outstanding principal amount of all Loans made by such Bank to (B) the aggregate outstanding principal amount of all Loans).

“ Prudent Industry Practices ” shall mean those practices, methods, equipment, techniques, specifications and standards of safety and performance that are commonly used from time to time by electric generation stations in the United States of America as good, safe and prudent engineering and operating practices, which, in the exercise of reasonable judgment in light of facts known at the time the decision was made, could have been expected to accomplish a desired result at a reasonable cost in connection with the operation, maintenance, repair and use of electric generating and other equipment, facilities and improvements of such electrical generation stations, with commensurate standards of safety, performance, dependability, efficiency and economy having due regard for applicable Laws and Government Approvals, and considering the state in which the Project is located and the type and size of the Project. “ Prudent Industry Practices ” is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to a spectrum of possible practices, methods or acts having due regard for, among other things, applicable Laws and Government Approvals.

“ PUHCA ” shall mean the Public Utility Holding Company Act of 2005, as amended, and the regulations and orders of FERC thereunder.

“ Quarterly Dates ” shall mean the last day of each March, June, September and December, the first of which Quarterly Dates shall be June 30, 2009, provided that, if any such date is not a Business Day, the relevant Quarterly Date shall be the next succeeding Business Day.

“ Reference Rate ” shall mean 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”.

“ Regulation D ” shall mean Regulation D of the Board of Governors of the Federal Reserve System, as the same may be amended or supplemented from time to time, or any other regulation in substance substituted therefor.

“ Regulatory Change ” shall mean, with respect to any Bank, any change after the date of this Agreement in United States federal, state or foreign laws or regulations (including Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks including such Bank of or under any United States federal or state, or any foreign, laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.

“ Reserve Requirement ” shall mean, for any Eurodollar Rate Loan for any Interest Period therefor, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System with deposits exceeding one billion Dollars against “Eurocurrency liabilities” (as such term is used in Regulation D).

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

“ Secured Parties ” shall mean the Agent, the Banks, and any Bank (or Affiliate of any Bank) party to any Interest Rate Protection Agreement.

“ Security Agreement ” shall mean the Security Agreement, dated as of the date hereof, between the Company and the Agent, substantially in the form of Exhibit D attached hereto.

“ Security Documents ” shall mean, collectively, the Mortgage, the Security Agreement and each Consent and Agreement.

“ 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 to which the Agent is subject for eurocurrency funding (currently referred to as “ Eurocurrency Liabilities ” in Regulation D). Such reserve percentages shall include those imposed pursuant to Regulation D. Eurodollar Rate 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 Bank under Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“ Subordinated Debt ” means unsecured Debt of the Company subordinated in right of payment to the Obligations.

“ Subsidiary ” shall mean, with respect to any Person, any corporation or unincorporated entity of which more than 50% of the outstanding capital stock (or comparable interest) having ordinary voting power (irrespective of whether at the time capital stock (or comparable interest) of any other class or classes of such corporation or entity shall or might have voting power upon the occurrence of any contingency) is at the time directly or indirectly owned by said Person (whether directly or through one or more other Subsidiaries). In the case of an unincorporated entity, a Person shall be deemed to have more than 50% of interests having ordinary voting power only if such Person’s vote in respect of such interests comprises more than 50% of the total voting power of all such interests in the unincorporated entity.

“ Taxes ” shall have the meaning ascribed thereto in Section 5.04(a) hereof.

“ Termination Date ” shall mean March 24, 2010.

“ Title Insurer ” shall mean Pioneer Title Agency, Inc., as agent for First American Title Insurance Company, or such other title insurance company approved by the Agent to insure the priority of the Lien of the Mortgage.

“ Total Commitments ” shall mean the aggregate amount of the Commitments of the Banks, which amount as of the Closing Date is equal to $30,000,000.

“ Transaction Documents ” shall mean, collectively, the Project Documents and the Financing Documents.

“ 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 Eurodollar Rate or the Alternate Base Rate ( provided that, for the avoidance of doubt, Loans and Borrowings the interest rate with respect to which is determined by reference to the Adjusted LIBOR Rate by operation of clause (c) of the definition of Alternate Base Rate herein shall be considered Loans or Borrowings, the interest rates with respect to which are determined by reference to the Alternate Base Rate).

“ UCC ” means the Uniform Commercial Code as the same may, from time to time, be in effect in the State of New York, provided , however , in the event that, by reason of mandatory provisions of law, the perfection or priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of New York, the term “ UCC ” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or priority of such Collateral and for purposes of definitions related to such provisions.

“ Union Bank ” shall mean Union Bank, N.A., a national banking association.

“ UniSource Credit Agreement ” shall mean the Amended and Restated Credit Agreement, dated as of August 11, 2006, as amended by Amendment No. 1 thereto, dated as of September 16, 2008, and Amendment No. 2 thereto, dated as of February 26, 2009, among the Guarantor, the Lenders party thereto, The Bank of New York Mellon (formerly known as The Bank of New York) and JPMorgan Chase Bank, N.A., as Co-Syndication Agents, Wells Fargo Bank, National Association and ABN AMRO Bank N.V., as Co-Documentation Agents, and Union Bank, N.A. (formerly known as Union Bank of California, N.A.), as Administrative Agent.

“ UNS Electric ” shall mean UNS Electric, Inc., an Arizona corporation.

“ UNS Tax Sharing Agreement ” shall mean 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 Company acknowledges and agrees that references in the UNS Tax Sharing Agreement (as in effect on the Closing Date) to “TEP” and the “TEP Group” have been, and will continue to be, deemed to comprise the Guarantor and the Guarantor and its Subsidiaries, respectively.

“ Withdrawal Liability ” shall mean 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 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) 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 in this Agreement to any of the Project Documents or Financing Documents or any other agreement, instrument or document shall be construed as referring to such Project Document, Financing Document, agreement, instrument or document as amended, supplemented, restated, replaced or otherwise modified and in effect from time to time (subject to any restrictions on such amendments, supplements, restatements, replacements or modifications set forth herein or in any other Project Document or Financing Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) references to any Law are to be construed as including all provisions consolidating, amending or replacing such Law, (iv) 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 (v) 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 Principles and 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 the Company notifies the Agent that the Company 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 Company’s operations), or if the Agent notifies the Company that the Majority Banks 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 2.

REPRESENTATIONS AND WARRANTIES

To induce the Banks to enter into this Agreement and to make the Loans to the Company under the provisions hereof, and in consideration thereof, the Company represents and warrants to each Bank and the Agent as follows:

SECTION 2.01 Corporate Existence and Business . The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Arizona, and is duly qualified to do business in each other jurisdiction in which the conduct of its business or the ownership or lease of its assets and ownership and operation of the Project requires such qualification and where the failure to so qualify could reasonably be expected to have a Material Adverse Effect. The Articles of Incorporation of the Company has been duly filed with the Arizona Corporation Commission, and no other filing, recording, publishing or other act is necessary or appropriate in connection with the existence of the Company except those which have been duly made or performed. The Company is currently engaged solely in the business of owning the Project and activities reasonably related thereto. The Guarantor is the sole stockholder of the Company.

SECTION 2.02 Litigation . There is no action, suit, investigation or proceeding pending or, to the best knowledge of the Company, threatened before any Governmental Authority against or affecting the Company or any properties or rights of the Company as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has not violated, and is not in default with respect to, any judgment, order, writ, injunction, decree, rule or regulation of any Governmental Authority where such violation or default could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

SECTION 2.03 Conflicting Agreements and Other Matters . The Company is not in default in the performance of any obligation, covenant, or condition in any agreement to which it is a party or by which it is bound, which default could reasonably be expected to have a Material Adverse Effect. The Company is not a party to any contract or agreement or subject to any charter or other legal restriction that could reasonably be expected to have a Material Adverse Effect. Neither the execution and delivery of any of the Financing Documents, nor the fulfillment of and compliance with their respective terms and provisions, will conflict with, or result in a breach of the terms, conditions or provisions of, or constitute a default under, or result in any violation of, or result in the creation of any Lien (except those created by the Financing Documents) upon any of the properties or assets of the Company pursuant to, (i) the articles of incorporation of the Company or its by-laws, (ii) any Governmental Approval, (iii) any judgment, order, writ, injunction or decree of any court or other Governmental Authority, (iv) any award of any arbitrator, or (v) any agreement (including, without limitation, any Project Document), lease, indenture, instrument or Law to which the Company is subject, except, with respect to the foregoing clauses (ii), (iii), (iv) and (v), for such conflicts, breaches, defaults or violations that, individually and in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

SECTION 2.04 Compliance with Law . The Company is in compliance with all Laws applicable to it, except to the extent that the failure to comply therewith would not, individually or in the aggregate, have a Material Adverse Effect. The Project is in compliance with all applicable zoning, environmental protection, use and building codes, laws, regulations and ordinances, except where such noncompliance could not reasonably be expected to have a Material Adverse Effect. The Company has no knowledge of any violations of any laws, ordinances, codes, requirements or orders of any Governmental Authority affecting the Project, which violation could reasonably be expected to have a Material Adverse Effect.

SECTION 2.05 Authorization; Enforceability . The Company has full corporate power, authority and legal right to incur the obligations provided for in the Transaction Documents to which the Company is a party, and to perform the terms thereof. The Transaction Documents to which the Company is a party have been duly authorized, executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors rights generally and subject to any equitable principles limiting the right to obtain specific performance of any such obligation. No other consent of any other Person, except for (i) the Agent and the Banks and (ii) such consents that have been obtained and are in full force and effect, is required as a prerequisite to the validity and enforceability of the Transaction Documents.

SECTION 2.06 Government Approvals and Other Consents and Approvals . The Company has obtained, or will obtain as and when required by applicable Laws (except where the failure to do so could not reasonably be expected to have a Material Adverse Effect), all necessary franchises, permits, licenses, and other rights to allow it to conduct the business it conducts and proposes to conduct, including all franchises, permits, licenses, exemptions, and other rights and approvals necessary to own, improve, equip, operate, and maintain the Project, none of which contains, and the Company has no reason to believe any will contain, as the case may be, any terms, conditions, or provisions which will adversely affect or impair the Project in any material way. No Government Approvals or other consents or approvals are required in connection with (a) the participation by the Company in the transactions contemplated by this Agreement and the other Financing Documents, or the execution, delivery and performance by the Company of the Financing Documents to which it is a party, (b) the construction, use, ownership or operation of the Project in compliance with all applicable Environmental Laws (except where the failure to do so could not reasonably be expected to have a Material Adverse Effect), or (c) the grant by the Company of the Liens created pursuant to the

Security Documents, the validity, enforceability or perfection of such Liens or the exercise by the Agent of its rights and remedies thereunder, except for such Government Approvals (including, without limitation, the FERC Order) or other consents or approvals that have been duly obtained, were validly issued and are in full force and effect and not subject to appeal or reconsideration. All of the Government Approvals necessary for the ownership, operation and maintenance of the Project as contemplated by the Transaction Documents are set forth in Schedule II hereto and have been duly obtained, were validly issued and are in full force and effect and not subject to appeal or reconsideration. There is no proceeding pending or, to the knowledge of the Company, threatened against the Company that seeks, or could reasonably be expected, to rescind, terminate, modify (in a materially adverse manner) or suspend any such Government Approval. The Company has no reason to believe that any Government Approvals which have not been obtained by the Company as of the date of this Agreement, but which will be required in the future, will not be granted to it in due course.

SECTION 2.07 Ownership of Property; Liens . The Company has (a) good and marketable title in fee simple to the portion of the Project, and to all real property and interests therein, purported to be owned by it and necessary for the Project, (b) valid leasehold interests in the portion of the Project leased by it, and (c) good title to all other Collateral, in each case free and clear of all Liens except Permitted Liens. On and after the Closing Date, no mortgage or financing statement or other instrument or recordation covering all or any part of the Collateral shall be on file in any recording office, except (i) such as may have been filed in favor of the Agent, and (ii) such as may have been filed in respect of Permitted Liens. The Company has been granted and has good title, free and clear of all Liens other than Permitted Exceptions, to all easements existing or required to be obtained by the Company for access to, and/or operation of, the Project. Except for the Ground Lease, there are no leases, licenses or other occupancy agreements, whether written, oral or otherwise, relating to any portion of the Premises.

SECTION 2.08 Purposes . The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any borrowing hereunder will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock. If requested by the Agent, the Company will furnish to the Agent a statement in conformity with the requirements of Federal Reserve Form U-1, referred to in Regulation U, to the foregoing effect. Neither the Company nor any agent acting on its behalf has taken or will take any action which might cause this Agreement or the Notes to violate any regulation of the Board of Governors of the Federal Reserve System (including Regulations T, U and X) or to violate any securities laws, state or federal, in each case as in effect now or as the same may hereafter be in effect.

SECTION 2.09 Investment Company Act . The Company is not and will not become an investment company or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended, or an investment adviser, within the meaning of the Investment Advisers Act of 1940, as amended.

SECTION 2.10 Security Documents . Upon delivery thereof, the Security Documents will be effective to create, in favor of the Agent, a legal, valid and enforceable (except as enforceability may be affected by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by such general principles of equity as may affect the availability of equitable remedies) Lien on and security interest in all of the Collateral and, on or prior to the Closing Date, all necessary and appropriate recordings and filings will have been duly effected in all appropriate public offices so that the Lien and security interest created by the Security Documents will constitute a perfected first Lien on and perfected first security interest in all right, title, estate and interest of the Company in and to the Collateral described therein (other than any item of Collateral as to which a security interest cannot be perfected by filing under the UCC or recording in the real estate records of the county in which the Premises are located), prior and superior to all other Liens and security interests, existing or future, subject to Permitted Liens.

SECTION 2.11 Anti-Terrorism Laws .

(a) Neither the Company nor, to the knowledge of the Company, any of its Affiliates is in violation of any 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 Company nor, to the knowledge of the Company, any of its Affiliates is any of the following:

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

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

(iii) a Person with whom the Company 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 Company nor, to the knowledge of the Company, 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 Company, 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 is acting for the benefit of the Company or any of its Affiliates, or benefiting in any capacity, in each case in connection with the Financing Documents.

SECTION 2.12 Leases . The Company enjoys peaceful and undisturbed possession of the leasehold estate under all leases necessary for the ownership and operation of the Project, none of which contains any unusual or burdensome provisions that could reasonably be expected to result in a Material Adverse Effect. All such leases are valid and subsisting and are in full force and effect.

SECTION 2.13 Public Utility Status .

(a) The Company is an EWG. The Company will be subject to the compliance requirements under PUHCA applicable to an EWG and an owner or operator of an “eligible facility” (as such term is defined in PUHCA), and also will be considered an “electric utility company”, “public utility” and “public-utility company” under PUHCA.

(b) The Company has “market-based rate authority” approval from FERC with authority to sell wholesale electric power at market-based rates and with all required waivers of regulations and authorizations as have been granted by FERC, and such “market-based rate authority” is not, to the knowledge of the Company, subject to any actual or threatened revocation, limitation, or administrative or judicial proceeding. The Company is not subject to regulation under the laws of the State of Arizona respecting the rates of electric utilities or the financial or organizational activities of electric utilities.

(c) None of the Secured Parties, nor any of their respective Affiliates, will, solely by reason of (i) the ownership, operation and maintenance of the Project by the Company or UNS Electric (as applicable), (ii) the making of the Loans hereunder, (iii) the securing of the Obligations by Liens on the Project and the Collateral, or (iv) any other transaction contemplated by this Agreement or any of the other Transaction Documents (subject to the immediately succeeding sentence), be deemed by any Governmental Authority having jurisdiction to be subject to financial, organizational or rate regulation as an “electric utility”, “electric corporation”, “electrical company”, “public utility”, “public utility company”, “public utility holding company” or any similar entity under any applicable Laws, or be deemed to be subject to regulation as a “public-utility company”, an “electric utility company”, or a “holding company”, or a “subsidiary company” or “affiliate” of either of the foregoing within the meaning of PUHCA or as a “public-utility”, an “electric utility”, or a “transmitting utility” within the meaning of the Federal Power Act, except that (x) a Secured Party or an Affiliate thereof may be subject to (1) Section 203(a)(2) of the Federal Power Act if it is otherwise a “holding company” as that term is defined under PUHCA or (2) Section 203(a)(1)(c) of the Federal Power Act if it is otherwise a “public utility” as that term is defined in the Federal Power Act, or (y) if a Secured Party or an Affiliate thereof will be the owner or operator of, or control, the Company, the Plant or the Company’s FERC-jurisdictional facilities upon the exercise of remedies under the Security Documents, such Person may be subject to regulation under the Federal Power Act and PUHCA.

SECTION 2.14 Material Agreement and Licenses . No licenses, trademarks, patents or agreements with respect to the usage of technology other than those already obtained and those constituting Government Approvals are necessary for the ownership, operation and maintenance of the Project.

SECTION 2.15 Environmental Matters .

(a)  Environmental Laws . Neither the Project nor any Property of the Company nor the operations currently conducted thereon by the Company or UNS Electric or, to the actual knowledge of the Company, by any prior owner or operator thereof, violate any applicable order of any court or other Governmental Authority or applicable Environmental Laws, which violation could reasonably be expected to have a Material Adverse Effect or could reasonably be expected to result in remedial obligations having a Material Adverse Effect assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to the Project or the relevant Property.

(b)  No Litigation . Without limitation of subsection (a) above, neither the Project nor any Property of the Company nor the operations currently conducted thereon by the Company or UNS Electric or, to the actual knowledge of the Company, by any prior owner or operator thereof, are the subject of any existing, pending or, to the knowledge of the Company, threatened action, suit, investigation, inquiry or proceeding by or before any court or other Governmental Authority or subject to any remedial obligations under applicable Environmental Laws, which action, suit, investigation, inquiry or proceeding could reasonably be expected to have a Material Adverse Effect or could reasonably be expected to result in remedial obligations having a Material Adverse Effect assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to the Project or the relevant Property.

(c)  Notices, Permits, etc. All notices, permits, licenses or similar authorizations, if any, required to be obtained or filed by the Company in connection with the ownership, operation or use of the Project, and any and all other Property of the Company, including but not limited to present, or, to the actual knowledge of the Company, past, treatment, storage, disposal or release of any Hazardous Materials into the environment, have been duly obtained or filed, except to the extent the failure to obtain or file such notices, permits, licenses or similar authorizations could not reasonably be expected to have a Material Adverse Effect and could not reasonably be expected to result in remedial obligations having a Material Adverse Effect assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to the Project or the relevant Property.

(d)  Hazardous Materials Carriers . All Hazardous Materials generated at the Project by the Company or UNS Electric or, to the actual knowledge of the Company, by any prior owner or operator thereof, and at any and all Property of the Company, have in the past been transported, treated and disposed of only by carriers maintaining valid permits under any applicable Environmental Laws, except to the extent the failure to have such Hazardous Materials transported, treated or disposed by such carriers could not reasonably be expected to have a Material Adverse Effect, and only at treatment, storage and disposal facilities maintaining valid permits under any applicable Environmental Laws, which carriers and facilities have been and are operating in compliance with such permits, except to the extent the failure to have such Hazardous Materials treated, stored or disposed at such facilities, or the failure of such carriers or facilities to so operate, could not reasonably be expected to have a Material Adverse Effect and could not reasonably be expected to result in remedial obligations having a Material Adverse Effect assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to the Project or the relevant Property.

(e)  Hazardous Materials Disposal . The Company has taken all reasonable steps necessary to determine and has determined that no Hazardous Materials have been disposed of or otherwise released and, to the knowledge of the Company, there has been no threatened release of any Hazardous Materials on or to the Project or any Property of the Company, except to the extent the failure to do so could not reasonably be expected to have a Material Adverse Effect and could not reasonably be expected to result in remedial obligations having a Material Adverse Effect assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to the Project or the relevant Property.

(f)  No Contingent Liability . The Company is not subject to any actual or contingent liability, existing or inchoate, under any Environmental Laws, other than such liabilities at any one time and from time to time that (i) could not reasonably be expected to exceed $1,000,000 in the aggregate in excess of applicable insurance coverage and for which adequate reserves for the payment thereof as required by GAAP have been provided, and (ii) could not reasonably be expected to result in remedial obligations having a Material Adverse Effect assuming disclosure to the applicable Governmental Authority of all relevant facts, conditions and circumstances, if any, pertaining to the Project or the relevant Property.

SECTION 2.16 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 Guarantor Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of